-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, thuxz2328rTN2OF2pkEIRQRWouvo3D8r1v3fht3Ze3Zv+kI1v5LGPGMm3q/4+HE9 xEps9h6AYqT9fX6gcDSK+g== 0000108703-94-000009.txt : 19940616 0000108703-94-000009.hdr.sgml : 19940616 ACCESSION NUMBER: 0000108703-94-000009 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19940524 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Change in fiscal year FILED AS OF DATE: 19940609 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WYMAN GORDON CO CENTRAL INDEX KEY: 0000108703 STANDARD INDUSTRIAL CLASSIFICATION: 3460 IRS NUMBER: 041992780 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-03085 FILM NUMBER: 94533585 BUSINESS ADDRESS: STREET 1: 244 WORCHESTER ST STREET 2: BOX 8001 CITY: N GRAFTON STATE: MA ZIP: 01536 BUSINESS PHONE: 5088394441 8-K 1 WYMAN-GORDON COMPANY FORM 8-K FILING AS OF 5/24/94 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): May 26, 1994 WYMAN-GORDON COMPANY (Exact name of registrant as specified in its charter) MASSACHUSETTS (State or other jurisdiction of incorporation) 0-3085 04-1992780 Commission File Number (IRS Employer Identification No.) 244 Worcester Street, Box 8001, No. Grafton, MA 01536-8001 (Address of principal executive offices) (Zip Code) (508) 839-4441 Registrant's Telephone Number 1 of 10 2 Item 2. Acquisition or Disposition of Assets. On May 26, 1994, Wyman-Gordon Company, a Massachusetts corporation (the "Company"), completed the acquisition (the "Acquisition") of all of the outstanding stock of Cameron Forged Products Company ("Cameron") from Cooper Industries, Inc. ("Cooper"), pursuant to an Amended and Restated Stock Purchase Agreement, dated as of January 10, 1994 (the "Stock Purchase Agreement"), and an Investment Agreement, dated as of January 10, 1994 (the "Investment Agreement"). Pursuant to the Stock Purchase Agreement, the Company paid to Cooper a purchase price, which was determined through negotiations between the Company and Cooper, of (i) 16,500,000 shares of common stock, par value $1.00 per share (the "Shares"), of the Company and (ii) $5,000,000 in cash, payable as set forth below (the "Cash Purchase Price"), subject to a cash adjustment to be paid by either Cooper or the Company based upon changes in certain assets and liabilities of Cameron between September 26, 1993 and the closing of the Acquisition (the "Closing"). The Cash Purchase Price consisted of (i) $400,000 in cash obtained by the Company from its cash on hand and paid to Cooper at the Closing and (ii) a promissory note of the Company in the principal amount of $4,600,000 (the " Cameron Note"), payable in annual installments, beginning on June 30, 1997 and on each June 30 thereafter until paid in full, in an amount equal to the least of (A) $2,300,000, (B) 25% of the Company's Free Cash Flow (as defined in the Cameron Note) for the twelve-month period ending on the April 30 immediately preceding such June 30 or (C) the unpaid principal balance of the Cameron Note. The Cameron Note does not bear interest, except that it will bear interest from and after May 1, 1998 at a floating rate equal to the 90-day commercial paper rate for high grade unsecured notes sold through dealers by major corporations, as published by The Wall Street Journal, on that portion of the principal amount of the Note equal to the sum of all amounts of unpaid principal that would have been payable but for mandatory debt payments by the Company. As a result of the Acquisition, Cooper currently owns approximately 48% of the outstanding Shares. The Investment Agreement governs certain aspects of the relationship between the Company and Cooper. Under the Investment Agreement, Cooper has agreed to certain restrictions on its ability to vote its Shares and to acquire additional Shares and other voting securities of the Company. Cooper is entitled to two representatives on the Company's board of directors. However, Cooper has agreed that it will not acquire additional Company securities for so long as it owns 5% or more the Shares. Cooper has also agreed that, so long as it owns 5% or more of the Shares, it will vote its Shares on all matters submitted to a shareholder vote, at its option, either as recommended by the Company's board of directors or proportionately with the public shareholders. Certain other provisions will also apply. These restrictions on Cooper will expire on May 26, 2004, or earlier in certain events, such as if the Company's consolidated net worth declines by 35% or more following consummation of the acquisition or if the Company consummates a merger or similar transaction that results in a -2- 3 change of control of the Company. Pursuant to the Stock Purchase Agreement, effective on May 26, 1994, the size of the Board of Directors of the Company was increased by two members and Dewain K. Cross, Vice President, Finance of Cooper, and H. John Riley, Jr., President and Chief Operating Officer of Cooper, were appointed to fill the vacancies created by such expansion. Cameron and its subsidiaries operate forging facilities in Houston, Texas and Livingston, Scotland, as well as a powder metal operation in Brighton, Michigan. The Company intends to integrate Cameron's operations with the forgings business of the Company. The foregoing descriptions of the Stock Purchase Agreement and the Investment Agreement are incomplete and are qualified in their entirety by reference to the full text of the Stock Purchase Agreement and the Investment Agreement, which are attached hereto as exhibits and are incorporated herein by reference. Item 5. Other Events. 10 % Senior Notes due 2003: Supplemental Indenture Effective May 20, 1994, the Company entered into a Supplemental Indenture with the holders of its outstanding 10 % Senior Notes due 2003 (the "Notes"). The Supplemental Indenture amends the Indenture, dated as of March 16, 1993, by and among the Company, the Subsidiary Guarantors and State Street Bank and Trust Company as Trustee (the "Indenture") as follows: * The definition which sets forth the exceptions to the general limitation on the Company's ability to incur additional indebtedness was amended to permit the Company to make the deferred payments to Cooper under the Cameron Note. * The definition of restricted payments, which restricts investments by the Company, was amended to permit the Acquisition and the establishment of the Receivables Financing Program as described below, along with other amendments to permit the Company to manage its cash, hedge its interest rate, currency and raw materials risks and capitalize subsidiaries (including Wyman-Gordon Receivables Corporation, a special purpose wholly-owned subsidiary of the Company formed to carry out the Receivables Financing Program ("WGRC")). * The definition of permitted liens was expanded to permit the pledge of collateral by Wyman-Gordon Limited (formerly CFPD, Ltd.) (the "U.K. Subsidiary") to a new U.K. lender. * An exception for WGRC is made from the covenant which would otherwise require WGRC to guarantee the Notes. As a limited purpose financing subsidiary, WGRC would be unable to retain the necessary degree of financial independence from the general obligations of the Company if it were required to guarantee the Notes. -3- 4 * Other amendments were made to various Indenture covenants to permit the Acquisition, the Receivables Financing Program and the U.K. Subsidiary financing. The foregoing description of the Supplemental Indenture is incomplete and is qualified in its entirety by reference to the full text of the Supplemental Indenture, which is attached hereto as an exhibit and is incorporated herein by reference. 10 % Senior Notes due 2003: Second Supplemental Indenture The U.K. Subsidiary entered into a financing agreement with Clydesdale Bank PLC as of May 27, 1994 under which it pledged certain of its assets as security. Accordingly, under the terms of the Indenture, the U.K. Subsidiary was required to execute a guaranty of the Notes. Such guaranty was effected through a Second Supplemental Indenture and Guarantee dated as of May 27, 1994 which is attached hereto as an exhibit and is incorporated herein by reference. Receivables Financing Program On May 20, 1994, the Company terminated its existing working capital financing arrangement with the CIT Group/Business Credit, Inc. under a Financing Agreement dated March 8, 1993 (the "Prior Working Capital Facility"). The Company replaced the Prior Working Capital Facility by entering into a revolving receivables-backed credit facility (the "Receivables Financing") effected through a Receivables Purchase and Sale Agreement dated as of May 20, 1994 among the Company, Wyman-Gordon Investment Castings, Inc. and Precision Founders, Inc. and WGRC (the "RPSA") and a Revolving Credit Agreement dated as of May 20, 1999 among WGRC, the financial institutions party thereto and Shawmut Bank N.A. as Issuing Bank, as Facility Agent and as Collateral Agent (the "RCA"). It is anticipated that Cameron will become a part of the Receivables Financing Program approximately 90 days after the date of the Acquisition. Pursuant to the RPSA, WGRC purchases the U.S. dollar- denominated trade receivables of the Company and certain subsidiaries on a daily basis, and WGRC pays cash for such purchased receivables to the Company or such subsidiaries either out of its available cash from receivables collections or from borrowings under the RCA. Pursuant to the RCA, a syndicate of lenders makes revolving loans to WGRC and issues letters of credit to beneficiaries designated by WGRC, in each case secured by the receivables purchased by WGRC. Following is a brief summary of the terms of the Receivables Financing Program. The aggregate maximum borrowing capacity under the Receivables Financing Program is $65 million, with a letter of credit sub- maximum of $35 million. Utilization of the maximum program amount would be subject to a formula which is dependent upon a number of reserves and adjustments relating to the accounts receivable purchased by WGRC. The Receivables Financing Program is rated "AAA" by Standard & Poor's Corporation. Borrowings under the Receivables Financing Program bear interest at either the Eurodollar Rate plus five-eighths of one percent (0.625%) or at an Alternative Base Rate which is a fluctuating rate per annum on any -4- 5 date equal to the higher of (i) the rate of interest most recently publicly announced by the Facility Agent as its "prime," "reference" or "base" rate and (ii) a rate of interest equal to the sum of (A) the Federal Funds Rate, plus (B) 0.50%. Fees for letters of credit are five-eighths of one percent (0.625%) per annum. Additionally, a fee of four-tenths of percent (0.40%) per annum is charged for unused borrowing capacity. The term of the Receivables Financing Program is 58 months, with an evergreen option feature. WGRC is organized as a bankruptcy-remote, limited purpose subsidiary of the Company. On May 20, 1994 and each day thereafter during the term of the Receivables Financing Program, WGRC purchases all of the U.S. dollar-denominated trade receivables of the Company and of the two subsidiaries comprising the Company's castings operations (collectively, the "Sellers"). It is intended that Cameron will be added as a Seller. The purchase price for the receivables will be paid by WGRC through collections on previously- purchased receivables, intercompany notes issued by WGRC or borrowings by WGRC under the revolving credit facility. The Receivables Financing Program is secured by a first priority security interest in all receivables purchased by WGRC from the Sellers. The Receivables Financing Program is not subject to financial or periodic maintenance covenants. The foregoing summary of the terms of the Receivables Financing Program is incomplete and is qualified in its entirety by reference to the full text of the RCA and the RPSA, which are attached hereto as exhibits and are incorporated herein by reference. Employment Arrangements David P. Gruber became Chief Executive Officer of the Company immediately following the Special Meeting in Lieu of Annual Meeting of Shareholders held on May 24, 1994. In connection with Mr. Gruber's new responsibilities, the Company has entered into a two- year employment agreement with him providing certain termination payments if he is terminated by the Company without cause or if he leaves the Company for good reason. In addition, the Company entered into a Performance Share Agreement with Mr. Gruber pursuant to which he has been issued 150,000 shares of common stock of the Company subject to restrictions and risk of forfeiture. The restrictions on some or all of Mr. Gruber's shares will lapse if (i) he is still employed by the Company as Chief Executive Officer five years from the date of the agreement and (ii) the market value of the Company's stock achieves certain targeted levels. In addition, the Performance Share Agreement contains provisions providing for partial vesting in the case of his death and restrictions on transfer of a portion of such shares after the restrictions lapse. On March 4, 1994, the Company employed J. Douglas Whelan as President, Forgings Division. In connection with the employment of Mr. Whelan, the Company has entered into an employment agreement with him that provides, among other things, for an annual salary of -5- 6 $204,000, a signing bonus of $50,000, participation in the incentive compensation plan being designed for key Cameron and Wyman-Gordon Company employees who will be responsible for implementing the consolidation of the Company and Cameron, which incentive compensation plan in the case of Mr. Whelan will pay out at 2 1/2 times base salary if $30 million of annual cost savings are achieved by the end of the second year following the Cameron acquisition. In addition, Mr. Whelan has received an option to purchase 75,000 shares under the Company's Long-Term Incentive Plan and has entered into an Executive Severance Agreement in the standard form as other executive officers. The foregoing summary of the terms of employment arrangements with Messrs. Gruber and Whelan is incomplete and is qualified in its entirety by reference to the full text of the Employment Agreement dated May 24, 1994 between Mr. Gruber and the Company, the Performance Share Agreement dated May 24, 1994 between Mr. Gruber and the Company, the Employment Agreement dated March 4, 1994 between Mr. Whelan and the Company and the Severance Agreement dated as of May 1, 1994 between Mr. Whelan and the Company, which are attached hereto as exhibits and are incorporated herein by reference. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements of Businesses Acquired. Attached hereto as Annex I are financial statements of Cameron for the periods specified in Rule 3-05(b) of Regulation S-X, along with a report of Ernst & Young, independent auditors, thereon. (b) Pro Forma Financial Statements. Attached hereto as Annex II are the pro forma financial statements required pursuant to Article 11 of Regulation S-X. (c) Exhibits The following exhibits are filed herewith: Exhibit No. Description 1 Amended and Restated Stock Purchase Agreement, dated as of January 10, 1994, between the Company and Cooper. 2 Investment Agreement, dated as of January 10, 1994, between the Company and Cooper. 3 Press release issued on by the Company on May 26, 1994. -6- 7 Exhibit No. Description 4 Amendment dated May 26, 1994 to Investment Agreement dated as of January 10, 1994, between the Company and Cooper. 5 10 % Senior Notes due 2003 Supplemental Indenture dated May 19, 1994. 6 10 % Senior Notes due 2003 Second Supplemental Indenture and Guarantee dated May 27, 1994. 7 Revolving Credit Agreement dated as of May 20, 1994 among Wyman-Gordon Receivables Corporation, the Financial Institutions Parties Hereto and Shawmut Bank N.A. as Issuing Bank, as Facility Agent and as Collateral Agent. 8 Receivables Purchase and Sale Agreement dated as of May 20, 1994 among Wyman-Gordon Company, Wyman- Gordon Investment Castings, Inc. and Precision Founders Inc. as the Sellers, Wyman-Gordon Company as the Servicer and Wyman-Gordon Receivables Corporation as the Purchaser. 9 Employment Agreement effective March 24, 1994 between Wyman-Gordon Company and David P. Gruber. 10 Employment Agreement effective March 4, 1994 between Wyman-Gordon Company and J. Douglas Whelan. 11 Performance Share Agreement under the Wyman-Gordon Company Long-Term Incentive Plan between the Company and David P. Gruber dated as of May 24, 1994. 12 Executive Severance Agreement between the Company and J. Douglas Whelan dated as of May 1, 1994. Item 8. Change in Fiscal Year On May 24, 1994, the Company's Board of Directors voted to change the Company's fiscal year-end from one which ended on December 31 to one which ends on the Saturday nearest to May 31. Accordingly, the Company plans to file a Form 10-Q for the five month transition period ended May 28, 1994. -7- 8 SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Wyman-Gordon Company Date: 6/8/94 By: /s/ Luis E. Leon Luis E. Leon Vice President, Chief Financial Officer and Treasurer -8- 9 ANNEX I INDEX TO FINANCIAL STATEMENTS
PAGE CAMERON FORGED PRODUCTS DIVISION Combined Results of Operations for the Three Months Ended March 31, 1993 and 1994 (unaudited) Q-1 Combined Balance Sheet as of March 31, 1994 and 1993 (unaudited) Q-2 Combined Cash Flows for the Three Months Ended March 31, 1993 and 1994 (unaudited) Q-3 Notes to Combined Financial Statements (unaudited) Q-4 Report of Independent Auditors F-1 Combined Results of Operations for the Years Ended December 31, 1991, 1992 and 1993 F-2 Combined Balance Sheets as of December 31, 1992 and 1993 F-3 Combined Cash Flows for the Years Ended December 31, 1991, 1992 and 1993 F- 4 Notes to Combined Financial Statements F-5
-9- 10 CAMERON FORGED PRODUCTS DIVISION COMBINED RESULTS OF OPERATIONS
Three Months Ended March 31, 1993 1994 (000's omitted) (Unaudited) Revenues $37,371 $38,836 Costs and expenses Cost of goods sold 33,402 34,134 Selling, general and administrative expenses 2,992 2,731 Depreciation and amortization 1,841 2,138 38,235 39,003 Loss before income taxes (864) (167) Income tax benefit 82 122 Net loss $ (782) $ (45)
The accompanying Notes to Combined Financial Statements are an integral part of these financial statements. Q-1 11 CAMERON FORGED PRODUCTS DIVISION COMBINED BALANCE SHEET
March 31, 1993 1994 (000's omitted) (Unaudited) ASSETS Current assets: Receivables $ 31,474 $ 33,076 Inventories 59,071 50,490 Other 353 389 Total current assets 90,898 83,955 Plant and equipment, at cost less accumulated depreciation 62,452 60,018 Intangibles, less accumulated amortization 2,315 2,137 Pension assets 9,060 8,546 Other assets 767 105 $165,492 $154,761 LIABILITIES AND NET ASSETS Current liabilities: Accounts payable and accrued liabilities $ 45,827 $ 33,234 Loss on long-term contracts and agreements - 15,200 Deferred income taxes 11,357 9,147 Total current liabilities 57,184 57,581 Postretirement benefits other than pensions 12,141 12,159 Pension liability - 10,946 Deferred income taxes 4,227 4,293 Net assets 91,940 69,782 $165,492 $154,761
The accompanying Notes to Combined Financial Statements are an integral part of these financial statements. Q-2 12 CAMERON FORGED PRODUCTS DIVISION COMBINED CASH FLOWS
Three Months Ended March 31, 1993 1994 (000's omitted) (Unaudited) OPERATING ACTIVITIES: Net loss $ (782) $ (45) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation 1,647 1,953 Amortization 194 185 Deferred income taxes (82) (122) Changes in assets and liabilities:(1) Receivables (8,103) (7,268) Inventories 5,288 4,112 Accounts payable and accrued liabilities (4,178) (2,260) Other assets and liabilities, net 519 (169) Net cash provided by (used for) operating activities (5,497) (3,614) INVESTING ACTIVITIES: Capital expenditures (2,887) (1,848) Proceeds from sales of plant and equipment 453 447 Net cash used for investing activities (2,434) (1,401) FINANCING ACTIVITIES: Transferred (to) from Cooper 8,144 5,176 Net cash provided by (used for) financing activities 8,144 5,176 Effect of translation on cash (213) (161) Increase (decrease) in cash retained by Cameron - - Cash retained by Cameron, beginning of period - - Cash retained by Cameron, end of period $ - $ - (1) Net of the effects of translation.
The accompanying Notes to Combined Financial Statements are an integral part of these financial statements. Q-3 13 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STAETMENTS (Unaudited) A. INTERIM FINANCIAL DATA The financial information presented as of March 31, 1993 and 1994 and for the three months ended March 31, 1993 and 1994 has been prepared from the books and records without audit. In the opinion of management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the financial information for the periods indicated have been included. B. NET ASSETS Changes in net assets during the three months ended March 31, 1993 and 1994 were as follows:
Trans- lation Minimum Adjust- Pension Total ment Liability Other (000's omitted) Balance at December 31, 1992 $86,153 $(1,511) $ - $87,664 Translation adjustment (1,575) (1,575) - - Cash flow provided by Cooper 8,144 - - 8,144 Net (loss) (782) - - (782) Balance at March 31, 1993 $91,940 $(3,086) $ - $95,026 Balance at December 31, 1993 $64,449 $(2,812) $(10,946) $78,207 Translation adjustment 202 202 - - Cash flow provided by Cooper 5,176 - - 5,176 Net (loss) (45) - - (45) Balance at March 31, 1994 $69,782 $(2,610) $(10,946) $83,338
Q-4 14 REPORT OF INDEPENDENT AUDITORS Board of Directors Cooper Industries, Inc. We have audited the accompanying combined balance sheets of Cameron Forged Products Division (a division of Cooper Industries, Inc.) as of December 31, 1992 and 1993, and the related statements of combined results of operations and combined cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Cameron Forged Products Division is a part of Cooper Industries, Inc. and has no separate legal status or existence. Transactions with Cooper Industries, Inc. are described in Note N. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of Cameron Forged Products Division at December 31, 1992 and 1993, and the combined results of their operations and their cash flows for the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in Note C, in 1992 the Company changed its methods of accounting for postretirement benefits other than pensions, income taxes and postemployment benefits. ERNST & YOUNG Houston, Texas February 28, 1994 F-1 15 CAMERON FORGED PRODUCTS DIVISION COMBINED RESULTS OF OPERATIONS
Year Ended December 31, 1991 1992 1993 (000's omitted) Revenues $198,937 $174,334 $149,534 Costs and expenses Cost of goods sold 164,134 149,222 135,686 Selling, general and administrative expenses 13,498 12,893 11,904 Depreciation and amortization 6,247 6,982 8,902 Loss on long-term contracts and agreements - - 15,200 Nonrecurring income - (2,300) - 183,879 166,797 171,692 Income (loss) before income taxes and cumulative effect of changes in accounting principles 15,058 7,537 (22,158) Income tax (expense) benefit (6,936) (2,995) 2,104 Income (loss) before cumulative effect of changes in accounting principles 8,122 4,542 (20,054) Cumulative effect on prior years of changes in accounting principles - (14,097) - Net income (loss) $ 8,122 $ (9,555) $(20,054)
The accompanying Notes to Combined Financial Statements are an integral part of these financial statements. F-2 16 CAMERON FORGED PRODUCTS DIVISION COMBINED BALANCE SHEETS
December 31, 1992 1993 (000's omitted) ASSETS Current assets: Receivables $ 23,489 $ 25,710 Inventories 64,584 54,493 Other 350 58 Total current assets 88,423 80,261 Plant and equipment, at cost less accumulated depreciation 62,976 60,687 Intangibles, less accumulated amortization 2,330 1,998 Pension assets 9,252 8,550 Other assets 869 344 $163,850 $151,840 LIABILITIES AND NET ASSETS Current liabilities: Accounts payable and accrued liabilities $ 50,122 $ 35,442 Loss on long-term contracts and agreements - 15,200 Deferred income taxes 11,417 9,437 Total current liabilities 61,539 60,079 Postretirement benefits other than pensions 11,424 12,241 Pension liability - 10,946 Deferred income taxes 4,249 4,125 Other long-term liabilities 485 - Net assets 86,153 64,449 $163,850 $151,840
The accompanying Notes to Combined Financial Statements are an integral part of these financial statements. F-3 17 CAMERON FORGED PRODUCTS DIVISION COMBINED CASH FLOWS
Year Ended December 31, 1991 1992 1993 (000's omitted) OPERATING ACTIVITIES: Net income (loss) $ 8,122 $ (9,555) $(20,054) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation 5,670 6,278 7,779 Amortization 577 704 1,123 LIFO provision 1,465 1,507 1,497 Loss on long-term contracts and agreements - - 15,200 Non-recurring income - (2,300) - Deferred income taxes 3,022 2,995 (2,104) Cumulative effect of changes in accounting principles - 14,097 - Changes in assets and liabilities:(1) Receivables 5,226 7,938 (2,351) Inventories 11,449 7,006 8,399 Accounts payable and accrued liabilities (6,948) (16,080) (14,561) Other assets and liabilities, net (73) (785) 2,645 Net cash provided by (used for) operating activities 28,510 11,805 (2,427) INVESTING ACTIVITIES: Capital expenditures (20,846) (27,665) (9,201) Proceeds from sales of plant and equipment 554 396 1,120 Net cash used for investing activities (20,292) (27,269) (8,081) FINANCING ACTIVITIES: Transferred (to) from Cooper (8,243) 14,359 10,597 Net cash provided by (used for) financing activities (8,243) 14,359 10,597 Effect of translation on cash 25 1,105 (89) Increase (decrease) in cash retained by Cameron - - - Cash retained by Cameron, beginning of year - - - Cash retained by Cameron, end of year $ - $ - $ - (1) Net of the effects of translation, non-recurring income and the cumulative effect of changes in accounting principles.
The accompanying Notes to Combined Financial Statements are an integral part of these financial statements. F-4 18 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS A. CAMERON FORGED PRODUCTS DIVISION The accompanying combined financial statements reflect the operations of the Cameron Forged Products Division ("Cameron") of Cooper Industries, Inc. ("Cooper"). The combined operations include Cameron Forged Products Company, a wholly owned U.S. subsidiary of Cooper, which owns and operates the U.S. forging operations, the United Kingdom forging operations, which are owned and operated by a Cooper subsidiary, Cooper Great Britain, and Cameron Pipeline, Inc., an inactive U.S. subsidiary. CFPD, Ltd., a wholly-owned subsidiary of Cameron Forged Products Company purchased the United Kingdom forging operations from Cooper Great Britain in February 1994. The Cameron Forged Products Division was acquired by Cooper as part of its acquisition of Cameron Iron Works, Inc. in November 1989. This acquisition was accounted for by Cooper as a purchase business combination with resulting adjustment of historical asset and liability amounts to estimated fair market values as of the acquisition date. Because at the time of acquisition it was Cooper's intention to divest the acquired forging operations, the net assets, primarily plant and equipment, were written-down to an anticipated sales value and none of the goodwill recorded in connection with the overall acquisition of Cameron Iron Works, Inc. was allocated to the Cameron Forged Products Division. The Cameron Forged Products Division is hereinafter referred to as "Cameron." Cameron operates in one business segment -- forged products. B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying combined financial statements include the accounts of Cameron as described above. These statements are presented as if Cameron had existed as an entity separate from its parent, Cooper, during the periods presented and include the assets, liabilities, revenues and expenses that are directly related to Cameron's operations. All transactions between Cameron U.S. and U.K. operations have been eliminated. Because Cameron's operations were included in the consolidated financial statements of Cooper on a divisional basis, there are no separate meaningful historical equity accounts for Cameron. Additionally, amounts of general corporate accounting, tax, legal and other administrative costs that are not directly attributable to the operations of Cameron have been allocated to Cameron based on a ratio of Cameron's revenues to the consolidated revenues of Cooper. Management believes that this allocation method provides Cameron with a reasonable amount of such expenses. The difference for each of the years presented between the general and administrative expenses calculated utilizing the allocation method described above and the actual cost of such expenses which Cameron anticipates it would have incurred on a stand alone basis is not material. Cash and debt management are totally centralized functions within Cooper's divisional management structure. As a result, there is no practical or logical basis on which to allocate debt and related interest expense to Cameron. The financial information included herein may not necessarily be indicative of F-5 19 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) the financial position, results of operations or cash flows of Cameron in the future or what statements of financial position, results of operations or cash flows of Cameron would have been if it was a separate, stand-alone company during the periods presented. REVENUE RECOGNITION Sales, including sales under long-term contracts, are recorded when the goods are shipped to the customer. LONG-TERM CONTRACTS AND AGREEMENTS Anticipated losses with respect to long-term contracts, including long-term pricing agreements, are recorded when available information indicates that the sales price is less than a fully allocated cost projection. RESEARCH AND DEVELOPMENT Costs for research and development are expensed as incurred and were $1,800,000, $2,900,000 and $1,800,000 for the years ended December 31, 1991, 1992 and 1993, respectively. INVENTORIES Inventories are carried at cost or, if lower, net realizable value. On the basis of current costs, 70% of inventories in 1992 and 72% in 1993 are carried on the last-in, first-out (LIFO) method. The remaining inventories are carried on the first-in, first-out (FIFO) method. PLANT AND EQUIPMENT Depreciation is provided over the estimated useful lives of the related assets using primarily the straight-line method. This method is applied to group asset accounts which in general have the following lives: buildings -- 10 to 40 years; machinery and equipment -- 8 to 12 years; and tooling, dies, patterns, etc. -- 3 to 7 years. INTANGIBLES Intangibles consist primarily of software which is being amortized over its estimated useful life -- generally five years. INCOME TAXES Income taxes are provided as if operations in all countries including the U.S. were stand-alone businesses filing separate tax returns. For the years 1992 and 1993, Cameron has determined tax expense and other deferred tax information in compliance with Statement of Financial Accounting Standards (SFAS) No. 109 (Accounting for Income Taxes). Prior years have not been restated and accordingly reflect the procedures required by Accounting Principles Board Opinion No. 11 -- Accounting for Income Taxes, as amended. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS For the years 1992 and 1993, Cameron has determined the accounting effect of postretirement benefits other than pensions (primarily retiree medical costs) in accordance with the provisions of SFAS No. 106 (Employer's Accounting for Postretirement Benefits Other Than Pensions). Such benefits in years prior to 1992 were accounted for on a partial accrual method. F-6 20 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) POSTEMPLOYMENT BENEFITS For the years 1992 and 1993, Cameron has accounted for the benefits payable to employees when they leave Cameron other than by reason of retirement in accordance with the provisions of SFAS No. 112 (Employers' Accounting for Postemployment Benefits). Except for an actuarial determination of the termination benefits payable to domestic salaried employees, Cameron's accounting in years prior to 1992 was the same as that required by SFAS No. 112. ENVIRONMENTAL REMEDIATION AND COMPLIANCE Environmental remediation costs are accrued, except to the extent costs can be capitalized, based on estimates of known environmental remediation exposures. Environmental compliance costs include maintenance and operating costs with respect to pollution control facilities, cost of ongoing monitoring programs and similar costs. Such costs are expensed as incurred. Capitalized environmental costs are depreciated generally utilizing a 15-year life and had a net book value of $400,000 and $300,000 at December 31, 1992 and 1993, respectively. EARNINGS PER SHARE Earnings per share have been omitted from the combined statement of results of operations since Cameron was an operating division of Cooper with no meaningful equity securities outstanding. FOREIGN CURRENCY TRANSLATION The local currency is the functional currency for the foreign operation and, as such, assets and liabilities are translated into U.S. dollars at year-end exchange rates. Income and expense items are translated at average exchange rates during the year. Translation adjustments resulting from changes in exchange rates are reported as a component of net assets. C. CHANGES IN ACCOUNTING PRINCIPLES Effective January 1, 1992, Cameron adopted the following accounting standards: SFAS NO. 106 -- EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS This standard provides that Cameron follow an accrual method of accounting for the benefits other than pensions (primarily health-care costs) provided to employees after retirement. The results of operations for the first quarter of 1992 include a charge of $9,922,000 for the immediate recognition of the net transition obligation with respect to benefits earned by active and retired employees prior to January 1, 1992. Additionally, 1992's ongoing postretirement costs have been recorded based on the required actuarially determined accrual method as opposed to Cameron's previous partial accrual method of accounting for such costs. The effect, excluding the effect of a September 1992 curtailment gain, was to decrease 1992 full-year earnings by $1,200,000. The remaining disclosure information required by SFAS No. 106 is set forth in Note J of the Notes to Combined Financial Statements. F-7 21 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) C. CHANGES IN ACCOUNTING PRINCIPLES (CONTINUED) SFAS NO. 109 -- ACCOUNTING FOR INCOME TAXES This standard requires a liability as opposed to a deferred method of accounting for income taxes. The results of operations for the first quarter of 1992 include a net tax charge of $3,545,000 to reflect the cumulative effect of adopting this pronouncement. This charge primarily resulted from the establishment of a valuation allowance for the pre-adoption deferred tax assets. Income tax expense and certain other adjustments for 1992 and 1993 have been determined in accordance with the provisions of the new standard. The 1992 effect was to decrease pre-tax income by $400,000 for higher depreciation expense on fixed asset values previously recorded net of tax and to increase tax expense by $1,500,000 to reflect the absence of the tax benefits with respect to fair market value depreciation reductions previously treated as permanent differences. The remaining disclosure information required by SFAS No. 109 is set forth in Note M of the Notes to Combined Financial Statements. SFAS NO. 112 -- EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS This standard provides that Cameron follow an accrual method of accounting for the benefits payable to employees when they leave Cameron other than by reason of retirement. Since most of these benefits were already accounted for by Cameron on an accrual method, this new standard has a relatively small cumulative effect -- $630,000 and a negligible effect on 1992's earnings. In addition, in 1992, Cameron changed its accounting policy with respect to the valuation of scrap. Certain of the forgings which Cameron produces utilize nickel as a component material. When, during the normal production process, Cameron produces scrap that includes nickel, the scrap is carefully controlled so that the nickel may be recovered. In 1992, as management became aware of the increasing amount of nickel on hand within the business, the accounting policy of Cameron was changed to value instead of expense the nickel in order to provide greater financial control over this asset. The financial statements for prior years have been restated to reflect this change in the accounting policy. D. NONRECURRING INCOME Cameron's 1992 results include $2,300,000 of income resulting from the reversal of vacation accruals due to a change in Cameron's vacation policy which resulted in the elimination of carryover vacation rights. The change in the vacation policy was announced in 1992. A portion of the income, $900,000, related to salaried employees and was recorded in the second quarter of 1992. The remainder, with respect to hourly employees, was recorded in the third quarter of 1992 when the change was approved by the hourly union. F-8 22 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) E. LOSS ON LONG-TERM CONTRACTS AND AGREEMENTS Starting in the latter part of 1992 and continuing into 1993, Cameron has experienced extreme pricing pressure from its major customers, who in turn have been under pressure from their major airline customers as well as continuing cutbacks from the U.S. military. This pressure, combined with large amounts of industry-wide excess forging capacity have caused Cameron's margins to decline faster than Cameron can adjust its fixed and semi-fixed period costs. In an effort to keep its operations functioning with the highest possible utilization and corresponding efficiency levels, Cameron has increasingly accepted orders with lower gross profit levels and also in the second quarter of 1993 entered into three-year pricing agreements with two of its major customers. Since the time when the original terms of these agreements were negotiated, the delivery dates have been steadily pushed into the future, exacerbating the current utilization problem. In accordance with Cameron's policy of accruing for losses on backlog and long-term pricing agreements, when available information indicates that a material loss will be incurred when the goods are delivered pursuant to the commitments, a loss accrual of $15,200,000 was provided in connection with the preparation of Cameron's financial statements for the third quarter ended September 30, 1993. Of the total accrual, approximately $10,000,000 relates to committed backlog and $5,000,000 relates to the three-year pricing agreements. Virtually all of the anticipated loss is with respect to Cameron's operations in the United States as opposed to the United Kingdom. The calculations were based on the anticipated revenues and fully allocated operating costs for Cameron for the year 1994. Deliveries from the backlog extend into 1995, while the pricing agreements continue until 1996. While some portion of the $15,200,000 may have been calculable as of an earlier date in 1993, quantities under the long-term agreements were not sufficiently quantifiable prior to the third quarter to permit accrual at an earlier date. In addition, lower volume levels anticipated during the budgeting process for 1994 have resulted in significant increases in the anticipated losses with respect to the backlog compared to calculations based on 1993 activity levels and costing structures. As a result, Cameron believes that including the charge against the third quarter of 1993 is appropriate from a timing perspective. The $15,200,000 accrual was unchanged at December 31, 1993 since an updated calculation indicated that the amount continued to be appropriate. In years prior to 1993, although there were individual orders which would have been at a loss calculated on a fully cost-allocated basis, the aggregate amount of such backlog or pricing agreements that would have resulted in a loss was not material to Cameron. F-9 23 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) F. INVENTORIES Inventories consisted of the following:
December 31, 1992 1993 (000's omitted) Raw Materials $19,544 $13,387 Work-in-process 20,474 21,454 Finished goods 9,722 5,250 Perishable tooling and supplies 4,341 3,751 54,081 43,842 Excess of historical LIFO costs over current standard costs 10,516 10,038 Other (13) 613 Net inventories $64,584 $54,493
During each year, reductions in inventory quantities resulted in liquidations of LIFO inventory layers carried at higher costs prevailing in prior years. The effect was to decrease net income by $1,465,000 in 1991, $1,507,000 in 1992 and $1,497,000 in 1993. G. PLANT AND EQUIPMENT AND INTANGIBLES Plant and equipment and intangibles consisted of the following:
December 31, 1992 1993 (000's omitted) Plant and equipment: Land, buildings and land improvements $13,616 $12,807 Machinery and equipment 54,810 68,809 Under construction 11,608 3,101 80,034 84,717 Accumulated depreciation (17,058) (24,030) $62,976 $60,687 Intangibles: Cost $ 4,121 $ 4,199 Accumulated amortization (1,791) (2,201) $ 2,330 $ 1,998
F-10 24 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) H. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities consisted of the following:
December 31, 1992 1993 (000's omitted) Trade accounts and accruals $28,367 $22,702 Salaries, wages and related fringe benefits 3,417 3,017 Pension liability 5,345 2,009 Estimated costs of plant relocations and nonrecurring items 7,070 2,604 Payroll and other taxes 3,239 3,996 Other (individual items less than 5% of total current liabilities) 2,684 1,114 $50,122 $35,442
I. PENSION AND SAVINGS PLANS In accordance with the Stock Purchase Agreement between Cooper and Wyman-Gordon Company, under which Wyman-Gordon Company will purchase all of the outstanding shares of Cameron Forged Products Company from Cooper, Cooper will retain all obligations and benefits of the defined benefit pension plans discussed below. Pension expense for defined benefit pension plans included the following components:
Year Ended December 31, 1991 1992 1993 (000's omitted) Service cost-benefits earned during the year $ 2,304 $ 2,364 $ 2,532 Interest cost on projected benefit obligation 5,930 6,559 6,420 Actual return on assets (8,490) (5,108) (9,362) Net amortization and deferral 2,564 (1,571) 3,132 Net pension cost $ 2,308 $ 2,244 $ 2,722
F-11 25 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) I. PENSION AND SAVINGS PLANS (CONTINUED) A summary of the funding status of the defined benefit pension plans is as follows:
Plans With Plans With Assets in Excess Accumulated of Accumulated Benefits in Benefits Excess of Assets December 31, December 31, 1992 1993 1992 1993 (000's omitted) Actuarial present value of: Vested benefit obligation $(23,724) $(34,624) $(40,697) $(51,360) Accumulated benefit obligation $(24,572) $(35,634) $(40,720) $(51,393) Projected benefit obligation $(31,122) $(38,118) $(45,064) $(51,478) Plan assets at fair value 35,425 43,350 35,349 38,337 Plan assets in excess of (less than) projected benefit obligation 4,303 5,232 (9,715) (13,141) Unrecognized net loss 5,321 3,724 4,287 11,031 Unrecognized net asset from adoption date (431) (399) - - Unrecognized prior service cost 142 94 - - Adjustment required to recognize - - - (10,946) Pension asset (liability) at end of year $ 9,335 $ 8,651 $ (5,428) $(13,056)
Computational Assumptions Project Benefit Net Pension Cost Obligation 1991 1992 1993 1992 1993 Discount rate: Domestic 9 % 9 % 8 1/2% 8 1/2% 7 % International 10 9 9 9 7 3/4 Rate of increase in compensation levels: Domestic 6 6 5 1/2 5 1/2 5 International 7 6 6 6 5 1/2 Expected long-term rate of return on assets: Domestic 9 1/2 9 1/2 9 1/2 - - International 11 10 10 - -
Benefit basis: Salaried plans: earnings during career Hourly plans: dollar units, multiplied by years of service Funding policy: 5 to 30 years. F-12 26 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) I. PENSION AND SAVINGS PLANS (CONTINUED) As part of Cooper, the domestic salaried employees of Cameron participate in the Salaried Employees' Retirement Plan of Cooper Industries, Inc. while the United Kingdom (U.K.) salaried and hourly employees participate in a combined plan along with certain other Cooper employees in the U.K. The domestic hourly employees of Cameron participate in the Cameron Iron Works USA, Inc. Retirement Plan for Hourly Employees as well as the Cameron Iron Works USA, Inc. Savings-Investment Plan for Hourly Employees (the Cameron Hourly Savings Plan). Under the Cameron Hourly Savings Plan employee savings deferrals are partially matched with company contributions of cash. The amounts shown in the preceding table reflect amounts allocated to Cameron as its proportionate share of both the domestic and the combined U.K. plans. Aggregate pension expense amounted to $2,680,000 in 1991, $2,612,000 in 1992 and $3,031,000 in 1993. Cameron's expense with respect to the defined benefit pension plans is set forth in the table above. For 1994, primarily as a result of the reduction in the domestic discount rate from 8.5% to 7%, Cameron's domestic defined benefit pension plan expense is projected to increase by approximately $1,400,000. Expense with respect to the domestic defined contribution plan for the years ended December 31, 1991, 1992 and 1993 amounted to $372,000, $368,000 and $309,000, respectively. Gains and losses on curtailments and settlements were not material in any of the three years ended December 31, 1993. The assets of the domestic and foreign plans are maintained in various trusts and consist primarily of equity and fixed income securities. At December 31, 1993, the $10,946,000 "minimum liability" with respect to the domestic hourly pension plan has been recorded in the Combined Balance Sheet as a long-term liability with an offsetting reduction in caption "Net Assets." The remaining December 31, 1993 liability of $2,110,000 with respect to this plan is included in accounts payable and accrued liabilities partially offset by a $101,000 asset with respect to the domestic salaried plan. The remaining pension asset of $8,550,000 relates to the United Kingdom pension plan and is included in a long-term pension asset caption. At December 31, 1992 there was no "minimum liability" with respect to the domestic hourly plan and the plan's regular liability of $5,428,000 was recorded in accounts payable and accrued liabilities partially offset by an $83,000 asset with respect to the domestic salaried plan. The remaining asset of $9,252,000 which related to the United Kingdom plan was recorded in a long-term pension asset caption. Cameron's full-time domestic salaried employees are also eligible to participate in the Cooper Savings and Stock Ownership Plan. Under the Cooper Savings and Stock Ownership Plan, employee's savings deferrals are partially matched with an allocation of shares in Cooper's Employee Stock Ownership Plan (ESOP). No assets or liabilities with respect to Cooper's ESOP have been included in F-13 27 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) I. PENSION AND SAVINGS PLANS (CONTINUED) Cameron's combined financial statements. Cameron's expense equals the matching contribution under the Plan's formula adjusted to reflect Cameron's proportionate participation in Cooper's ESOP. Expense for the years ended December 31, 1991, 1992 and 1993 amounted to $367,000, $366,000 and $343,000, respectively. J. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS As part of Cooper, Cameron's salaried employees participate in various domestic employee welfare benefit plans including for active employees medical, dental and prescriptions, among other benefits. Salaried employees who retired prior to 1989, as well as certain other employees who were near retirement and elected to receive certain benefits, have retiree medical, prescription and life insurance benefits while active salaried employees will not have postretirement medical benefits. The hourly employees have separate plans with varying benefit formulas. In all cases, however, currently active employees, except for certain employees who are near retirement and previously elected to receive certain benefits, will not receive health care benefits after retirement. Cameron entered into a union agreement in 1992 which reduced certain postretirement health care benefits and resulted in a curtailment gain of $1,500,000. In addition, certain amendments were made in 1992 which resulted in an additional $1,900,000 of accumulated postretirement benefit obligation and additional expense of $300,000 in 1992 and 1993. All of Cooper's plans and therefore Cameron's portion of such plans are unfunded. As described in Note C of the Notes to the Combined Financial Statements, Cooper, and therefore Cameron, elected for the year 1992 and future years to follow the provisions of SFAS No. 106 (Employers' Accounting for Postretirement Benefits Other Than Pensions). The amounts reflected in the table which follows represent Cameron's portion of Cooper's overall salaried employee retiree liability as well as Cameron's proportionate amounts in various plan groupings which were actuarially evaluated in arriving at Cooper's overall expense in accordance with SFAS No. 106. F-14 28 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) J. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
Accumu- Items Not Yet Amounts Per lated Recorded Financial Statements Post- in Financial Liability tirement Statements for Post- Benefit Actu- retirement Net Obliga- Prior arial Benefits Annual tion Service Net Other Than Expense (APBO) Cost Gain Pensions (Income) Balance - December 31, 1991 $ (2,178) $ - $ - $ (2,178) $ - Adoption of SFAS No. 106 effective January 1, 1992 (9,922) - - (9,922) - Plan activity: Service cost (200) - - - 200 Interest cost (900) - - - 900 Benefit payments 576 - - 576 - Plan amendments (1,900) 1,900 - - - Amortization of unrecognized prior service cost - (300) - - 300 Curtailment gain 1,500 - - - (1,500) Net annual expense - - - 100 - Balance - December 31, 1992 (13,024) 1,600 - (11,424) $ (100) Plan activity: Service cost (100) - - - $ 100 Interest cost (800) - - - 800 Benefit payments 383 - - 383 - Actuarial net gain 4,400 - (4,400) - - Amortization of unrecognized prior service cost - (300) - - 300 Net annual expense - - - (1,200) - Balance - December 31, 1993 $ (9,141) $1,300 $(4,400) $(12,241) $ 1,200
F-15 29 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) J. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
December 31, 1992 1993 Amount of APBO related to: Retired employees $(6,512) $(4,753) Employees eligible to retire (2,214) (1,554) Other employees (4,298) (2,834) Actuarial assumptions: Discount rate 7.64% 7.58% 1993 to 2002 - health-care cost trend rate: 20% Ratable 17% Ratable to 5.5% to 5.5% Effect of 1% change in health-care cost trend rate: Increase December 31, 1992 APBO 9% 9% Increase 1992 expense 10% 10%
K. NET ASSETS Changes in net assets during the three years ended December 31, 1993 were as follows:
Trans- lation Minimum Adjust- Pension Total ment Liability(1) Other (000's omitted) Balance at December 31, 1990 $ 85,781 $ 2,800 $ - $ 82,981 Translation adjustment 598 598 - - Cash flow transferred to Cooper (8,243) - - (8,243) Net income 8,122 - - 8,122 Balance at December 31, 1991 86,258 3,398 - 82,860 Translation adjustment (4,909) (4,909) - - Cash flow provided by Cooper 14,359 - - 14,359 Net (loss) (9,555) - - (9,555) Balance at December 31, 1992 86,153 (1,511) - 87,664 Translation adjustment (1,301) (1,301) - - Cash flow provided by Cooper 10,597 - - 10,597 Adjustment required to recognize minimum pension liability (10,946) - (10,946) - Net (loss) (20,054) - - (20,054) Balance at December 31, 1993 $ 64,449 $(2,812) $(10,946) $ 78,207 (1) See Note I of the Notes to Combined Financial Statements.
Intercompany transactions are principally cash transfers between Cameron and Cooper. F-16 30 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) L. INDUSTRY SEGMENTS, DOMESTIC AND INTERNATIONAL OPERATIONS, AND MAJOR CUSTOMERS Cameron's operations are conducted within one business segment -- forged products. Translation and transaction gains and losses included in each year's Combined Results of Operations were not significant. Net sales to major customers as a percentage of sales were as follows:
Year Ended December 31, 1991 1992 1993 General Electric 25.4% 27.3% 29.6% Rolls-Royce plc 9.8 11.7 10.5 United Technologies 9.0 10.6 10.2
Domestic and International Operations -- Transfers between domestic and international operations, principally inventory transfers, are charged to the receiving organization at prices sufficient to recover manufacturing costs and provide a reasonable return. Export sales to unaffiliated customers included in domestic sales were $13,000,000 in 1991, $15,500,000 in 1992 and $14,900,000 in 1993. Of total export sales, 25% (63% in 1992 and 24% in 1993) were to Europe, 38% (26% in 1992 and 44% in 1993) were to Canada, and 37% (11% in 1992 and 32% in 1993) were to Asia.
Revenues Year Ended December 31, 1991 1992 1993 (000's omitted) Domestic $159,557 $132,306 $116,014 Europe 41,677 42,158 33,585 Eliminations: Transfers to Europe (1,845) (130) (65) Transfers to Domestic (452) - - $198,937 $174,334 $149,534
F-17 31 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) L. INDUSTRY SEGMENTS, DOMESTIC AND INTERNATIONAL OPERATIONS, AND MAJOR CUSTOMERS (CONTINUED)
Operating Earnings (Loss) (1) Year Ended December 31, 1991 1992(2) 1993 (000's omitted) Domestic $14,276 $5,738 $(19,848) Europe 550 1,799 (2,317) Eliminations: Transfers to Europe 242 - 7 Transfers to Domestic (10) - - $15,058 $7,537 $(22,158) (1) Combined income before income taxes and the cumulative effect of changes in accounting principles in 1992. (2) Domestic operating earnings include nonrecurring income as further described in Note D of the Notes to the Combined Financial Statements.
Identifiable Assets December 31, 1991 1992 1993 (000's omitted) Domestic $105,900 $114,720 $108,348 Europe 50,837 49,130 43,485 Eliminations: Transfers to Europe (242) - 7 Transfers to Domestic 10 - - $156,505 $163,850 $151,840
M. INCOME TAXES Income (loss) before income taxes and cumulative effect of changes in accounting principles is comprised of the following:
Year Ended December 31, 1991 1992 1993 (000's omitted) Income (loss) before income taxes and cumulative effect of changes in accounting principles: U.S. operations $14,518 $5,738 $(19,841) Foreign operations 540 1,799 (2,317) Income (loss) before income taxes and cumulative effect of changes in accounting principles $15,058 $7,537 $(22,158)
F-18 32 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) M. INCOME TAXES (CONTINUED) Income tax expense (benefit) is comprised of the following:
Deferred Liability Method Method 1991 1992 1993 (000's omitted) Income taxes: Currently payable: U.S. Federal $3,357 $ - $ - U.S. state and local - - - Foreign 557 - - 3,914 - - Deferred: U.S. Federal 3,317 2,861 (1,916) U.S. state and local - 6 (4) Foreign (295) 128 (184) 3,022 2,995 (2,104) Income tax expense (benefit) $6,936 $2,995 $(2,104) Following is a summary of items giving rise to deferred income taxes: Excess of tax over book depreciation $1,323 $ - $ - Capitalized for books and expensed for tax 2,311 - - Reserves and accruals 330 - - LIFO inventory (829) 3,222 (1,974) Other (113) (227) (130) Deferred income taxes $3,022 $2,995 $(2,104) The provision for income taxes is at a rate other than the federal statutory tax rate for the following reasons: U.S. Federal statutory rate 34.0% 34.0% (34.0)% Nontaxable permanent difference on book depreciation (10.1) - - Net domestic and foreign losses without tax benefits 22.2 5.7 24.5 Indicated effective tax rate 46.1% 39.7% (9.5)% Following is the amount of income taxes refunded: Total income taxes refunded* $ (809) $ - $ - * Taxes are refunded by Cameron to Cooper who in turn receives the taxes from the various taxing authorities.
F-19 33 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) M. INCOME TAXES (CONTINUED) The components of deferred tax liabilities and assets were as follows:
December 31, 1992 1993 (000's omitted) Deferred tax liabilities: LIFO inventory $(11,411) $ (9,437) Other (4,255) (4,125) Total deferred tax liabilities (15,666) (13,562) Deferred tax assets: Reserves and accruals 7,866 9,632 Plant and equipment 5,622 2,959 Postretirement benefits other than pensions 3,889 4,168 Net operating loss carryforwards 9,689 15,139 Total deferred tax assets 27,066 31,898 Valuation allowances (27,066) (31,898) Net deferred tax liabilities $(15,666) $(13,562)
Although Cameron's U.S. operations were included in the consolidated U.S. Federal and certain combined and separate state income tax returns of Cooper and its foreign operations were included in the tax return of a Cooper subsidiary doing business in the U.K., the above tax provisions and tax liabilities presented have been determined as if Cameron's operations in all countries were stand-alone businesses filing separate tax returns. Deferred income taxes have been determined from temporary differences between financial statement income and taxable income with appropriate valuation allowances based on Cameron's stand-alone ability to utilize both net operating losses and other deferred tax assets. The balance of accrued taxes for Cameron's U.S. and foreign operations is included in Cameron's intercompany/equity balance with Cooper, since Cooper pays all taxes and receives all tax refunds on Cameron's behalf. Income tax expense and the information shown above for 1992 and 1993 have been determined in accordance with the provisions of SFAS No. 109 (Accounting for Income Taxes) which basically provides for a "liability" approach to taxes. Income taxes for years prior to 1992 have not been restated and are accordingly reflected above based on a "deferred" approach to taxes. The major difference between the two approaches as reflected in the information above is that (a) acquisition date fair market value write-downs of plant and equipment which were not tax effected and therefore treated as permanent differences have now been tax effected and (b) items that were previously accounted for on a "net-of-tax" basis (primarily acquisition date reserves and accruals of acquired businesses and F-20 34 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) M. INCOME TAXES (CONTINUED) certain fair market value adjustments of inventories and fixed assets) are now considered to be "temporary differences" that give rise to larger deferred tax amounts in the provision disclosure. See Note C of the Notes to Combined Financial Statements. On a stand-alone basis, Cameron has pre-tax net operating loss carryforwards of $44,526,471 ($0 net of the valuation allowance) at December 31, 1993 with the earliest expiration date being 2000. These net operating losses have in fact been utilized by Cooper in its consolidated return, except for a $8,165,000 net operating loss which existed at acquisition date and must be utilized by Cameron on a separate return basis. The adoption of SFAS No. 109 has not changed the actual amount of income tax that Cameron pays nor, except for the $1,500,000 increase in income tax expense described in Note C of the Notes to Combined Financial Statements, has it changed Cameron's income tax expense. The U.S. Federal portion of the above provision includes U.S. tax expected to be payable on the foreign portion of Cameron's income before income taxes when such earnings are remitted. Through December 31, 1993, essentially all earnings of Cameron's foreign operations have been remitted. N. RELATED PARTY TRANSACTIONS Cameron receives services provided by Cooper which include employee benefits administration, cash management, risk management, certain legal services, public relations, domestic tax reporting and internal and domestic external audit. The costs associated with these services have been allocated to Cameron. See Note B of the Notes to Combined Financial Statements. For purposes of Cameron's financial statements, the intercompany account between Cameron and Cooper has been included as an element of Cameron's net assets. All free cash flows and cash requirements of Cameron are considered to be transferred to or provided by Cooper and are included in this intercompany account. Cameron sells products to Cooper on third party terms which amounted to $10,000,000 in 1991, $6,400,000 in 1992 and $4,700,000 in 1993. In addition, Cameron incurs expense for use of Cooper's mainframe computer and charges Cooper for shared office space and administrative personnel in the U.K. The amounts involved in these transactions are not material to Cameron. F-21 35 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) O. OFF-BALANCE-SHEET ITEMS, CONCENTRATIONS OF CREDIT AND FAIR VALUE OF FINANCIAL INSTRUMENTS OFF-BALANCE-SHEET ITEMS Cameron enters into forward exchange contracts to hedge certain foreign currency transactions for periods consistent with the terms of the underlying transactions. Cameron does not engage in speculation, nor does Cameron typically hedge nontransaction-related balance sheet exposure. While the forward contracts affect Cameron's results of operations, they do so only in connection with the underlying transactions. As a result, they do not subject Cameron to risk from exchange rate movements, because gains and losses on these contracts offset losses and gains on the transactions being hedged. At December 31, 1992 and 1993, Cameron had approximately $1,800,000 and $2,000,000, respectively of foreign exchange contracts outstanding for the exchange of British pounds for other European currencies, Canadian dollars, U.S. dollars or Japanese yen. The forward exchange contracts have maturities that generally do not exceed one year. Cameron's other off-balance-sheet risks are not material. CONCENTRATIONS OF CREDIT Concentrations of credit with respect to trade receivables are limited due to the wide variety of customers and markets into which Cameron's products are sold, as well as their dispersion across many different geographic areas. As a result, at December 31, 1993, Cameron does not consider itself to have any significant concentrations of credit risk except for receivables of $4,528,000, $3,701,000, and $4,903,000 from General Electric, Rolls-Royce plc and United Technologies, respectively. FAIR VALUE OF FINANCIAL INSTRUMENTS Cameron's financial instruments consist primarily of trade receivables, trade payables, and foreign currency forward contracts. The book values of trade receivables and trade payables are considered to be representative of their respective fair values. Based on year-end exchange rates and the various maturity dates of the foreign currency forward contracts, Cameron estimates the aggregate contract value to exceed the fair value by .3% at December 31, 1993. F-22 36 CAMERON FORGED PRODUCTS DIVISION NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED) P. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter 1st 2nd 3rd 4th (000's omitted) 1992 Revenues $ 46,903 $48,346 $ 43,821 $35,264 Gross margin(1) 6,450 8,982 5,097 4,583 Income (loss) before cumulative effect of changes in accounting principles(2) 326 2,818 1,808 (410) Cumulative effect on prior years of changes in accounting principles (14,097) - - - Net income (loss)(2) (13,771) 2,818 1,808 (410) 1993 Revenues $ 37,371 $36,508 $ 39,975 $35,680 Gross margin (loss)(1) 3,969 3,140 (13,674) 5,213 Net income (loss) (782) (1,822) (17,289) (161) (1) Gross margin equals sales less cost of goods sold (including loss on long-term contracts and agreements) before depreciation and amortization. (2) Includes nonrecurring income as further described in Note D of the Notes to Combined Financial Statements.
F-23 37 ANNEX II UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF WYMAN-GORDON COMPANY WITH CAMERON FORGED PRODUCTS COMPANY The following unaudited pro forma combined financial data give effect to the Acquisition and are based on estimates and assumptions set forth below in the notes to such data which include pro forma adjustments. These unaudited pro forma combined financial data have been prepared utilizing the historical financial statements of the Company and Cameron and should be read in conjunction with such historical financial statements and accompanying notes. The unaudited pro forma combined financial data do not reflect any sales attrition which may result from the combination or the cost savings that the Company expects to achieve from the combination. These unaudited pro forma combined financial data do not purport to be indicative of the results which actually would have been obtained if the Acquisition had been effected on the date or dates indicated or of those results which may be obtained in the future. The pro forma combined financial data are based on the purchase method of accounting for the Acquisition. The pro forma condensed combined balance sheet assumes an April 2, 1994 acquisition date. The pro forma combined statements of operations assume that the Acquisition had occurred on January 1, 1993. Although neither the Company nor Cooper has complete current information as to the fair market values of Cameron's individual assets and liabilities, a preliminary estimate of the allocation of the purchase price was made on the basis of available information. The actual allocation of the purchase price may be different from that reflected in the pro forma financial data. Such differences would result from adjustments in the purchase price and refinements in the fair market values of the net assets acquired. P-1 38 UNAUDITED PRO FORMA COMBINED BALANCE SHEET April 2, 1994
Historical Pro Forma Wyman- Adjust- Combined Gordon Cameron ments Companies (000's Omitted, except per share data) ASSETS: Cash and cash equivalents $ 25,255 $ - $ (400)(d) $ 49,466 24,611 (c) Accounts receivable 49,208 33,076 - 82,284 Inventories 41,005 50,490 2,167 (d) 93,662 Prepaid expenses 11,024 389 - 11,413 Total current assets 126,492 83,955 26,378 236,825 Property, plant and equipment, net 94,643 60,018 (15,959)(d) 122,402 (16,300)(a) Intangible assets 20,550 2,137 (2,137)(d) 21,350 800 (d) Pension intangible and asset 8,368 8,546 (8,546)(b) 8,368 Deferred income taxes - - 10,002 (d) 10,002 Other assets 29,757 105 - 29,862 $279,810 $154,761 $ (5,762) $428,809 LIABILITIES AND STOCKHOLDERS' EQUITY: Current maturities of long-term debt $ 77 $ - $ - $ 77 Accounts payable and accrued liabilities 26,307 33,234 (1,517)(b) 58,024 Note payable - - 24,862 (c) 24,862 Loss on long-term contracts and agreements - 15,200 7,400 (d) 22,600 Deferred income taxes - 9,147 (9,147)(d) - Accrued restructuring, integration, disposal and environmental 4,425 - 7,759 (d) 23,284 11,100 (a) Total current liab. 30,809 57,581 40,457 128,847 Restructuring, integration, disposal and environmental 13,549 - 9,553 (d) 23,102 Long-term debt 90,461 - - 90,461 Pension liability 14,065 10,946 (10,946)(b) 18,565 4,500 (d) Deferred income taxes and other 9,275 4,293 (4,293)(d) 12,461 3,186 (d) Postretirement benefits other than pensions 41,817 12,159 - 53,976 Stockholders' equity 79,834 69,782 (27,400)(a) 101,397 (251)(c) 49,214 (d) (69,782)(d) $279,810 $154,761 $ (5,762) $428,809
P-2 39 UNAUDITED PRO FORMA COMBINED BALANCE SHEET (CONTINUED) April 2, 1994
Historical Pro Forma Wyman- Adjust- Combined Gordon Cameron ments Companies (000's Omitted, except per share data) Book value per share $ 4.43 $ 2.94 Number of common shares outstanding used to calculate book value per share 18,040 34,540
P-3 40 UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF WYMAN-GORDON COMPANY WITH CAMERON FORGED PRODUCTS COMPANY UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1993
Historical Pro Forma Wyman- Adjust- Combined Gordon Cameron ments Companies (000's Omitted, except per share data) Revenue $239,761 $149,534 $ - $389,295 Cost and expenses: Cost of sales 210,069 135,686 4,206 (e) 349,961 Selling, general and administrative 20,098 11,904 175 (e) 32,177 Depreciation and amortization 15,569 8,902 (4,590)(e) 19,881 Loss on long-term contracts and agreements - 15,200 - 15,200 Other 2,453 - - 2,453 248,189 171,692 (209) 419,672 Income (loss) from operations (8,428) (22,158) 209 (30,377) Other deductions (income): Interest expense 9,897 - 318 (e) 10,215 Miscellaneous, net (1,321) - - (1,321) 8,576 - 318 8,894 Income (loss) before income taxes and cumulative effect of changes in accounting principles (17,004) (22,158) (109) (39,271) Income tax (expense) benefit - 2,104 (2,104)(e) - Income (loss) before cumulative effect of changes in accounting principles $(17,004) $(20,054) $(2,213) $(39,271) Income (loss) per share before cumulative effect of changes in accounting principles $ (0.95) $ (1.14) Average number of common shares outstanding 17,936 34,436
P-4 41 UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF WYMAN-GORDON COMPANY WITH CAMERON FORGED PRODUCTS COMPANY UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ENDED APRIL 2, 1994
Historical Pro Forma Wyman- Adjust- Combined Gordon Cameron ments Companies (000's Omitted, except per share data) Revenue $ 52,268 $ 38,836 $ - $ 91,104 Cost and expenses: Cost of sales 48,962 34,134 1,849 (f) 84,945 Selling, general and administrative 5,352 2,731 43 (f) 8,126 Depreciation and amortization 3,812 2,138 (1,225)(f) 4,725 58,126 39,003 667 97,796 Income (loss) from operations (5,858) (167) (667) (6,692) Other deductions (income): Interest expense 2,399 - 80 (f) 2,479 Miscellaneous, net 429 - - 429 2,828 - 80 2,908 Income (loss) before income taxes (8,686) (167) (747) (9,600) Income tax (expense) benefit - 122 (122)(f) - Net income (loss) $ (8,686) $ (45) $ (869) $ (9,600) Net income (loss) per share $ (0.48) $ (0.28) Average number of common shares outstanding 18,017 34,517
P-5 42 NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF WYMAN-GORDON COMPANY WITH CAMERON FORGED PRODUCTS COMPANY (a) The unaudited pro forma combined statements of operations do not include non-recurring charges which result from the transaction and the integration into the Company of Cameron, and which are expected to be charged to operations at the consummation of the Acquisition. Such charges, which are expected to approximate $27.4 million, represent only those integration expenses related to the Company's personnel, facilities, machinery and equipment and production operations and include movement of machinery and equipment and tooling and dies, transfer of technology between the Company and Cameron, relocation and severance of personnel of the Company and the write-down of certain assets of the Company to net realizable value as a result of consolidating certain systems and facilities, idling certain machinery and equipment, and eliminating certain processes, departments, and operations as a result of the acquisition. Following is a summary of such charges based on the Company's current plans for the integration into the Company of Cameron which have been reflected in the pro forma balance sheet (000's omitted):
Cash Non-Cash Total Movement of the Company's machinery and equipment and tooling dies $ 5,100 $ - $ 5,100 Relocation, severance and other costs related to personnel of the Company 6,000 - 6,000 Write-down of certain assets of the Company to net realizable value: Metal production facility - 8,500 8,500 Forging equipment - 5,700 5,700 Machining and testing equipment - 2,100 2,100 $11,100 $16,300 $27,400
Certain of these charges are preliminary estimates based on current plans for the integration into the Company of Cameron and may change based on additional information. (b) To eliminate Cameron assets not acquired and liabilities not assumed. (c) To reflect the planned factoring of Cameron's U.S. accounts receivable by Cooper in accordance with the Stock Purchase Agreement and under terms and conditions that provide for a purchase price of 99% of the total face amount of such receivables, less a reserve of uncollectible accounts and for the repurchase by the Company of any such receivables uncollected 90 days following the Acquisition. P-6 43 (d) To record the purchase price, to allocate the purchase price to acquired assets and liabilities based on their relative fair values, and to adjust property, plant and equipment for the excess of the fair value of net assets acquired over the purchase price as follows (000's omitted):
Cost of acquisition: Issuance of 16,500 shares of common stock to Cooper, including direct costs of $2,527 $ 49,214 Note payable to Cooper net of discount of $1,414 3,186 Cash paid to Cooper 400 52,800 Estimated direct costs to the acquisition and integration of Cameron into the Company 17,312 $ 70,112 Allocation of cost of acquisition: Historical cost of net assets acquired $ 73,699 Purchase accounting adjustments: Adjust inventories to reflect the Company's full absorption method of valuing inventories 2,167 Adjust intangible assets to fair value (2,137) Record favorable lease 800 Record revaluation of Cameron's long-term sales agreements (7,400) Record pension transition liability (4,500) Adjust deferred income taxes: Long-term asset 10,002 Current liability 9,147 Long-term liability 4,293 Adjustment to property, plant and equipment (15,959) $ 70,112
The Stock Purchase Agreement provides for adjustment of the purchase price based on changes in certain assets and liabilities between September 26, 1993 and the closing date. Management presently believes these adjustments will not significantly affect the purchase price. Estimated direct costs related to the Acquisition and integration of Cameron into the Company include the following (000's omitted):
Long- Current Term Total Stand-alone costs for settling assumed workers compensation liabilities $ - $1,400 $ 1,400 Cost of relocating Cameron's machinery and equipment and tooling and dies 2,100 6,100 8,200 Severance of Cameron personnel 3,500 - 3,500 Other 2,159 2,053 4,212 $7,759 $9,553 $17,312 P-7 44 All such costs are incremental and directly related to the Acquisition and reflect only those costs associated with Cameron's facilities, organization, and personnel. Certain of these costs are estimates based on preliminary information and may change based on receipt of additional information.
(e) To adjust historical operating results for the year ended December 31, 1993 to reflect the Acquisition as follows (000's omitted):
Increase (Decrease) in Income Selling, Deprec- General iation Income Cost and and Tax of Adminis- Amorti- Interest (Expense) Sales trative zation Expense Benefit Reflect the Company's full absorption method of valuing inventories $(1,592) Reflect stand-alone fringe benefit and insurance costs (2,214) $(175) Reflect amortization of favorable lease value (400) Reduce historical Cameron depreciation and amortization to reflect the acquisi- tion basis and useful lives of assets purchased $4,590(1) Reflect amortization of discount on note payable to Cooper ($2,300 discounted at 10% for 38 months and $2,300 at 10% for 50 months) $(318) Adjust income tax (expense) benefit to reflect the Acquisi- tion $(2,104) $(4,206) $(175) $4,590 $(318) $(2,104)
P-8 45 (1) Adjustment is calculated as follows:
Acquis- Estimated ition Useful Deprec- Basis Life iation Acquisition basis of property, plant and equipment: Land $ 3,012 N/A $ - Buildings and land improvements 9,035 25 years 362 Machinery and equipment 32,012 8 years 3,950 $44,059 4,312 Historical 1993 Cameron depreciation and amortization 8,902 Increase in income $4,590
P-9 46 (f) To adjust historical operating results for the thirteen weeks ended April 2, 1994 to reflect the Acquisition as follows (000's omitted):
Increase (Decrease) in Income Selling, Deprec- General iation Income Cost and and Tax of Adminis- Amorti- Interest (Expense) Sales trative zation Expense Benefit Reflect the Company's full absorption method of valuing inventories $(1,195) Reflect stand-alone fringe benefit and insurance costs (554) $(43) Reflect amortization of favorable lease value (100) Reduce historical Cameron depreciation and amortization to reflect the acquisi- tion basis and useful lives of assets purchased $1,225(1) Reflect amortization of discount on note payable to Cooper ($2,300 discounted at 10% for 38 months and $2,300 at 10% for 50 months) $(80) Adjust income tax (expense) benefit to reflect the Acquisi- tion $(122) $(1,849) $(43) $1,225 $(80) $(122)
P-10 47 (1) Adjustment is calculated as follows:
Acquis- Estimated ition Useful Deprec- Basis Life iation Acquisition basis of property, plant and equipment: Land $ 3,012 N/A $ - Buildings and land improvements 9,035 25 years 77 Machinery and equipment 32,012 8 years 836 $44,059 913 Historical Cameron depreciation and amortization for the three months ended March 31, 1994 2,138 Increase in income $1,225
P-11 48 INDEX TO EXHIBITS
Exhibit No. Description Page No. 99.1 Amended and Restated Stock Purchase 11 Agreement, dated as of January 10, 1994, between the Company and Cooper. 99.2 Investment Agreement, dated as of 12 January 10, 1994, between the Company and Cooper. 99.3 Press release issued by the Company 13 on May 26, 1994. 99.4 Amendment dated May 26, 1994 to 14 Investment Agreement dated as of January 10, 1994, between the Company and Cooper. 99.5 10 % Senior Notes due 2003 Supple- 15 mental Indenture dated May 19, 1994. 99.6 10 % Senior Notes due 2003 Second 16 Supplemental Indenture and Guarantee dated May 27, 1994. 99.7 Revolving Credit Agreement dated as 17 of May 20, 1994 among Wyman-Gordon Receivables Corporation, the Financial Institutions Parties Hereto and Shawmut Bank N.A. as Issuing Bank, as Facility Agent and as Collateral Agent. 99.8 Receivables Purchase and Sale 18 Agreement dated as of May 20, 1994 among Wyman-Gordon Company, Wyman- Gordon Investment Castings, Inc. and Precision Founders Inc. as the Sellers, Wyman-Gordon Company as the Servicer and Wyman-Gordon Receivables Corporation as the Purchaser. 99.9 Employment Agreement effective 19 March 24, 1994 between Wyman- Gordon Company and David P. Gruber. 99.10 Employment Agreement effective 20 March 4, 1994 between Wyman-Gordon Company and J. Douglas Whelan.
-10- 49
Exhibit No. Description Page No. 99.11 Performance Share Agreement under 21 the Wyman-Gordon Company Long-Term Incentive Plan between the Company and David P. Gruber dated as of May 24, 1994. 99.12 Executive Severance Agreement between 22 the Company and J. Douglas Whelan dated as of May 1, 1994.
-2- EX-99.1 2 1 EXHIBIT 99.1 AMENDED AND RESTATED STOCK PURCHASE AGREEMENT Between COOPER INDUSTRIES, INC. and WYMAN-GORDON COMPANY Dated as of January 10, 1994 -11- 2 STOCK PURCHASE AGREEMENT TABLE OF CONTENTS (Not Part of the Agreement)
SECTION PAGE PARTIES 1 PREAMBLES 1 ARTICLE I SALE OF COMPANY COMMON STOCK 1 1.1 Purchase and Sale 1 1.2 Consideration 1 1.3 Closing Balance Sheet 2 1.4 Seller's Review of Preliminary Closing Balance Sheet 5 1.5 Buyer Response to Seller's Letter 5 1.6 Meeting to Resolve Proposed Adjustments 5 1.7 Resolution by Accounting Arbitrator 6 1.8 Positive or Negative Purchase Price Adjustment 6 1.9 Values 7 1.10 Place of Payment 7 ARTICLE II CLOSING 7 2.1 Time and Place of Closing 7 2.2 Deliveries by the Seller 7 2.3 Deliveries by the Buyer 8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER 8 3.1 Organization 8 3.2 Capitalization 9 3.3 Authority Relative to This Agreement 9 3.4 Consents and Approvals; No Violations 10 3.5 Financial Statements 10 3.6 Absence of Certain Changes 11 3.7 No Undisclosed Liabilities 11 3.8 Information in Proxy Statement 12 3.9 Litigation 12 3.10 Compliance With Applicable Law 12 3.11 Taxes 13 3.12 ERISA; Employee Benefits 13 3.13 Intellectual Property 15 3.14 Material Contracts; No Defaults 16 3.15 Environmental Compliance 16 3.16 Title to Real Property 17 3.17 Company Assets 17 3.18 Labor Matters 17 3.19 Purchase for Investment 18 3.20 No Beneficial Ownership of the Buyer's Stock 18 3.21 Change in Control 18 3.22 Business of the Company 18 3.23 Representations Accurate 18
ii 3
SECTION PAGE ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER 19 4.1 Organization 19 4.2 Capitaliztion 19 4.3 Authority Relative to this Agreement 20 4.4 Consents and Approvals; No Violations 21 4.5 Reports 21 4.6 Absence of Certain Changes 22 4.7 No Undisclosed Liabilities 22 4.8 Information in Proxy Statement 23 4.9 Litigation 23 4.10 Compliance with Applicable Law 23 4.11 Taxes 23 4.12 ERISA; Employee Benefits 24 4.13 Intellectual Property 25 4.14 No Defaults 26 4.15 Environmental Compliance 26 4.16 Representations Accurate 26 4.17 Purchase for Investment 27 ARTICLE V COVENANTS 27 5.1 Business Covenants of the Seller 28 5.2 Business Covenants of the Buyer 29 5.3 Current Information 31 5.4 Access to Information 31 5.5 Reasonable Best Efforts 32 5.6 Consents; Filings 33 5.7 Shareholder Meeting 33 5.8 Amendment to Articles of Organization and By-Laws 34 5.9 Rights Agreement 34 5.10 Brokers or Finders 34 5.11 Fees and Expenses 34 5.12 Employee Benefits 34 5.13 Public Announcements 42 5.14 Use of the Company Name 42 5.15 Company Books and Records 43 5.16 Disclosure Supplements 43 5.17 Ancillary Agreement 43 5.18 WARN Act 44 5.19 Taxes 44 5.20 Existing Insurance Coverage 50 5.21 Certain Obligations 50 5.22 Survival; Indemnification 51 5.23 Repurchase of Receivables 55
ii 4
SECTION PAGE ARTICLE VI CONDITIONS 55 6.1 Conditions to Each Party's Obligation to Effect the Transactions Contemplated by this Agreement 55 6.2 Conditions of Obligations of the Seller to Effect the Transactions Contemplated by this Agreement 56 6.3 Conditions of Obligations of the Buyer to Effect the Transactions Contemplated by this Agreement 57 ARTICLE VII TERMINATION AND ABANDONMENT 57 7.1 Termination 57 7.2 Procedure and Effect of Termination 58 ARTICLE VIII MISCELLANEOUS 58 8.1 Amendment and Modification 58 8.2 Waiver of Compliance; Consents 58 8.3 Investigations; Survival Upon Termination 59 8.4 Notices 59 8.5 Annexes, Schedules and Exhibits 60 8.6 Descriptive Headings 60 8.7 Counterparts 60 8.8 Entire Agreement; Assignment 60 8.9 Governing Law 60 8.10 Specific Performance 60 8.11 Alternative Dispute Resolution 61 8.12 Non-Competition 62 8.13 Further Assurances 63 8.14 No Third-Party Beneficiaries 63 8.15 Remedies; Waiver 63 8.16 Severability 63
iii 5 AMENDED AND RESTATED STOCK PURCHASE AGREEMENT AMENDED AND RESTATED STOCK PURCHASE AGREEMENT, dated as of January 10, 1994 (the "Agreement"), between Cooper Industries, Inc., an Ohio corporation (the "Seller"), and Wyman-Gordon Company, a Massachusetts corporation (the "Buyer"). WHEREAS, the Seller owns all of the issued and outstanding shares of common stock, par value $.208-1/3 per share (the "Company Common Stock"), of Cameron Forged Products Company, a Delaware corporation (the "Company"); and WHEREAS, the Seller desires to sell and the Buyer desires to purchase the Company Common Stock; and WHEREAS, simultaneously with the execution and delivery of the Stock Purchase Agreement dated as of January 10, 1994 by and between the Buyer and the Seller (the "Original Agreement") and as an inducement to enter into the Original Agreement, the Buyer and the Seller have entered into the Investment Agreement dated as of the date hereof and in the form attached hereto as Annex I (the "Investment Agreement"), providing for certain arrangements with respect to their relationship following consummation of the transactions contemplated by this Agreement; and WHEREAS, the Buyer and the Seller wish to make certain technical corrections to the Original Agreement. NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree to amend and restate in its entirety the Original Agreement and all the terms and provisions thereof to read in their entirety as follows: ARTICLE I SALE OF COMPANY COMMON STOCK 1.1 Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, at the Closing (as hereinafter defined) the Seller will sell, assign, transfer and deliver to the Buyer, and the Buyer will accept and purchase from the Seller, all of the Company Common Stock. 1.2 Consideration. (a) Upon the terms and subject to the conditions of this Agreement, and in consideration of the sale, assignment, transfer and delivery of the Company Common Stock the Buyer will pay, issue, and deliver to the Seller the Consideration. The Consideration consists of (i) the Cash Consideration, (ii) the Balance Sheet Consideration Amount and (iii) the Equity Consideration. -1- 6 (b) The "Cash Consideration" $5,000,000 payable as follows: (i) The Buyer will pay to the Seller the sum of $400,000 at Closing and (ii) the Buyer will execute and deliver to Seller, at Closing, Buyer's promissory note, dated as of the Closing, in the form attached hereto as Annex II in the principal amount of $4,600,000 (the "Note"). (c) The "Equity Consideration" is 16,500,000 shares, par value $1.00 per share, of the Buyer's Common Stock. At Closing Buyer will issue and deliver to Seller the Equity Consideration. (d) The Balance Sheet Consideration Amount will be determined and paid as set forth herein. Within five days following the date on which the Final Net Asset Value is determined pursuant to the provisions of Section 1.8, either Seller shall pay to Buyer the Negative Net Asset Amount or Buyer shall pay to Seller the Positive Net Asset Amount, in either case, together with interest thereon at the annual rate of 4% per annum from the Closing Date (as hereinafter defined) until the date paid (the "Balance Sheet Consideration Amount"). 1.3 Closing Balance Sheet. Within 60 days following the Closing Date, the Buyer shall prepare and deliver to the Seller a consolidated balance sheet of the Company and the Company Subsidiaries as of the close of business on the Closing Date (the "Preliminary Closing Balance Sheet"). The Preliminary Closing Balance Sheet and the final balance sheet determined in accordance with Sections 1.4, 1.5, 1.6 and 1.7 of this Article I (the "Final Closing Balance Sheet") shall be prepared in accordance with principles, practices and procedures that are the same as those which resulted in the asset and liability values reflected in the Balance Sheet dated September 26, 1993, which is attached hereto as Annex III (the "Peg Balance Sheet"). The Preliminary Closing Balance Sheet and the Final Closing Balance Sheet are sometimes collectively referred to herein as the Preliminary and Final Closing Balance Sheets. Notwithstanding the foregoing, the following specific provisions shall take precedence over such principles, practices and procedures in the preparation of the Preliminary and Final Closing Balance Sheets: (a) The asset and liability amounts included in the Preliminary and Final Closing Balance Sheets will be the same as those included in the Peg Balance Sheet except as necessary to reflect those changes in the asset and liability values that result from new transactions and actual changes in facts and circumstances occurring during the period after (but not including) September 26, 1993 (the "Peg Date") through and including the Closing Date (the "Change Period"). (To illustrate, if an item of machinery and equipment was included in the Peg Balance Sheet at a net book value of $1 million, but had not been used for the past several years, or would no longer function, or would require major repairs to put it in working condition, this item would be valued at $1 million in the Preliminary and Final Closing Balance Sheets because no changes in facts or circumstances occurred during the Change Period which would warrant a reduction in the book value of that asset as of the -2- 7 Closing Date that would not have been equally appropriate as of the Peg Date. However, if a change in facts or circumstances occurred during the Change Period which would have warranted a change in the book value of such item of machinery and equipment that would not have been equally appropriate as of the Peg Date, then the book value of such item would be changed on the Preliminary and Final Closing Balance Sheets. As further examples, any liability which was under-accrued or over-accrued as of the Peg Date, absent a change in facts and circumstances during the Change Period, will be recorded so that it is equally under-accrued or over-accrued as of the Closing Date, and the aging of accounts receivable may constitute a change in facts and circumstances warranting a change in the bad debt reserve.) (b) The quantities of inventory used to determine the inventory amount to be included in the Preliminary and Final Closing Balance Sheets will be based on the results of a physical inventory to be taken as of the opening of business on the Closing Date in accordance with procedures to be mutually agreed to by the parties. The physical inventory quantities will be priced utilizing the same standard costs which were used in the determination of the inventory amount reflected in the Peg Balance Sheet and in the case of items which were not on hand as of the Peg Date in accordance with the normal procedures of the Company. The Preliminary and Final Closing Balance Sheets will include a LIFO debit of $8,226,129 which is the same amount as the LIFO debit included in the Peg Balance Sheet. The Preliminary and Final Closing Balance Sheets will not include any reserve or accrual with respect to inventory shrinkage but will include reserves or accruals for any other inventory valuation matter that are equal in amount to any such reserves or accruals that were included in the Peg Balance Sheet, including without limitation, reserves and accruals for excess, obsolete or slow moving inventory or for loss jobs. (c) No depreciation or amortization expense shall be recorded for the Change Period. As a result, the accumulated depreciation and amortization balances reflected in the Preliminary and Final Closing Balance Sheets shall be the same as the amounts included in the Peg Balance Sheet adjusted only for asset sales or other dispositions in the ordinary course of business and in accordance with the terms of this Agreement. (d)The Peg Balance Sheet did not and the Preliminary and Final Closing Balance Sheets will not include any payable or receivable for (i) federal income tax or (ii) state and local income tax balances. The deferred tax balances on the Preliminary and Final Closing Balance Sheets will be the same as the deferred tax balances included in the Peg Balance Sheet adjusted only to reflect changes in the book or tax basis of the underlying assets and liabilities which occur during the Change Period. -3- 8 (e) The Peg Balance Sheet did not and the Preliminary and Final Closing Balance Sheets will not include any cash either on- hand or in banks other than cash equal to the "Receivables Purchase Price" paid by the Seller to the Company pursuant to the Factoring Agreement (as hereinafter defined) and the Peg Balance Sheet did not and the Preliminary and Final Closing Balance Sheets will not include any payable or receivable between the Company and the Seller including any of Seller's Affiliates. (f)The Peg Balance Sheet did not and the Preliminary and Final Closing Balance Sheets will not include any assets or liabilities with respect to the Company's Domestic Retirement and Savings Plans or Seller U.K. Pension Plans (as such terms are hereinafter defined). (g) The Peg Balance Sheet did not and the Preliminary and Final Closing Balance Sheets will not include any amounts as to land, land improvements or buildings or environmental accruals with respect to the Katy Road Site (as hereinafter defined). (h) For purposes of this Agreement, a change in translation rates between the U.S. dollar and various foreign currencies, including the U.K. pound, during the Change Period will be considered to be a change in facts and circumstances. (i) The deferred tax asset amount included in the Preliminary and Final Closing Balance Sheets will be net of a deferred tax asset valuation allowance of $2,776,000 which is the same as the deferred tax asset valuation allowance included in the Peg Balance Sheet. (j) The Peg Balance Sheet did not and the Preliminary and Final Closing Balance Sheets will not include any amounts (assets or liabilities) with respect to the Gulf Metals Site (as hereinafter defined). (k) The Peg Balance Sheet did not and the Preliminary and Final Closing Balance Sheets will not include any adjustments to asset or liability amounts, including any adjustments for currency translation (increase or decrease) which may occur in connection with a transfer as contemplated by this Agreement at other than current book value of U.K. assets or other assets used in the Business between (i) Seller and the Seller's Subsidiaries and (ii) the Company and the Company's Subsidiaries. (l) The Tech Mod accrual to be included in the Preliminary and Final Closing Balance Sheets will be the same as the Tech Mod accrual included in the Peg Balance Sheet. (m) The Preliminary and Final Closing Balance Sheets will include a prepaid asset equal to 1% of the trade and notes receivable of the Company sold to Seller pursuant to the Factoring Agreement. -4- 9 (n)The Peg Balance Sheet did not and the Preliminary and Final Closing Balance Sheets will not include any reserve or accrual with respect to any loss or potential liability which the Company may have in connection with Item 1 in Section 3.7 of the Seller Disclosure Schedule. (o) The Preliminary and Final Closing Balance Sheets will not include any accruals with respect to company matching contributions to the Seller Salaried 401(k) Plan and the Seller Hourly 401(k) Plan (as such terms are defined in Section 5.12(c)). 1.4 Seller's Review of Preliminary Closing Balance Sheet. Seller shall have 30 days following receipt of the Preliminary Closing Balance Sheet to review (the "Seller's Review") such balance sheet. If Seller determines, in Seller's reasonable judgment, that it has not been prepared in accordance with the provisions of Section 1.3 then within the said 30-day period allowed for Seller's Review, Seller shall prepare and deliver a letter to Buyer (the "Seller's Letter") setting forth in reasonable detail the adjustments that Seller determines are appropriate. During the said 30-day period, Buyer shall grant Seller reasonable access during normal business hours to the books and records of the Company and its working papers pertaining to the Preliminary Closing Balance Sheet and shall authorize the Company's auditors to grant Seller's auditors access to any working papers or other documents prepared by such auditors with respect to the Preliminary Closing Balance Sheet. If Seller does not prepare and furnish Seller's Letter to Buyer within the said 30-day period, then the Preliminary Balance Sheet as prepared by Buyer will become the Final Closing Balance Sheet. 1.5 Buyer Response to Seller's Letter. Buyer will have 15 days following receipt of Seller's Letter, if any, to review such letter and prepare a written response (the "Buyer's Letter") setting forth Buyer's position with respect to each adjustment proposed by Seller in Seller's Letter. If Buyer does not prepare and furnish Buyer's Letter to Seller within the 15 days allowed, then all of the adjustments set forth in Seller's Letter shall be deemed to have been accepted by Buyer, and the Final Closing Balance Sheet shall be prepared by adjusting the Preliminary Closing Balance Sheet for all of the adjustments set forth in Seller's Letter. 1.6 Meeting to Resolve Proposed Adjustments. As soon as practicable, but not later than ten days following the receipt by Seller of Buyer's Letter, if any, the parties shall meet and endeavor to mutually resolve any of Seller's adjustments not agreed to in Buyer's Letter. If the parties reach agreement on the remaining adjustments, if any, then the Final Closing Balance Sheet shall be prepared by adjusting the Preliminary Closing Balance Sheet for the adjustments agreed to in Buyer's Letter and those resolved by the parties. -5- 10 1.7 Resolution by Accounting Arbitrator. If the parties do not meet within the said ten-day period, or they fail to agree to meet at some later date, or they meet but are unable to resolve all of the adjustments set forth in Seller's Letter to the mutual satisfaction of both parties, then the parties, jointly, or if one party is unwilling then the other party singly, shall engage the New York office of the firm of Deloitte & Touche (the "Accounting Arbitrator") to resolve any of Seller's adjustments which remain unresolved. The Accounting Arbitrator shall be furnished with a copy of the Agreement, the Peg Balance Sheet, the Preliminary Closing Balance Sheet, Seller's Letter, Buyer's Letter and any other relevant correspondence between the parties. The Accounting Arbitrator must, within 30 days from the date such documents are furnished, complete his review and render a written report setting forth his conclusion with respect to each of Seller's adjustments which were unresolved between the parties. The Accounting Arbitrator shall be granted access to the books and records of the Company as well as the working papers or other documents which either party or its accountants may have which relate to the Preliminary Closing Balance Sheet and any other documents or information which the Accounting Arbitrator may deem appropriate. The Accounting Arbitrator's review shall be limited to the purpose of determining whether, in respect of each disputed adjustment, the Seller's proposed adjustment or the Buyer's position with respect to the Seller's proposed adjustment is more nearly in accordance with the terms of this Agreement. The parties shall have the right to submit written materials to the Accounting Arbitrator and make oral presentations all in accordance with procedures to be set forth in the engagement letter between the parties and the Accounting Arbitrator. In arriving at his determination the Accounting Arbitrator must select for each adjustment either the Seller's proposed adjustment or Buyer's position with respect to the Seller's proposed adjustment. The decision by the Accounting Arbitrator shall be in writing and delivered to both Buyer and Seller. The Accounting Arbitrator's said decision shall be conclusive and binding upon the parties and may be entered and enforced in any court of competent jurisdiction. The parties agree to submit to the jurisdiction of any such court for the enforcement of such award or decision. Each party shall pay 50% of the fees and expenses of the Accounting Arbitrator. If the Accounting Arbitrator is engaged, the Final Closing Balance Sheet will be prepared by adjusting the Preliminary Closing Balance Sheet for any of Seller's adjustments accepted by Buyer's Letter, those agreed to by the parties and those determined by the Accounting Arbitrator. 1.8 Positive or Negative Purchase Price Adjustment. When the Final Closing Balance Sheet is determined pursuant to the provisions of Sections 1.4, 1.5, 1.6 or 1.7, then the net asset/equity value set forth on such Final Closing Balance Sheet will be the Final Net Asset Value and the Positive or Negative Net Asset Amount shall be determined by comparing the Final Net Asset Value to the net asset/equity amount set forth on the Peg Balance Sheet (the "Peg Value"). If the Peg Value is more than the Final Net Asset Value, then the excess is the Negative Net Asset Amount. If the Final Net Asset Value is more than the Peg Value, then the excess is the Positive Net Asset Amount. -6- 11 1.9 Values. On or about the date that the number of shares was fixed between the parties the estimated value of the Equity Consideration was $47,437,500. This amount added to the Cash Consideration of $5,000,000 is $52,437,500. These values will be utilized by the Buyer for all relevant financial accounting purposes. 1.10 Place of Payment. All payments to Seller under this Agreement shall be made by wire transfer in immediately available funds to Chase Manhattan Bank, New York, ABA #021000021, for credit to Cooper Industries, Inc., account number 910-1-144781. All payments to Buyer under this Agreement shall be made by wire transfer in immediately available funds to Shawmut Bank, Boston, for the credit to Wyman-Gordon Company, account number 030-03- 92612. ARTICLE II CLOSING 2.1 Time and Place of Closing. The closing of the transac- tions contemplated by this Agreement (the "Closing") will take place at the offices of the Seller, at 10:00 A.M. (Houston time) on the fifth business day following the date on which all of the conditions to each party's obligations hereunder have been satisfied or waived; or at such other place or time or both as the parties may agree. The date on which the Closing actually occurs is hereinafter referred to as the "Closing Date." The Closing and the consummation of the transactions contemplated hereby shall be deemed effective as of the close of business on the Closing Date. 2.2 Deliveries by the Seller. At the Closing the Seller will deliver the following to the Buyer: (a)Stock certificates representing the Company Common Stock, issued to and registered in the name or names of the Buyer or its designee or designees, together with evidence of payment of any applicable stock transfer taxes. (b)The resignations of those members of the Boards of Directors of the Company, the U.K. Sub or the Pipeline Sub (as such terms are hereinafter defined) who will continue after the Closing to be employees of the Seller. (c)The stock books, stock ledgers, minute books and corporate seals of the Company, the U.K. Sub and the Pipeline Sub; provided that any of the foregoing items shall be deemed to have been delivered pursuant to this Section 2.2(c) if delivered to or otherwise located at the offices of the Company, the U.K. Sub or the Pipeline Sub. (d)The officers' certificate and other documents contem- plated by Sections 6.1 and 6.3. (e)All other documents required to be delivered by the Seller on or prior to the Closing Date pursuant to this Agreement. -7- 12 2.3 Deliveries by the Buyer. At the Closing the Buyer will deliver the following to the Seller: (a)Stock certificates representing the Equity Consider- ation issued to and registered in the name or names of the Seller or its designee or designees, together with evidence of payment of any stock transfer taxes. (b)$400,000 in cash. (c)The Note duly executed by the Buyer. (d)A letter from Wachtell, Lipton, Rosen & Katz addressed to the Seller and dated the Closing Date stating that (without opining as to Massachusetts law) neither the execution nor delivery of the Rights Agreement (as hereinafter defined) will constitute a breach or violation of any of the provisions of the Original Rights Agreement (as hereinafter defined). (e)The officers' certificate and other documents contem- plated by Sections 6.1 and 6.2. (f)All other documents required to be delivered by the Buyer on or prior to the Closing Date pursuant to this Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER The Seller represents and warrants to the Buyer as follows: 3.1 Organization. Each of the Seller, the Company, CFPD, Ltd., incorporated under the laws of England and Scotland and a wholly owned subsidiary of the Company (the "U.K. Sub"), and Cameron Pipeline, Inc., a Texas corporation and a wholly owned subsidiary of the Company (the "Pipeline Sub" and, together with the U.K. Sub, the "Company Subsidiaries"), is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of the Seller, the Company and the Company Subsidiaries is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. "Material Adverse Effect," as used in this Article III, means a material adverse effect on the business operations or financial condition of the Company and the Company Subsidiaries, taken as a whole, or on the Business (as defined below). The Seller has heretofore delivered to the Buyer accurate and complete copies of the Certificate of Incorporation and By-laws (or similar organizational documents), as currently in effect, of the Company and each Company Subsidiary. The Company has no subsidiaries other than the Company -8- 13 Subsidiaries and does not own, directly or indirectly, any capital stock or other equity securities of any corporation or have any direct or indirect equity ownership in any business other than the Company Subsidiaries. The Company Subsidiaries have no subsidiaries and do not own, directly or indirectly, any capital stock or other equity securities of any corporation or have any direct or indirect equity ownership in any business. 3.2 Capitalization. (a)The authorized capital stock of the Company consists of 5,000 shares of Company Common Stock, all of which are issued and outstanding as of the date hereof. Except as listed in Section 3.2(a) of the Seller's disclosure schedule (the "Seller Disclosure Schedule"), the authorized capital stock of the U.K. Sub consists of 1,000,000 shares of common stock (the "U.K. Stock"), one share of which is issued and outstanding as of the date hereof. The authorized capital stock of the Pipeline Sub consists of 1,000 shares of common stock par value $1.00 per share (the "Pipeline Stock"), all of which are issued and outstanding as of the date hereof. All of the shares of Company Common Stock are owned by the Seller, and all of the shares of U.K. Stock and Pipeline Stock are owned by the Company, and are in each case validly issued, fully paid, nonassessable and free of preemptive rights. Except pursuant to this Agreement, there are no subscriptions, options, warrants, convertible or exchangeable securities, calls, rights or other agreements or commitments obligating the Seller, the Company or the Company Subsidiaries to issue, transfer or sell any securities of the Company or of the Company Subsidiaries. (b)The Seller has good and marketable title to the shares of Company Common Stock, and the Company has good and marketable title to the shares of U.K. Stock and Pipeline Stock, free and clear of all pledges, security interests, liens, charges, encumbrances, equities, claims and options of whatever nature. Upon consummation of the transactions contemplated hereby, the Buyer will acquire good and marketable title to the shares of Company Common Stock, free and clear of all pledges, security interests, liens, charges, encumbrances, equities, claims and options of whatever nature. (c)Section 3.2(c) of the Seller Disclosure Schedule sets forth the name, jurisdiction of incorporation and capitalization of each Company Subsidiary and the jurisdictions in which the Company and each Company Subsidiary are qualified to do business. 3.3 Authority Relative to This Agreement. The Seller has full corporate power and authority to execute and deliver this Agreement, the Investment Agreement and the other instruments, agreements and documents contemplated by this Agreement and the Investment Agreement (the "Other Agreements") and to perform its obligations hereunder and thereunder. The execution and delivery of this Agreement, the Investment Agreement and the Other Agreements and the consummation of the transactions contemplated hereby or thereby have been duly and validly authorized by the Board of Directors of the Seller and no other corporate proceedings -9- 14 on the part of the Seller are necessary to authorize this Agreement, the Investment Agreement and the Other Agreements or to consummate the transactions so contemplated. This Agreement and the Investment Agreement have been duly and validly executed and delivered by the Seller and (assuming they are duly and validly executed by the Buyer) constitute, and the Other Agreements will when executed (assuming due and valid execution by any other parties thereto) constitute, valid and binding agreements of the Seller, enforceable against the Seller in accordance with their respective terms, except as such enforceability may be limited by respective applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). 3.4 Consents and Approvals; No Violations. Except for applicable requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and German pre-merger notification laws, no filing with, and no permit, authorization, consent or approval of, any governmental body or authority, including courts of competent jurisdiction, domestic or foreign ("Governmental Entity"), is necessary for the consummation by the Seller of the transactions contemplated by this Agreement and the Investment Agreement and the Other Agreements. Except as set forth in Section 3.4 of the Seller Disclosure Schedule, neither the execution and delivery of this Agreement, the Investment Agreement and the Other Agreements by the Seller nor the consummation by the Seller of the transactions contemplated hereby or thereby nor compliance by the Seller with any of the provisions hereof or thereof will (i) conflict with or breach any provision of the Certificate of Incorporation or By-laws (or similar organizational documents) of the Seller, any Seller Subsidiary (as defined below), the Company or any Company Subsidiary, (ii) violate or breach any provision of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or result in the creation of any lien) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation to which the Seller, the Company or any Company Subsidiary is a party or by which the Seller, the Company or any Company Subsidiary or any of their properties or assets may be bound, or (iii) violate any order, judgment, writ, injunction, decree, statute, rule or regulation applicable to the Seller, the Company or any Company Subsidiary or any of their properties or assets, except in the case of clauses (ii) and (iii) for violations, breaches or defaults which would not either have a Material Adverse Effect or prevent or delay the consummation of the transactions contemplated hereby. For purposes of this Agreement, the "Seller Subsidiaries" means the subsidiaries of the Seller other than the Company and the Company Subsidiaries. 3.5 Financial Statements. Attached hereto as Exhibit A are true and complete copies of (i) the audited combined balance sheets of the Cameron Forged Products Division of the Seller, which includes the Company, that portion of Cooper (Great Britain) Ltd. to the extent that it previously conducted all or part of the -10- 15 Business (as hereinafter defined) and the Pipeline Sub (collectively, "Cameron"), as of December 31, 1993 and December 31, 1992 (collectively the "Company Balance Sheets"), and (ii) the related audited combined statements of operations and cash flows for each of the years ended December 31, 1991, 1992 and 1993 (collectively with the Company Balance Sheets, the "Company Financial Statements"), together with the notes thereto and an opinion of E&Y relating thereto. The Company Financial Statements and the Peg Balance Sheet have been prepared from, and are in accordance with, the books and records of Cameron and the books and records of Seller that pertain to Cameron. The Company Balance Sheets fairly present the financial position of Cameron as of their respective dates, and the other related statements included in the Company Financial Statements fairly present the results of operations and changes in financial position of Cameron for the periods then ended. The Company Financial Statements have been prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis, except as otherwise disclosed in the notes thereto. 3.6 Absence of Certain Changes. Except as disclosed in Section 3.6 of the Seller Disclosure Schedule or in Annex IV hereto, or as disclosed in the Company Financial Statements, since September 30, 1993, none of the Company, the Company Subsidiaries and the Business has (i) taken any of the actions set forth in Section 5.1(a) through Section 5.1(o) of this Agreement, (ii) suffered a Material Adverse Effect, or any change in circumstances that is reasonably likely to have a Material Adverse Effect (other than any change generally affecting the industry in which the Business is engaged), or (iii) entered into any transaction, or conducted its business or operations, other than in the ordinary course of business and consistent with past practice. 3.7 No Undisclosed Liabilities. Any reference in this Agreement to Seller's Knowledge shall be a reference solely to the actual knowledge of Kenneth L. Hardcastle and his direct reports, and Michael J. Sebastian, D. Bradley McWilliams, Alan J. Hill, Robert W. Teets, Stephen V. O'Neill, Donald R. Sheley, Jr. and Bruce E. Himmelreich. Seller's Knowledge shall not include any constructive knowledge, imputed knowledge or any knowledge attributed to Seller solely because Seller or its agents or employees should have known the matter in question. Except as and to the extent set forth in Section 3.7 of the Seller Disclosure Schedule, to Seller's Knowledge, neither the Company nor any Company Subsidiary has any liabilities (absolute, accrued, contingent or otherwise) of a kind required to be reflected in a balance sheet prepared in accordance with GAAP, or required to be disclosed in the notes thereto, except (a) liabilities which were reflected in the December 31, 1992, or the December 31, 1993, Company Balance Sheets or disclosed in the notes thereto, (b) liabilities which were incurred since December 31, 1993 in the ordinary course of business, consistent with past practice and which would be reflected in a balance sheet prepared in accordance with GAAP, (c) liabilities which have not had a Material Adverse Effect, and are not reasonably likely to have a Material Adverse -11- 16 Effect, and (d) liabilities incurred in connection with this Agreement. Except as disclosed in Section 3.7 of the Seller Disclosure Schedule or the Exhibits or Annexes hereto, there are no material obligations or liabilities of the Company or the Company Subsidiaries to the Seller or any of the Seller Subsidiaries that will exist after the Closing Date. 3.8 Information in Proxy Statement. None of the information supplied in writing by the Seller, the Seller Subsidiaries, the Company or the Company Subsidiaries (including without limitation the Company Financial Statements and any other financial statements of the Company and the Company Subsidiaries) for inclusion or incorporation by reference in the proxy statement relating to the meeting of the Buyer's shareholders to be held with respect to the transactions contemplated by this Agreement (the "Proxy Statement") will, at the time the Proxy Statement is mailed to the shareholders of the Buyer or at the time of the meeting of shareholders of the Buyer, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. 3.9 Litigation. Except as disclosed in Section 3.9 of the Seller Disclosure Schedule, (a) there are no existing orders, injunctions, judgments or decrees of any Governmental Entity which apply to the Company or any Company Subsidiary or any assets, properties or operations of the foregoing and (b) there are no actions, suits or proceedings, at law or in equity, pending, or to Seller's Knowledge, threatened, or to Seller's Knowledge, any investigations pending or threatened involving the Company or the Company Subsidiaries by or before any Governmental Entity which in the case of either Clause (a) or (b) above are reasonably likely to have a Material Adverse Effect. 3.10 Compliance With Applicable Law. Except as set forth in Section 3.10 of the Seller Disclosure Schedule, and except with respect to environmental matters, which are addressed in Section 3.15 hereof, (a) the Company and the Company Subsidiaries are, and the Business has been conducted, in compliance with all laws, ordinances, rules, regulations, decrees and orders of all Govern- mental Entities ("Laws"), except where the failure to be in compliance is not reasonably likely to have a Material Adverse Effect and (b) the Seller, the Company, and the Company Subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities necessary to conduct the Business as currently conducted (the "Company Permits"), and such Company Permits are in full force and effect, except for such failure to hold or be in full force and effect which would not be reasonably likely to have a Material Adverse Effect. To Seller's Knowledge, no suspension, cancellation or termination of any of the Company Permits is threatened or imminent that would be reasonably likely to have a Material Adverse Effect. -12- 17 3.11 Taxes. The Company has duly filed all returns of income Taxes (as hereinafter defined) of the Company and the Company Subsidiaries and all material returns of other Taxes of the Company and the Company Subsidiaries required to be filed by them or such income or other returns have been included in a return filed by an affiliated group or by a consolidated, unitary or combined group of companies of which the Company is or has been a member, and the Seller or the Company has duly paid, caused to be paid or made adequate provision for the payment of all such Taxes required to be paid in respect of the periods covered by such returns and has made adequate provision for payment of all Taxes anticipated to be payable in respect of all calendar periods since the periods covered by such returns. Except as disclosed in Section 3.11 of the Seller Disclosure Schedule, no material deficiency or adjustment in respect of any Taxes against the Company or any Company Subsidiary remains unpaid and no material claim or assessment for any such deficiency or adjustment is pending or, to Seller's Knowledge, threatened. There are no material claims for Taxes (other than Taxes attributable to Seller or the Seller Subsidiaries) against the Company or any Company Subsidiaries which might result in a lien, charge or encumbrance on any of the assets of the Company or any Company Subsidiary. 3.12 ERISA; Employee Benefits. The Seller hereby represents and warrants to Buyer that as of the date hereof and as of the Closing Date: (a)Section 3.12(a) of the Seller Disclosure Schedule identifies each Seller Employee Plan with an annual cost in excess of $100,000. The Seller has furnished or made available to Buyer true and complete copies of such Seller Employee Plans (and, if applicable, related trust agreements) and all amendments thereto and written interpretations thereof together with (i) the most recent annual report prepared in connection with any such Seller Employee Plan (Form 5500 or 5500-C including, if applicable, Schedules A and B thereto), (ii) the summary plan description currently in effect for each such Seller Employee Plan and all modifications thereof, (iii) for each such Seller Employee Plan with respect to which there is no summary plan description in ef- fect, a written description of such Seller Employee Plan including all materials distributed or made available to employees with re- spect to such Seller Employee Plan and (iv) the most recent financial statements and actuarial reports (if any) for each such Seller Employee Plan and its related trust (if any), (collectively, the "Seller Employee Plan Documents"). (b)Neither the Company nor the Seller nor any subsidiary of either has incurred, or reasonably expects to incur prior to the Closing Date, any Controlled Group Liability that could become a material liability of Buyer or any Buyer Subsidiary (including the Company) after the Closing Date. Except as set forth on Section 3.12(b) of the Seller Disclosure Schedule, no Seller Employee Plan with an annual cost in excess of $100,000 is a Title IV Plan. No Seller Employee Plan is a Multiemployer Plan. -13- 18 (c)Except as set forth in Section 3.12(c) of the Seller Disclosure Schedule, each Seller Employee Plan with an annual cost in excess of $100,000 has been maintained in compliance in all material respects with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations including but not limited to ERISA and the Code. Neither the Seller nor any Related Person has engaged in, nor to Seller's Knowledge has any other Person engaged in, any "prohibited transaction" (as defined in ERISA and the Code) with respect to any such Seller Employee Plan. (d)Section 3.12(d) of the Seller Disclosure Schedule identifies each Seller Benefit Arrangement with an annual cost in excess of $100,000. The Seller has furnished or made available to Buyer true and complete copies or, if no written document exists, descriptions of each such Seller Benefit Arrangement. Each such Seller Benefit Arrangement has been maintained in compliance in all material respects with its terms and with the requirements pre- scribed by any and all applicable statutes, orders, rules and (e)Section 3.12(e) of the Seller Disclosure Schedule identifies each Seller International Plan with an annual cost in excess of $100,000. The Seller has furnished or made available to Buyer true and complete copies or, if no written document exists, descriptions of each such Seller International Plan. Each such Seller International Plan has been maintained in all material respects in compliance with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations (including any special provisions relating to qualified plans where such Seller International Plan was intended to so qualify) and has been maintained in good standing with applicable regulatory authorities. (f)Except as set forth on Section 3.12(f) of the Seller Disclosure Schedule, there are no actions, suits, arbitrations, inquiries, investigations or other proceedings (other than routine claims for benefits), pending or, to the Seller's Knowledge, threatened, with respect to any Seller Employee Plan, Seller Benefit Arrangement or Seller International Plan which would be reasonably likely to have a Material Adverse Effect. (c) Except as set forth on Section 3.12(g) of the Seller Disclosure Schedule, and except for coverage mandated by Section 4980B of the Code, no Employees or Former Employees and no beneficiaries or dependents of Employees or Former Employees are or may become entitled under any Seller Employee Plan, Seller Benefit Arrangement or Seller International Plan to post-employment welfare benefits of any kind, including without limitation death or medical benefits, having an annual cost, in the aggregate, in excess of $100,000. (h)Except as set forth on Section 3.12(h) of the Seller Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not result in any obligation to pay severance, separation pay or other compensation in the -14- 19 aggregate in excess of $100,000 associated with the termination of employment to any Employee or Former Employee, result in any increase in the amount of compensation or benefits or accelerate the vesting or timing of any payment of any compensation or benefits payable to or with respect to any Employee or Former Employee, or cause any amounts paid or payable by the Company, the Buyer or their subsidiaries to or with respect to any Employee or Former Employee to fail to be deductible for U. S. federal income tax purposes by reason of Section 280G of the Code. (i)Except (i) as set forth on Section 3.12(i) of the Seller Disclosure Schedule, (ii) pursuant to the terms of each Seller Employee Plan, Seller International Plan and Seller Benefit Arrangement, respectively, (iii) pursuant to any collective bargaining agreement or (iv) pursuant to applicable law, there are no arrangements, understandings or agreements, written or unwritten, formal or informal, which would prevent the termination of each Seller Employee Plan, Seller International Plan and Seller Benefit Arrangement, respectively, in each case, without any liability to the Company in excess of $100,000, other than for accrued benefits thereunder. 3.13 Intellectual Property. Section 3.13 of the Seller Disclosure Schedule sets forth a list of all of the Company's or any of the Company Subsidiaries' domestic and foreign patents and patent applications currently being used in the Business. "Company Intellectual Property" means all of the Company's or any of the Company Subsidiaries' domestic and foreign letters patent, patents, patent applications, patent licenses, trademark licenses, software licenses and knowhow licenses, trade names, trademarks, copyrights, service marks, trademark registrations and applications, service mark registrations and applications and copyright registrations and applications currently being used in the Business. Except as set forth in Section 3.13 of the Seller Disclosure Schedule and except for any claim, infringement, act or omission that would not be reasonably likely to have a Material Adverse Effect (a) no claim is pending or, to Seller's Knowledge, threatened which alleges that any of the Company Intellectual Property is invalid or unenforceable or which is otherwise adverse to the right, title and interest of the Company and the Company Subsidiaries in and to the Company Intellectual Property, (b) to Seller's Knowledge, no actions or operations of any other person, association, corporation, individual, partnership, trust or other entity or organization, including a Governmental Entity (a "Person") infringe upon or conflict with the right, title or interest of the Company and the Company Subsidiaries in and to the Company Intellectual Property, and (c) to Seller's Knowledge, no Company Intellectual Property infringes on the rights owned or held by any other Person. Except as set forth in Section 3.13 of the Seller Disclosure Schedule, no existing contract, agreement or understanding between the Seller, the Company or any Company Subsidiary and any other party would impede or prevent the continued use by the Company and the Company Subsidiaries of the entire right, title and interest of the Company and the Company Subsidiaries in and to the Company Intellectual Property except such contracts or understandings that would not be reasonably likely to have a Material Adverse Effect. -15- 20 3.14 Material Contracts; No Defaults. Except as set forth in Section 3.14 of the Seller Disclosure Schedule or in the notes to the Company Balance Sheets, neither the Company nor any Company Subsidiary is a party to any written: (a) material consulting agreement or collective bargaining agreement; (b) indenture, mortgage, note or other agreement relating to the borrowing of money not in the ordinary course of business by the Company or any Company Subsidiary or the guaranty by the Company or any Company Subsidiary of an obligation of a third party for the borrowing of money; (c) agreement which involves a certain (rather than contingent) obligation of the Company or any Company Subsidiary of more than $1,000,000 in any twelve-month period; or (d) agreement containing covenants limiting the ability of the Company or any Company Subsidiary to compete in any line of business with any Person or in any area or territory (collectively, the "Company Contracts"). Except as set forth in Section 3.14 of the Seller Disclosure Schedule, (1) there is not, under any of the Company Contracts, any existing default or event of default or event or condition which, with or without due notice or lapse of time or both, would constitute a default or event of default on the part of the Company or any Company Subsidiary, or, to the Seller's Knowledge, the other parties thereto, except such defaults, events of default and other events which would not be reasonably likely to have a Material Adverse Effect, and (2) the Company Contracts are (i) valid and binding obligations of the Company or the Company Subsidiaries and, to the Seller's Knowledge, the other parties thereto, (ii) are in full force and effect and (iii) are enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). 3.15 Environmental Compliance. (a)Except as set forth on Section 3.15 of the Seller Disclosure Schedule, all operations, properties and business activities of the Company, the Company Subsidiaries and the Business are in compliance with all Environmental Laws and neither the Company nor any of the Company Subsidiaries has or is subject to any claim, notice of investigation or liability based upon any Environmental Law or arising from the disposal of any Regulated Materials except where such failure to be in compliance or such claim, notice of investigation or liability would not be reasonably likely to have a Material Adverse Effect. (b)"Environmental Laws" means all Laws and Company Permits concerning, relating to or controlling (i) the handling, transpor- tation, sale, offering for sale, storage, treatment, discharge, disposal, release, use, processing or manufacture of any material or substance or (ii) the introduction of any material, substance, radiation or other emission into the environment or workplace, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), the Solid Waste Disposal Act as amended by the Resource Conservation and -16- 21 Recovery Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, and the Occupational Safety and Health Act. (c)"Regulated Material" means any material, substance, radiation or emission which is regulated by or subject to any Environmental Law. 3.16 Title to Real Property. Section 3.16 of the Seller Disclosure Schedule sets forth a list of all of the Owned Real Property reflected on the September 30, 1993 Company Balance Sheet or acquired by the Company or any of the Company Subsidiaries sub- sequent to the date thereof and conveyed hereby to Buyer (the "Company Real Property"), together with all Company Leases (as defined below). The Company or one of the Company Subsidiaries has good and marketable title to the Company Real Property, free and clear of all mortgages, liens, pledges, charges or encumbrances of any kind or character, except for current property taxes not yet payable or such encumbrances that would not be reasonably likely to have a Material Adverse Effect. To Seller's Knowledge, there is no appropriation, condemnation or like proceeding relating to the Company Real Property. Each lease for any leased real property (a "Company Lease") is a valid and binding lease under which the Company or one of the Company Subsidiaries is entitled to occupy and use the parcel of real property for its current use to which such Company Lease relates except for such failure to be valid and binding as would not be reasonably likely to have a Material Adverse Effect. 3.17 Company Assets. Except for those assets, properties, contract rights, or licenses listed on Section 3.17 of the Seller Disclosure Schedule, the Company and the Company Subsidiaries will own or have at Closing the right to use all of the assets, properties, contract rights and licenses currently used to operate the Business, or reflected on the September 30, 1993 Company Balance Sheet (the "Company Assets"), except for cases in which the failure to own or to have such right to use would not be reasonably likely to have a Material Adverse Effect. To the Seller's Knowledge, the consummation of the transactions contemplated by this Agreement will not, in and of itself, adversely affect the ownership of or right to use the Company Assets, the Company Intellectual Property and the Company Permits of the Company or the Company Subsidiaries, except in cases where the failure to own or to have such right to use would not be reasonably likely to have a Material Adverse Effect. 3.18 Labor Matters. Except as set forth on Section 3.18 of the Seller Disclosure Schedule and except as would not constitute a Material Adverse Effect: (a)there is no unfair labor practice complaint against the Company or any of the Company Subsidiaries pending or, to the Seller's Knowledge, threatened before the National Labor Relations Board or the Ministry of Labor, as the case may be; -17- 22 (b)there is no labor strike, dispute, slowdown or stoppage pending or, to the Seller's Knowledge, threatened against or affecting the Company, any of the Company Subsidiaries or the Business; and (c)there is no grievance or arbitration proceeding arising out of or under collective bargaining agreements pending or, to the Seller's Knowledge, threatened against or affecting the Company, any of the Company Subsidiaries or the Business. 3.19 Purchase for Investment. The Seller is acquiring the Equity Consideration for its own account as principal, with no view to any distribution of any of the Equity Consideration or any beneficial interest in the Equity Consideration to any third party, and the Seller has no agreement, understanding or arrangement to sell, pledge or otherwise dispose of the Equity Consideration or any beneficial interest in the Equity Consideration to any other Person. The Seller understands and agrees that the Equity Consideration has not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or applicable state securities laws, and therefore may not be sold or otherwise transferred, unless the Equity Consideration is registered under the Securities Act and any applicable state securities laws or unless an exemption from such registration is available. 3.20 No Beneficial Ownership of the Buyer's Stock. The Seller and its Affiliates do not hold, have the right to vote or direct the voting of, or otherwise beneficially own any shares of Common Stock, par value $1.00 per share, of the Buyer (the "Buyer Common Stock"). 3.21 Change in Control. Except as set forth in Section 3.21 of the Seller Disclosure Schedule or in cases which would not be reasonably likely to have a Material Adverse Effect, neither the Company nor any Company Subsidiary is party to any contract, agreement or understanding relating to employment which contains a "change in control," "potential change in control" or similar provision. 3.22 Business of the Company. To the Seller's Knowledge, the Company has not engaged in any businesses other than the Business, and the Pipeline Sub has not engaged in any businesses other than the transmission of natural gas. 3.23 Representations Accurate. To Seller's Knowledge, the representations and warranties of the Seller set forth in this Agreement and qualified by materiality or by Material Adverse Effects shall be true and correct (subject to such qualification) as of the Closing Date (except for representations and warranties that expressly speak only as of some other time), subject to the disclosures in the Seller Disclosure Schedule as supplemented or amended through the Closing Date and excluding those failures to be true and correct that do not have a Material Adverse Effect. To Seller's Knowledge, the representations and warranties of the Seller set forth in this Agreement and not qualified by materiality -18- 23 or by Material Adverse Effects shall be true and correct in all material respects as of the Closing Date (except for representations and warranties that expressly speak only as of some other time), subject to the disclosures in the Seller Disclosure Schedule as supplemented or amended through the Closing Date and excluding those failures to be true and correct that do not have a Material Adverse Effect. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER The Buyer represents and warrants to the Seller as follows: 4.1 Organization. Except as disclosed in Section 4.1 of the Buyer's disclosure schedule attached hereto (the "Buyer Disclosure Schedule"), each of the Buyer and its Subsidiaries (collectively, the "Buyer Subsidiaries") is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of the Buyer and the Buyer Subsidiaries is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. "Material Adverse Effect," as used in this Article IV, means a material adverse effect on the business, operations or financial condition of the Buyer and Buyer Subsidiar- ies taken as a whole. The Buyer has heretofore delivered to the Seller accurate and complete copies of the Articles of Organization and By-laws, as currently in effect, of the Buyer. 4.2 Capitalization. (a)The authorized capital stock of the Buyer consists of (i) 35,000,000 shares of Buyer Common Stock, of which 17,984,249 shares are issued and outstanding as of the date hereof, and (ii) 5,000,000 shares of preferred stock, no par value, none of which are issued or outstanding as of the date hereof. All of the issued and outstanding shares of Buyer Common Stock are (and the Equity Consideration will upon issuance be) validly issued, fully paid, nonassessable and free of preemptive rights. As of the date hereof, approximately 1,690,609 shares of Buyer Common Stock were issuable upon exercise of stock options ("Stock Options") granted under the Buyer's Long-Term Incentive Plan and Executive Long-Term Incentive Program (collectively, the "Stock Plans") and an in- determinate number of shares of Buyer Common Stock were reserved for issuance in accordance with the Rights Agreement, dated as of October 19, 1988 by and between the Buyer and State Street Bank & Trust Company, as Rights Agent (the "Original Rights Agreement"). Except pursuant to this Agreement, the Stock Plans, the Original Rights Agreement and the Buyer's Savings/Investment Plan or as disclosed in Section 4.2 of the Buyer Disclosure Schedule, there are no subscriptions, options, warrants, calls, rights or other -19- 24 agreements or commitments obligating the Buyer to issue, transfer or sell any of its securities, including any right of conversion or exchange under any outstanding security. (b)Upon consummation of the transactions contemplated hereby, the Seller will acquire good and marketable title to the Equity Consideration, free and clear of all pledges, security interests, liens, charges, encumbrances, equities, claims and options of whatever nature. (c)Except as disclosed in Section 4.2 of the Buyer Disclosure Schedule, the only direct or indirect subsidiaries of the Buyer are those named in the Buyer SEC Reports. Except as disclosed in Section 4.2 of the Buyer Disclosure Schedule, or in the Buyer SEC Reports, the Buyer does not own, directly or indirectly, any capital stock or other equity securities of any corporation or have any direct or indirect equity ownership interest in any business. All of the outstanding shares of capital stock of each of the Buyer Subsidiaries have been validly issued and are fully paid, nonassessable and free of preemptive rights and, except as set forth in Section 4.2 of the Buyer Disclosure Schedule are owned by either the Buyer or another of the Buyer Subsidiaries free and clear of all pledges, security interests, liens, charges, encumbrances, equities, claims and options of whatever nature. Except as disclosed in Section 4.2 of the Buyer Disclosure Schedule there are no outstanding subscriptions, options, warrants, calls, rights, convertible securities or other agreements or commitments of any character relating to the issued or unissued capital stock or other securities of any Buyer Subsidiary, or otherwise obligating the Buyer or any Buyer Subsidiary to issue, transfer or sell any such securities. Except for the Investment Agreement, there are not now, and at the Closing Date there will not be, any voting trusts or other agreements or understandings to which the Buyer or any Buyer Subsidiary is a party or is bound with respect of the voting of the capital stock of the Buyer or any Buyer Subsidiary. Except as set forth above or in Section 4.2 of the Buyer Disclosure Schedule, there are no persons or entities (other than Buyer Subsidiaries) in which the Buyer or any Buyer Subsidiary has any voting rights or equity interests. 4.3 Authority Relative to this Agreement. The Buyer has full corporate power and authority to execute and deliver this Agreement, the Investment Agreement and the Other Agreements and to perform its obligations hereunder and thereunder. The execution and delivery of this Agreement, the Investment Agreement and the Other Agreements and the consummation of the transactions contemplated hereby or thereby have been duly and validly authorized and approved by the Board of Directors of the Buyer, including by a two-thirds vote of the Continuing Directors at a meeting at which a Continuing Director Quorum (as such terms are defined in the Buyer's Articles of Organization) was present for purposes of approving the amendment to Article 6(c)2 of the Buyer's Articles of Organization in the form attached hereto as Annex V (the "Fair Price Charter Amendment")), and no other corporate -20- 25 proceedings on the part of the Buyer are necessary to authorize this Agreement, the Investment Agreement and the Other Agreements (other than the approval of the transactions contemplated hereby by the requisite affirmative vote of the holders of Buyer Common Stock). This Agreement and the Investment Agreement have been duly and validly executed and delivered by the Buyer and (assuming they are duly and validly executed by the Seller) constitute, and the Other Agreements will when executed constitute, valid and binding agreements of the Buyer, enforceable against the Buyer in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). 4.4 Consents and Approvals; No Violations. Except as disclosed in Section 4.4 of the Buyer Disclosure Schedule, and except for applicable requirements of the Exchange Act and German pre-merger notification laws, no filing with, and no permit, authorization, consent or approval of, any Governmental Entity, is necessary for the consummation by the Buyer of the transactions contemplated by this Agreement and the Investment Agreement. Except as set forth in Section 4.4 of the Buyer Disclosure Sched- ule, neither the execution and delivery of this Agreement, the Investment Agreement and the Other Agreements by the Buyer nor the consummation by the Buyer of the transactions contemplated hereby or thereby nor compliance by the Buyer with any of the provisions hereof or thereof will (i) conflict with or breach any provision of the Articles of Organization or By-Laws (or similar organizational documents) of the Buyer or any Buyer Subsidiary, (ii) violate or breach any provision of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or result in the creation of any lien) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation to which the Buyer or any Buyer Subsidiary is a party or by which any of them or any of their properties or assets may be bound, or (iii) violate any order, judgment, writ, injunction, decree, statute, rule or regulation applicable to the Buyer, any Buyer Subsidiary or any of their properties or assets, except in the case of clauses (ii) and (iii) for violations, breaches or defaults which would not either have a Material Adverse Effect or prevent or delay the consummation of the transactions contemplated hereby. 4.5 Reports. Except as disclosed in Section 4.5 of the Buyer Disclosure Schedule, the Buyer has filed all required forms, reports and documents with the Securities and Exchange Commission (the "SEC") since January 1, 1990 (collectively, the "Buyer SEC Reports"), each of which has complied in all material respects with all applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act. Except as disclosed in Section 4.5 of the Buyer Disclosure Schedule, as of their respective dates, none of the Buyer SEC Reports, including without limitation, any financial statements or schedules -21- 26 (including the related notes) included therein, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. Each of the balance sheets (including the related notes) included in the Buyer SEC Reports fairly presents the consolidated financial position of the Buyer and the Buyer Subsidiaries as of the date thereof, and the other related statements (including the related notes) included therein fairly present the consolidated results of operations and cash flows of the Buyer and the Buyer Subsidiaries for the respective periods indicated. Each of the financial statements (including the related notes) included in the Buyer SEC Reports has been prepared from and is in accordance with the books and records of the Buyer and has been prepared in accordance with GAAP consistently applied during the period involved, except as otherwise noted therein and except for year-end audit adjustments, consisting of normal and recurring adjustments. The Buyer has delivered to the Seller accurate and complete copies of all Buyer SEC Reports filed since January 1, 1990. 4.6 Absence of Certain Changes. Except as disclosed in Section 4.6 of the Buyer Disclosure Schedule or as disclosed in the Buyer SEC Reports, since December 31, 1992, neither the Buyer nor any of the Buyer Subsidiaries has (i) taken any actions set forth in Section 5.2(a) through Section 5.2(l) of this Agreement, (ii) suffered a Material Adverse Effect, or (iii) entered into any transaction, or conducted its business or operations, other than in the ordinary course of business and consistent with past practice. 4.7 No Undisclosed Liabilities. Any reference in this Agreement to Buyer's Knowledge shall be a reference solely to the actual knowledge of John M. Nelson, David P. Gruber, and their direct reports. Buyer's Knowledge shall not include any constructive knowledge, imputed knowledge or any knowledge attributed to Buyer solely because Buyer or its agents or employees should have known the matter in question. Except as and to the extent set forth in Section 4.7 of the Buyer Disclosure Schedule, to Buyer's Knowledge, neither the Buyer nor any Buyer Subsidiary has any liabilities (absolute, accrued, contingent or otherwise) of a kind required to be reflected in a balance sheet prepared in accordance with GAAP, or required to be disclosed in the notes thereto, except (a) liabilities which were reflected in the audited consolidated balance sheet of the Buyer and the Buyer Subsidiaries as of December 31, 1992 incorporated in the Buyer's Annual Report on Form 10-K for the fiscal year ended December 31, 1992 (the "Buyer Balance Sheet") or disclosed in the notes thereto, (b) liabilities which were incurred since December 31, 1992 in the ordinary course of business, consistent with past practice and which would be reflected in a balance sheet prepared in accordance with GAAP, (c) liabilities which do not constitute a Material Adverse Effect and would not be reasonably likely to constitute a Material Adverse Effect and (d) liabilities incurred in connection with this Agreement. -22- 27 4.8 Information in Proxy Statement. None of the information supplied in writing by the Buyer for inclusion or incorporation by reference in the Proxy Statement will, at the time the Proxy Statement is mailed to the shareholders of the Buyer and at the time of the meeting of shareholders of the Buyer, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement will comply in all material respects with the provisions of the Exchange Act, and the rules and regulations thereunder, except that no representation is made by the Buyer with respect to statements made therein based on information supplied by the Seller or the Company in writing for inclusion or incorporation by reference therein. 4.9 Litigation. Except as disclosed in Section 4.9 of the Buyer Disclosure Schedule or in the Buyer SEC Reports, (a) there are no existing orders, injunctions, judgments or decrees of any Governmental Entity which apply to Buyer or any Buyer Subsidiary or to the assets, properties or operations of the foregoing and (b) there are no actions, suits, proceedings, at law or in equity, pending, or to Buyer's Knowledge, threatened or to Buyer's Knowledge any investigations pending or threatened involving the Buyer or the Buyer Subsidiaries, or before any Governmental Entity which in the case of either clause (a) or (b) are reasonably likely to have a Material Adverse Effect. 4.10 Compliance with Applicable Law. Except as set forth in Section 4.10 of the Buyer Disclosure Schedule, or in the Buyer SEC Reports, and except with respect to environmental matters, which are addressed in Section 4.15 hereof, (a) the Buyer and the Buyer Subsidiaries are, and the business, operations or financial condition of the Buyer and the Buyer Subsidiaries has been conducted, and is, in compliance with all Laws, except where the failure to be in compliance would not be reasonably likely to have a Material Adverse Effect, and (b) the Buyer and Buyer Subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities necessary to conduct their respective businesses as currently conducted (the "Buyer Permits"), and such Buyer Permits are in full force and effect, except for such failures to hold or be in full force and effect which would not be reasonably likely to have a Material Adverse Effect . 4.11 Taxes. The Buyer and each Buyer Subsidiary has duly filed all returns of income Taxes (as hereinafter defined) and all material returns of other Taxes required to be filed by it, and the Buyer has duly paid, caused to be paid or made adequate provision for the payment of all Taxes required to be paid in respect of the periods covered by such returns and has made adequate provision for payment of all Taxes anticipated to be payable in respect of all calendar periods since the periods covered by such returns. Except as set forth in Section 4.11 of the Buyer Disclosure Schedule, the United States federal and state income tax returns of the Buyer have been audited by the Internal Revenue Service or relevant state tax authorities or are closed by the applicable statute of -23- 28 limitations for all taxable years through 1986. All deficiencies and assessments asserted as a result of such audits have been paid, fully settled or adequately provided for in the financial statements contained in the Buyer SEC Reports, or are being contested in good faith by appropriate proceedings. Except as set forth in Section 4.11 of the Buyer Disclosure Schedule, there are no outstanding agreements or waivers extending the statutory period of limitation relating to the payment of Taxes of the Buyer or its subsidiaries for taxable periods for which the applicable statute of limitations has not expired. 4.12 ERISA; Employee Benefits. The Buyer hereby represents and warrants to Seller that as of the date hereof and as of the Closing Date: (a)Section 4.12(a) of the Buyer's Disclosure Schedule identifies each Buyer Employee Plan with an annual cost in excess of $100,000. The Buyer has furnished or made available to Seller true and complete copies of such Buyer Employee Plans (and, if applicable, related trust agreements) and all amendments thereto and written interpretations thereof together with (i) the most recent annual report prepared in connection with any such Buyer Employee Plan (Form 5500 or 5500-C including, if applicable, Schedules A and B thereto), (ii) the summary plan description currently in effect for each such Buyer Employee Plan and all modifications thereof, (iii) for each such Buyer Employee Plan with respect to which there is no summary plan description in effect, a written description of such Buyer Employee Plan including all materials distributed or made available to employees with respect to such Buyer Employee Plan and (iv) the most recent financial statements and actuarial reports (if any) for each such Buyer Employee Plan and its related trust (if any) (collectively, the Buyer Employee Plan Documents"). (b)Except as set forth in Section 4.12(b) of the Buyer Disclosure Schedule, no Buyer Employee Plan with an annual cost in excess of $100,000 is a Title IV Plan or a Multiemployer Plan. (c)Each Buyer Employee Plan with an annual cost in excess of $100,000 that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified and no event has occurred since the date of such determination that would adversely affect such qualification; each trust created under any such Buyer Employee Plan has been determined by the Internal Revenue Service to be exempt from tax under Section 501(a) of the Code and no event has occurred since the date of such determination that would adversely affect such exemption. The Buyer has furnished to Seller the most recent determination letter of the Internal Revenue Service relating to each such Buyer Employee Plan. Each such Buyer Employee Plan has been maintained in compliance in all material respects with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code. Neither the Buyer -24- 29 nor any Related Person engaged in, nor to Buyer's Knowledge has any other Person has engaged in, any "prohibited transaction" (as defined in ERISA and the Code) with respect to any such Buyer Employee Plan. (d)Section 4.12(d) of the Buyer's Disclosure Schedule identifies each Buyer Benefit Arrangement with an annual cost in excess of $100,000. The Buyer has furnished or made available to Seller true and complete copies or, if no written document exists, descriptions of each such Buyer Benefit Arrangement. Each such Buyer Benefit Arrangement has been maintained in compliance in all material respects with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations. (e)Section 4.12(e) of the Buyer Disclosure Schedule identifies each Buyer International Plan with an annual cost in excess of $100,000. The Buyer has furnished or made available to Seller true and complete copies or, if no written document exists, descriptions of each such Buyer International Plan. Each such Buyer International Plan has been maintained in compliance in all material respects with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations (including any special provisions relating to qualified plans where such Buyer International Plan was intended to so qualify) and has been maintained in good standing with applicable regulatory authorities. (f)Except as set forth on Section 4.12(f) of the Buyer Disclosure Schedule, there are no actions, suits, arbitrations, inquiries, investigations or other proceedings (other than routine claims for benefits) pending or, to the Buyer's Knowledge, threatened, with respect to any Buyer Employee Plan, Buyer Benefit Arrangement or Buyer International Plan which would be reasonably likely to have a Material Adverse Effect. (g)Except as set forth on Section 4.12(g) of the Buyer Disclosure Schedule, and except for coverage mandated by Section 4980B of the Code, no Employees or Former Employees and no beneficiaries or dependents of Employees or Former Employees are or may become entitled under any Buyer Employee Plan, Buyer Benefit Arrangement or Buyer International Plan to post-employment welfare benefits of any kind, including without limitation death or medical benefits, having an annual cost, in the aggregate, in excess of $100,000. 4.13 Intellectual Property. "Buyer Intellectual Property" means all of the Buyer's or any of the Buyer Subsidiaries' domestic and foreign letters patent, patents, patent applications, patent licenses, trademark licenses, software licenses and know-how licenses, trade names, trademarks, copyrights, service marks, trademark registrations and applications, service mark registra- tions and applications and copyright registrations and applications currently being used by the Buyer or any Buyer Subsidiary. Except as set forth in Section 4.13 of the Buyer Disclosure Schedule or -25- 30 Buyer's SEC Reports and except for any claim, infringement, act or omission that would not be reasonably likely to have a Material Adverse Effect (a) no claim is pending or, to the knowledge of the Buyer, threatened to the effect that any of the Buyer Intellectual Property is invalid or unenforceable or which is otherwise adverse to the right, title and interest of the Buyer and the Buyer Subsidiaries in and to the Buyer Intellectual Property; (b) to the knowledge of the Buyer, no actions or operations of any Person infringe upon or conflict with the right, title or interest of the Buyer and the Buyer Subsidiaries in and to the Buyer Intellectual Property; and (c) to the knowledge of the Buyer, no Buyer Intellectual Property infringes on the rights owned or held by any other Person. Except as set forth in Section 4.13 of the Buyer Disclosure Schedule, no contract, agreement or understanding between the Buyer or any Buyer Subsidiary and any other party exists which would impede or prevent the continued use by the Buyer and the Buyer Subsidiaries of the entire right, title and interest of the Buyer and the Buyer Subsidiaries in and to the Buyer Intellectual Property. 4.14 No Defaults. Except as set forth in Section 4.14 of the Buyer Disclosure Schedule or in the Buyer SEC Reports, to Buyer's Knowledge, Buyer and the Buyer Subsidiaries are not in default under, and no condition exists that with notice or lapse of time or both would constitute a default under, (i) any mortgage, loan agreement, indenture, evidence of indebtedness or other instrument evidencing borrowed money, Buyer and Buyer Subsidiaries' organizational documents, any other material agreement, contract, lease, license to which Buyer or Buyer Subsidiaries are a party or by which they or their properties are bound, or (ii) any judgment, order or injunction of any court, arbitrator or Governmental Entity, except in the case of clause (i) and (ii) above those that will not be reasonably likely to have a Material Adverse Effect. 4.15 Environmental Compliance. Except as set forth in Section 4.15 of the Buyer Disclosure Schedule, all operations, properties and business activities of the Buyer and the Buyer Subsidiaries are in compliance with all Environmental Laws, and neither the Buyer nor any of the Buyer Subsidiaries has or is subject to any claim, notice of investigation or liability based upon any Environmental Law or arising from the disposal of any Regulated Material except where such failure to be in compliance or such claim, notice of investigation or liability would not be reasonably likely to have a Material Adverse Effect. 4.16 Representations Accurate. To Buyer's Knowledge, the representations and warranties of the Buyer set forth in this Agreement and qualified by materiality or by Material Adverse Effects shall be true and correct (subject to such qualification) as of the Closing Date (except for representations and warranties that expressly speak only as of some other time), subject to the disclosures in the Buyer Disclosure Schedule as supplemented or amended through the Closing Date and excluding those failures to be true and correct that do not have a Material Adverse Effect. To Buyer's Knowledge, the representations and warranties of the Buyer -26- 31 set forth in this Agreement and not qualified by materiality or by Material Adverse Effects shall be true and correct in all material respects as of the Closing Date (except for representations and warranties that expressly speak only as of some other time), subject to the disclosures in the Buyer Disclosure Schedule as supplemented or amended through the Closing Date and excluding those failures to be true and correct that do not have a Material Adverse Effect. 4.17 Purchase for Investment. The Buyer is acquiring the Company Common Stock for its own account as principal, with no view to any distribution of any of the Company Common Stock or any beneficial interest in the Company Common Stock to any third party, and the Buyer has no agreement, understanding or arrangement to sell, pledge or otherwise dispose of the Company Common Stock or any beneficial interest in the Company Common Stock to any other Person. The Buyer understands and agrees that the Company Common Stock has not been registered under the Securities Act, or applicable state securities laws, and neither the Seller nor the Company has any obligation hereunder to so register and, therefore, the Company Common Stock may not be sold or otherwise transferred so as to cause the sale of the shares hereunder by the Seller to be unlawful or violative of any law or regulation, unless the Company Common Stock is registered under the Securities Act and any applicable state securities laws or unless an exemption from such registration is available. ARTICLE V COVENANTS 5.1 Business Covenants of the Seller. Except as expressly contemplated by this Agreement, the Ancillary Agreements (as hereinafter defined) and except for the pre-Closing transactions described in Annex IV hereto between the Seller and its Affiliates, on the one hand, and the Company and the Company Subsidiaries, on the other hand, during the period from the date of this Agreement and continuing until the Closing Date, the Seller will cause the Company and the Company Subsidiaries to carry on their respective businesses in the ordinary course, consistent with past practice, and to use their respective reasonable best efforts to preserve intact their present business organizations, to keep available the services of their present officers and key employees and to preserve their relationships with customers, suppliers, licensors, licensees, contractors, distributors and others having business dealings with them. Without limiting the generality of the foregoing, and except as provided herein, the Seller will not, without the prior consent of the Buyer, cause or permit the Company and the Company Subsidiaries to: (a)(i)declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any of its capital stock, except that the Company Subsidiaries may declare and pay a dividend to the Company, (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in -27- 32 respect of, in lieu of or in substitution for shares of its capital stock or (iii) amend the terms of, repurchase, redeem or otherwise acquire, or permit any subsidiary to repurchase, redeem or otherwise acquire, any of its securities or any securities of its subsidiaries, or propose to do any of the foregoing; (b)authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any stock of any class or any other securities (including indebtedness having the right to vote) or equity equivalents (including, without limitation, stock appreciation rights), except pursuant to any Company Benefit Plan, or amend in any material respect any of the terms of any such agreements, commitments, stock, securities or equity equivalents outstanding on the date hereof; (c)amend or propose to amend its charter or by-laws; (d)acquire, sell, lease, encumber, transfer or dispose of any assets other than in the ordinary course of business consistent with past practice; (e)make any capital expenditures which in the aggregate exceed $100,000; (f)create, incur or assume any long-term debt (including obligations in respect of capital leases); (g)except in the ordinary course of business consistent with past practice, create, incur, assume, maintain or permit to exist any short-term debt (including obligations in respect of capital leases) or assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person, except that such debt or obligations which are set forth on the Seller Disclosure Schedule may be maintained and permitted to exist; (h)permit any of its current insurance policies to be cancelled or terminated or any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation or lapse, replacement policies providing coverage equal to or greater than coverage remaining under those cancelled, terminated or lapsed are in full force and effect; (i)change any of the accounting principles or practices used by it (except as required by GAAP); (j)except as required by law, or pursuant to the terms of any collective bargaining agreement, (i) enter into, adopt, amend or terminate any Company Benefit Plan or any agreement, arrangement, plan or policy between itself and one or more of its directors, executive officers, or other employees, or (ii) increase in any manner the compensation or fringe benefits of any director, officer or other employee or pay any benefit not required by any -28- 33 plan or arrangement as in effect as of the date hereof, except such increases as are granted in the ordinary course of business consistent with past practice (which shall include normal periodic performance reviews and related compensation and benefit increases but not any general across-the-board increases); (k)amend or terminate any material agreements, commitments or contracts, or enter into other material agreements, commitments or contracts, except in the ordinary course of business consistent with past practice and not in excess of current requirements; (l)lend any money in excess of $100,000 to any Person other than an Affiliate or trade creditor; (m)merge or consolidate with or into any other Person; or (n)enter into any agreement with any Person for the purchase of inventory for the Company in excess of $500,000 if such purchase would cause the Company's inventory to exceed substantially the amount of inventory required to fill outstanding contracts with customers of the Company; or (o)agree to take any of the foregoing actions. Notwithstanding the provisions of this Section 5.1, nothing in this Agreement shall be construed or interpreted to prevent the Seller, the Company and the Company Subsidiaries from making, accepting or settling intercompany advances to, from or with one another, or engaging in any other transaction incidental to their normal cash management procedures, including without limitation, short-term investments in time deposits, certificates of deposit and bankers acceptances made in the ordinary course of business. 5.2 Business Covenants of the Buyer. Except as expressly contemplated by this Agreement, during the period from the date of this Agreement and continuing until the Closing Date, the Buyer will, and will cause the Buyer Subsidiaries to, carry on their respective businesses in the ordinary course, consistent with past practice, and to use their respective reasonable best efforts to preserve intact their present business organizations, to keep available the services of their present officers and key employees and to preserve their relationships with customers, suppliers, licensors, licensees, contractors, distributors and others having business dealings with them. Without limiting the generality of the foregoing, and except as provided herein, the Buyer will not, and will cause the Buyer Subsidiaries not, without the prior consent of the Seller, to: (a)(i)declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any of its capital stock, (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital -29- 34 stock or (iii) amend the terms of, repurchase, redeem or otherwise acquire, or permit any subsidiary to repurchase, redeem or otherwise acquire, any of its securities or any securities of its subsidiaries, or propose to do any of the foregoing; (b)authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any stock of any class or any other securities (including indebtedness having the right to vote) or equity equivalents (including, without limitation, stock appreciation rights) except in accordance with Buyer's Stock Plans, or amend in any material respect any of the terms of any such agreements, commitments, stock, securities or equity equivalents outstanding on the date hereof; (c)amend or propose to amend its charter or by-laws in any manner adverse to the interests of the Seller; (d)make any capital expenditures which in the aggregate exceed the amounts contemplated by the Buyer's most recent annual operating budget, unless the Buyer notifies and consults with the Seller prior to taking any such action; (e)create, incur or assume any long-term debt (including obligations in respect of capital leases) in excess of $1,000,000; (f)except in connection with draws made pursuant to the Financing Agreement dated March 8, 1993 by and between The CIT Group/Business Credit, Inc. and the Buyer, among others, or otherwise in the ordinary course of business consistent with past practice, create, incur, assume, maintain or permit to exist any short-term debt (including obligations in respect of capital leases) in excess of $1,000,000 or assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person (except that any such debt or obligations set forth in Section 5.2(f) of the Buyer Disclosure Schedule may be maintained and permitted to exist); (g)lend any money in excess of $100,000, unless the Buyer notifies and consults with the Seller prior to taking any such action; (h)except as required by law, (i) enter into, adopt, amend or terminate any agreement, arrangement, plan or policy between itself and one or more of its directors or executive officers, or (ii) increase in any manner the compensation or fringe benefits of any director or executive officer or pay any benefit to any director or executive officer not required by any plan or arrangement as in effect as of the date hereof; -30- 35 (i)enter into any material agreements, commitments or contracts relating to the acquisition or divestiture of any businesses; (j)amend or terminate any material agreements, commitments or contracts, or enter into, other material agreements, commitments or contracts, except in the ordinary course of business consistent with past practice and not in excess of current requirements, unless the Buyer notifies and consults with the Seller prior to taking any such action; (k)merge or consolidate with or into any other Person; or (l)agree to take any of the foregoing actions. 5.3 Current Information. During the period from the date of this Agreement to the Closing Date, the Buyer will notify the Seller and the Seller will notify the Buyer of any material change (or any event which might reasonably be expected to cause a material change) in the normal course of business or operations of the Buyer and the Buyer Subsidiaries or of the Company and the Company Subsidiaries, as the case may be, and of any complaints, investigations or hearings by any Governmental Entity (or communi- cations indicating that the same may be contemplated), or the institution or threat or settlement of significant litigation, in each case involving the Buyer or the Buyer Subsidiaries or the Company or the Company Subsidiaries, as the case may be, and to keep each other fully informed of such events. 5.4 Access to Information. (a)Between the date of this Agreement and the Closing Date the Buyer will and will cause the Buyer Subsidiaries to, (i) give the Seller and the Company and their authorized representa- tives reasonable access to all books, records, plants, offices, warehouses and other facilities and properties of the Buyer and the Buyer Subsidiaries, (ii) permit the Seller and the Company and their authorized representatives to make such inspections thereof, during regular business hours, as they may reasonably request, and (iii) cause their officers to furnish the Seller and the Company and their authorized representatives with such financial and oper- ating data and other information with respect to the business, operations and properties of the Buyer and the Buyer Subsidiaries as the Seller and the Company may from time to time reasonably request; provided, however, that any such investigation shall be conducted in such a manner as not to interfere unreasonably with the operation of the business of the Buyer and the Buyer Subsidiaries. (b)Between the date of this Agreement and the Closing Date the Seller will and will cause the Company and the Company Subsidiaries to, (i) give the Buyer and the Buyer Subsidiaries and their authorized representatives reasonable access to all books, records, plants, offices, warehouses and other facilities and properties of the Company, the Company Subsidiaries and the Business, and to reasonably permit the Buyer to make copies of such -31- 36 books and records, (ii) permit the Buyer and the Buyer Subsidiaries and their authorized representatives to make such inspections thereof, during regular business hours, as they may reasonably request, and (iii) cause its officers to furnish the Buyer and the Buyer Subsidiaries and their authorized representatives with the monthly financial reporting package of the Company that is prepared for the Seller in its ordinary practice and with such other financial and operating data and other information with respect to the business, operations and properties of the Company, the Company Subsidiaries and the Business as the Buyer and the Buyer Sub- sidiaries may from time to time reasonably request; provided, however, that any such investigation shall be conducted in such manner as not to interfere unreasonably with the operation of the business of the Seller, the Company and the Company Subsidiaries. (c)Notwithstanding (a) and (b) above, the Buyer, the Buyer Subsidiaries, the Seller, the Seller Subsidiaries, the Company and the Company Subsidiaries shall not be obligated to furnish information if, in the opinion of counsel, such furnishing of information would be reasonably likely to violate the law. (d)Between the date of this Agreement and the Closing Date (or, if this Agreement terminates pursuant to Section 7.1 or otherwise, for three years from the date hereof), the Buyer will hold and will cause the Buyer Subsidiaries and their respective officers, directors, employees, representatives, consultants and advisors to hold and the Seller will hold and will cause the Seller Subsidiaries, the Company and the Company Subsidiaries and their respective officers, directors, employees, representatives, consul- tants and advisors to hold in strict confidence in accordance with the terms of the Confidentiality Agreement, dated January 29, 1992, between the Buyer and the Seller (the "Confidentiality Agreement"), all documents and information furnished to each other and their representatives, consultants or advisors in connection with the transactions contemplated by this Agreement; provided, however, that the Buyer shall not be required hereunder to hold in strict confidence such documents and information that relate solely to the operation of the Company, the Company Subsidiaries or the Business. The Confidentiality Agreement will terminate on the Closing Date. 5.5 Reasonable Best Efforts. Subject to the terms and condi- tions of this Agreement, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Without limiting the foregoing, the Buyer agrees to use its reasonable best efforts to, as promptly as practicable, (a) prepare and file with the SEC the Proxy Statement, respond to the comments (if any) of the staff of the SEC with respect thereto, and mail to the shareholders of the Buyer the definitive Proxy Statement, which Proxy Statement shall contain the recommendation of the Board of Directors of the Buyer to the Buyer's shareholders regarding the transactions contemplated by this Agreement, and (b) take such actions as may be required to cause, prior to the Closing -32- 37 Date, the Equity Consideration to be received by the Seller pursu- ant to this Agreement to be eligible for quotation on the NASDAQ National Market System (subject to official notice of issuance). The Seller shall use its reasonable best efforts (i) to provide to the Buyer all information about the Seller, the Seller Subsidiaries, the Company or the Company Subsidiaries (including without limitation the Company Financial Statements and any other financial statements of the Company and the Company Subsidiaries) required to be included or incorporated by reference in the Proxy Statement and (ii) otherwise to cooperate with the Buyer in taking the actions described in the preceding sentence. 5.6 Consents; Filings. (a)Each of the parties hereto will use its reasonable best efforts to obtain consents of all Persons necessary for the consummation of the transactions contemplated by this Agreement. (b)Each of the parties hereto will use its reasonable best efforts to file expeditiously the appropriate German pre- merger filings. The Buyer and the Seller will make all such other filings, notifications and requests for consent, approval or permission that may be required by statute, regulation or judicial decree in connection with the transactions contemplated by this Agreement and will cooperate in providing each other or their respective outside counsel any information, including reasonable access to knowledgeable individuals, necessary in connection therewith. The Buyer and the Seller shall, upon the request of any Governmental Entity, supply such agency with any additional re- quested information as expeditiously as is reasonably possible, and shall use their reasonable best efforts to cause the satisfaction or termination of the applicable waiting period under German pre- merger notification laws. The Buyer and the Seller shall use their reasonable best efforts to resolve as promptly as practicable any concern on the part of any Governmental Entity regarding the legality of the transactions contemplated hereby, but shall not be required to divest any assets, significantly change the conduct of the business currently conducted by the Buyer, the Seller or the Company or otherwise materially restrict the future business activities of the Buyer, the Seller or the Company. 5.7 Shareholder Meeting. The Buyer shall duly call, give notice of, convene and hold a meeting of its shareholders as promptly as practicable for the purpose of adopting and approving this Agreement and the transactions contemplated hereby (including, without limitation, adopting and approving (i) an amendment to the Buyer's Articles of Organization providing that the number of authorized shares of Buyer Common Stock be increased to 70,000,000 (the "Authorized Shares Amendment"), (ii) the issuance of the Equity Consideration, and (iii) the Fair Price Charter Amendment) and for such other purposes as may be necessary or desirable to effectuate the transactions contemplated by this Agreement. The Buyer shall use its reasonable best efforts to obtain the agreement of its Affiliates to vote all shares of Buyer Common Stock beneficially owned by each such Affiliate in favor of the matters presented to the Buyer's shareholders in connection with the transactions contemplated by this Agreement. -33- 38 5.8 Amendment to Articles of Organization and By-Laws. As promptly as practicable following adoption of the Authorized Shares Amendment and the Fair Price Charter Amendment by the requisite affirmative vote of the Buyer's shareholders but prior to Closing, the Buyer shall file with the Secretary of the Commonwealth of Massachusetts articles of amendment, duly signed in accordance with the Massachusetts Business Corporation Law, setting forth the Authorized Shares Amendment, the Fair Price Charter Amendment, and the due adoption thereof. Prior to Closing, the Board of Directors shall adopt and approve the amendment to the Buyer's By-laws in the form attached hereto as Annex VI (the "Control Share Acquisitions Amendment"). 5.9 Rights Agreement. As promptly as practicable following the approval and adoption of the Amended and Restated Rights Agreement in the form attached hereto as Annex VII (the "Rights Agreement") by the Buyer's Board of Directors but prior to the Closing, the Buyer shall execute and deliver the Rights Agreement. 5.10 Brokers or Finders. Each of the Buyer and the Seller represents, as to itself, its subsidiaries and its Affiliates, that no agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement, except Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and Shearson Lehman Brothers, Inc. ("Shearson"), whose fees and ex- penses, if any, will be paid by the Buyer in accordance with the Buyer's agreement with DLJ or Shearson, and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and The First Boston Corporation ("First Boston"), whose fees and expenses, if any, will be paid by the Seller in accordance with the Seller's agreement with Merrill Lynch or First Boston; and the Buyer and the Seller each agree to indemnify and hold the other harmless from and against any and all claims, liabilities or obligations with respect to any other fees, commissions or expenses asserted by any Person on the basis of any act or statement alleged to have been made by or on behalf of such party. 5.11 Fees and Expenses. Whether or not the transactions contemplated by this Agreement are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses; provided, however, that in no event shall such expenses be paid by the Company or the Company Subsidiaries. 5.12 Employee Benefits. (a)The following terms, as used in this Agreement, have the following meanings: "Buyer Benefit Arrangement" means any employment, severance or similar contract, arrangement or policy, or any plan or arrangement (whether or not written) providing for severance benefits, insurance coverage (including any self-insured arrange- ments), workers' compensation, disability benefits, supplemental -34- 39 unemployment benefits, vacation benefits, retirement benefits, deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights, fringe benefits, perquisites or other forms of compensation or post-retirement insurance, compensation benefits that (i) is not a Buyer Employee Plan, (ii) is entered into or maintained, as the case may be, by the Buyer or any of its Affiliates, and (iii) covers any individual employed or formerly employed, as the case may be, by the Buyer or a subsidiary or Affiliate of the Buyer. "Buyer Employee Plan" means any "employee benefit plan", as defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is maintained, administered or con- tributed to by the Buyer or any of its Affiliates, and (iii) covers any individual employed or formerly employed by the Buyer or a subsidiary or Affiliate of the Buyer. "Buyer International Plan" means any employment, severance or similar contract, arrangement or policy (exclusive of any such contract which is terminable within thirty days without liability of the Buyer or any of its Affiliates), or any plan or arrangement providing for severance, insurance coverage (including any self-insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits, pension or retirement benefits or for deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights, fringe benefits, perquisites or other forms of compensation or post-retirement insurance, compensation or benefits that (i) is not a Buyer Employee Plan or a Buyer Benefit Arrangement, (ii) is maintained or contributed to by the Buyer or any of its Affiliates, and (iii) covers any individual employed or formerly employed or by the Buyer or a subsidiary or Affiliate of the Buyer outside the United States. "COBRA" means Part 6 of Title I of ERISA and Section 4980B of the Code. "Company Domestic Retirement and Savings Plans" shall mean the Seller Employee Plans which are included in the definition of "employee pension benefit plan" as defined in Section 3(2) of ERISA. "Controlled Group Liability" means any and all li- abilities under (i) Title IV of ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971 of the Code, (iv) the continuation coverage requirements of section 601 et seq. of ERISA and section 4980B of the Code and (v) corresponding or similar provisions of foreign laws or regulations. "Employee" means any individual who, on the Closing Date, is employed in the Business in any active or inactive status and whose current employment in the Business has not been terminated and, if applicable, any beneficiary thereof. -35- 40 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, and the rules and regulations promulgated thereunder. "Former Employee" means any individual employed in the Business by the Seller or any of its Affiliates and whose employment has been terminated prior to the Closing Date (and, if applicable, any beneficiary thereof), excluding any individuals subsequently employed by the Seller or any of its Affiliates outside of the Business. "Multiemployer Plan" means each Employee Plan that is a multiemployer plan, as defined in Section 3(37) of ERISA. "Related Person" of any Person means any other Person which, together with such Person, would or at any time has been treated as a single employer with either the Buyer or the Seller (as appropriate), the Company or any Affiliate under Section 414 of the Code. "Seller Benefit Arrangement" means any employment, severance or similar contract, arrangement or policy, or any plan or arrangement (whether or not written) providing for severance benefits, insurance coverage (including any self-insured arrange- ments), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights, fringe benefits, perquisites or other forms of compensation or post-retirement insurance, compensation benefits that (i) is not a Seller Employee Plan, (ii) is entered into or maintained, as the case may be, by the Seller or any of its Affiliates, and (iii) covers any individual employed or formerly employed, as the case may be, in the Business in the United States. "Seller Employee Plan" means any "employee benefit plan", as defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is maintained, administered or con- tributed to by the Seller or any of its Affiliates, and (iii) covers any individual employed or formerly employed in the Business. "Seller Hourly 401(k) Plan" shall mean the Cameron Iron Works, USA Inc. Savings-Investment Plan for Hourly Employees. "Seller International Plan" means any employment, severance or similar contract, arrangement or policy (exclusive of any such contract which is terminable within thirty days without liability of the Seller or any of its Affiliates), or any plan or arrangement providing for severance, insurance coverage (including any self-insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits, pension or retirement benefits or for deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights, fringe benefits, perquisites or other forms of compensation or post-retirement insurance, compensation or benefits that (i) is not -36- 41 a Seller Employee Plan or a Seller Benefit Arrangement, (ii) is maintained or contributed to by the Seller or any of its Affiliates and (iii) covers any individual employed or formerly employed outside the United States in the Business. "Seller Salaried 401(k) Plan" shall mean the Cooper Industries, Inc. Savings and Stock Ownership Plan. "Seller Self-Insured LTD Benefits" shall mean the long-term disability benefits which are self-insured and payable through the Cameron Iron Works, USA Inc. Employee Benefit Trust and administered by Thomas L. Jacobs to certain Employees or Former Employees who became eligible for long-term disability benefits on or before August 31, 1990 under the terms of the Company's long- term disability benefit plans in effect on or before August 31, 1990. "Seller U.K. Pension Plan" shall mean the Cameron Iron Works Retirement Benefits Scheme (1974). "Title IV Plan" means an Employee Plan, other than any Multiemployer Plan, subject to Title IV of ERISA. (b) As of the Closing Date each Employee will continue as an employee of the Company in the same status and at the same salary or wage and benefit levels as provided to such Employee on the Closing Date by the Company; provided that, nothing herein shall prevent the Buyer from altering such salary, wage and benefit levels or terminating the employment of any Employee after the Closing Date. (c) Prior to the Closing Date, the Buyer shall establish a plan or plans which are substantially similar in all material respects to the Company Domestic Retirement and Savings Plans. The Buyer reserves the right to amend or terminate such plans at any time after the Closing Date. Such plan or plans shall provide credit for the service earned in each of the Company Domestic Retirement and Savings Plans for purposes of eligibility (including for early retirement subsidies and disability benefits) and vesting. Such plan or plans shall also provide credit for benefit accrual purposes from the Closing Date forward. Benefit accruals shall cease under each of the Company Domestic Retirement and Savings Plans as of the Closing Date for all Employees, except for the Seller Salaried 401(k) Plan in which eligible Employees will continue to contribute and accrue company matching contributions in accordance with the terms of such plan through May 31, 1994 and except for the Seller Hourly 401(k) Plan in which eligible Employees will continue to contribute and accrue company matching contributions in accordance with the terms of such plan through May 29, 1994, such employee and matching contributions in each case to be made by Seller. Buyer shall reimburse Seller in an amount equal to 31.25% of the company matching contribution accrued by eligible Employees in the Seller Salaried 401(k) Plan for the period from May 16, 1994 through May 31, 1994 and for 42.86% of the company matching contribution accrued by eligible Employees in the Seller -37- 42 Hourly 401(k) Plan for the period from May 23, 1994 through May 29, 1994. Buyer will transfer to Seller the employee 401(k) plan contributions for the period from May 16, 1994 through May 31, 1994 for eligible Employees in the Seller Salaried 401(k) Plan and for the period May 23, 1994 through May 29, 1994 for eligible Employees in the Seller Hourly 401(k) Plan. Service on and after the Closing Date with the Buyer or any Affiliate, subsidiary or successor of the Buyer shall be credited under each Company Domestic Retirement and Savings Plan which is not a Section 401(k) plan solely for the purposes of eligibility (including for early retirement subsidies and disability benefits) and vesting. Employees shall not be considered terminated or retired by the Seller under the Company Domestic Retirement and Savings Plans until they are no longer being credited with service for purposes of eligibility (including for early retirement subsidies and disability benefits) and vesting. The Seller shall take all necessary steps to remove the Company as sponsoring employer or a participating employer of the Company Domestic Retirement and Savings Plans as of the Closing Date, except for the Seller Salaried 401(k) Plan in which case the Company shall be removed as a sponsoring or participating employer as of May 31, 1994 and except for the Seller Hourly 401(k) Plan in which case the Company shall be removed as a sponsoring or participating employer as of May 29, 1994. The Seller shall retain all assets and liabilities associated with each Company Domestic Retirement and Savings Plan. Notwithstanding the foregoing, as soon as practicable after the Closing Date, Seller shall cause the trustee of Seller Salaried 401(k) Plan and the trustee of the Seller Hourly 401(k) Plan to segregate or otherwise identify the assets of each such plan and related trust and make any and all filings and submissions to the appropriate governmental agencies arising in connection with the transfer of assets as described below. The manner in which the account balances of Employees under each such plan are invested shall not be affected by such segregation or identification of assets. As soon as practicable after the Closing Date, Buyer shall establish or designate profit sharing plans with a salary reduction 401(k) feature for the benefit of Employees (such Buyer plans, the "Successor Individual Account Plans"), shall take all necessary action, if any, to qualify the Successor Individual Account Plans under the applicable provisions of the Code and shall make any and all filings and submissions to the appropriate governmental agencies required to be made by it in connection with the transfer of assets described below. The successor Individual Account Plans shall include loan and in-service withdrawal provisions substantially similar to those of the Seller Salaried 401(k) Plan and the Seller Hourly 401(k) Plan, respectively. As soon as practicable after the Closing Date, but not earlier than (i) thirty (30) days after the filing of all necessary governmental forms and (ii) the receipt of a favorable determination letter with respect to the qualification of each of the Successor Individual Account Plans or the receipt of an opinion of counsel acceptable to the Buyer and the Seller regarding such qualified status, Seller shall cause the transfer of the entire account balance (which account balances will have been credited with any employer contribution for the current Plan year to which the applicable Employee is entitled under the terms of this -38- 43 Agreement) to the appropriate trustee as designated by Buyer under the trust agreement forming a part of the Successor Individual Account Plans. The assets to be transferred shall be in the form of cash, common stock of the Seller or preferred stock of the Seller, as determined by Seller. The transfer of assets to the Successor Individual Account Plans described herein shall each satisfy the requirements of the Code. In consideration for the transfer of assets described herein, Buyer shall, effective as of the date of transfer described herein, assume all of the obligations of Seller and any of its Affiliates in respect of the transferred account balances for the Employees under both the Seller Salaried 401(k) Plan and the Seller Hourly 401(k) Plan (exclusive of any portion of such account balances which are paid or otherwise withdrawn prior to the date of transfer described herein). Neither Buyer nor any of its Affiliates shall assume any other obligations or liabilities arising under or attributable to the Seller Salaried 401(k) Plan or the Seller Hourly 401(k) Plan. The Buyer, the Company and their Affiliates shall indemnify and hold the Seller and its Affiliates harmless against all obligations and liabilities arising out of or relating to the maintenance of any plan it establishes pursuant to the provisions of this Section 5.12(c). Notwithstanding any other provision contained in this Agreement to the contrary, in the event the Buyer, the Company, or their Affiliates modify or terminate any plan it establishes pursuant to the provisions of this Section 5.12(c), the Buyer, the Company and their Affiliates indemnify and shall hold the Seller and its Affiliates harmless against any increase in the obligations or liabilities of the Seller and its Affiliates that arise out of or relating to such modification or termination. (d) The Buyer shall procure (or shall procure that the U.K. Sub procures) that: (i) on or before the Closing Date it establishes a retirement benefit scheme which is approved or is capable of exempt approval under Chapter I of Part XIV of the Income and Corporation Taxes Act 1988 (the "New Plan") for the benefit of the employees of the U.K. Sub and that such employees are offered membership of the New Plan with effect from the Closing Date; (ii) the benefits to be provided by the New Plan for the employees of the U.K. Sub shall be substantially similar in all material respects to those provided under the Seller U.K. Pension Plan (details of which have been disclosed) as of the Closing Date (for purposes of this paragraph 5.12(d)(ii), "substantially similar" shall mean that any differences between the New Plan and the Seller U.K. Pension Plan shall not constitute a change to any Employee's contract of employment); and (iii) for the purpose of vesting benefits in the New Plan in respect of those employees of the U.K. Sub who have not at the Closing Date qualified for preserved benefits under the Seller U.K. Pension Plan, the New Plan will recognize the period of pensionable service such employees have accrued under the Seller U.K. Pension Plan to the intent that they shall qualify for -39- 44 preserved benefits on the date that they would have done had their pensionable service under the Seller U.K. Pension Plan not ceased as a consequence of this Agreement. In the case of those employees of the U.K. Sub who already qualify for preserved benefits under the Seller U.K. Pension Plan the New Plan shall contain provisions which immediately vest the accrual of their benefits after the Closing Date in the New Plan. Buyer reserves the right to modify or terminate the New Plan at any time or from time to time after Closing Date. (e) The Seller shall procure that in respect of those employees of the U.K. Sub who have not at the Closing Date qualified for preserved benefits under the Seller U.K. Pension Plan such persons will each be offered the opportunity of electing for a deferred vested benefit in accordance with the provisions of Rules 12(b) of the Consolidating Trust Deed and rules of the Seller U.K. Pension Plan dated 13 December 1993 (therein described "Discretionary award of Short Service Benefit in relation to Non Qualifying Members") as an alternative to receiving a refund of member contributions to which he or she may be entitled under the terms of the Seller U.K. Pension Plan as at the Closing Date. (f) Except for liabilities or obligations arising under the Company Domestic Retirement and Savings Plans (but not including liabilities or obligations transferred to plans designated by Buyer in accordance with paragraph 5.12(c)), the Seller Self-Insured LTD Benefits, the Seller U.K. Pension Plan, the 1993 ESPP and any Seller Benefit Arrangement providing for the issuance of Seller Stock ("Seller Stock Plans") as of the Closing Date the Company shall retain, or the Buyer shall assume, all liabilities or other obligations associated with the Seller Employee Plans, the Seller Benefit Arrangements and the Seller International Plan for or attributable to any Employee or Former Employee. (g) Except for liabilities or obligations arising under the Company Domestic Retirement and Savings Plans, the Seller U.K. Pension Plan, the Seller Self-Insured LTD Benefits, the 1993 ESPP and the Seller Stock Plans (i) the Buyer, the Company and their Af- filiates shall indemnify and hold the Seller and its Affiliates harmless against liabilities or obligations arising under the Seller Employee Plans, Seller Benefit Arrangements and Seller International Plans in respect of any Employee or Former Employee (including any beneficiary or dependent thereof) and all obligations and liabilities arising out of or relating to the employment of any Employee or Former Employee by the Company before or after the Closing other than obligations and liabilities expressly retained by the Seller pursuant to this Section 5.12 and (ii) without limiting the generality of the foregoing, the Company, the Buyer and their Affiliates shall assume, be solely responsible for, and shall hold the Seller and its Affiliates harmless against, any claims for workers compensation, medical benefits, life insurance, or other insured or uninsured welfare benefits of any kind incurred by any Employee or Former Employee or beneficiary thereof. The Company shall, as of the Closing Date, assume and -40- 45 retain, and hold the Seller and its Affiliates harmless against, all obligations and liabilities of the Company and its Affiliates to provide post-retirement health benefits to any Employee or Former Employee. Seller hereby indemnifies Buyer and its Affiliates against and agrees to hold each of them harmless from any and all damage, loss, liability and expense (including, without limitation, reasonable expenses of investigation and reasonable attorney fees and expenses) incurred or suffered by Buyer or any of its Affiliates (including the Company) as a result of, arising out of or relating to (I) the imposition of any Controlled Group Liability with respect to any employee benefit plan (as that term is defined in Section 3(3) of ERISA (whether or not such plan is subject to ERISA)) or arrangement currently or previously maintained or contributed to by Seller, the Company or any ERISA Affiliate of Seller or the Company at any time or to which Seller or any Related Person had or has an obligation to contribute at any time, other than any Seller Employee Plan, Seller Benefit Arrangement or Seller International Plan to the extent maintained for the benefit of Employees or Former Employees of the Company and its Subsidiaries or (II) the Company Domestic Retirement and Savings Plans and the Seller U.K. Pension Plan. (h) The Company shall be responsible for continuation coverage requirements under Section 4980B of the Code for "qualifying events" (within the meaning of 4980B(f)(3) of the Code) with respect to any Employee or Former Employee. (i) After the Closing, the Buyer shall cause the Company and the Company Subsidiaries to comply with their collective bargaining obligations. (j) Certain Employees as of July 1, 1993 (including certain Former Employees who became so since July 1, 1993) are participating in the 1993 Offering to the Seller's employees ("ESPP Participants") under the Seller's Employee Stock Purchase Plan (the "1993 ESPP"), a payroll deduction stock purchase plan under which options were granted on July 1, 1993, to purchase shares of Seller common stock on September 8, 1995, and the related payroll administration is being conducted by the Company in accordance with the Seller's 1993 ESPP standard administration manual. On or before the Closing Date, the Seller will cause the 1993 ESPP to be continued subsequent to the Closing Date for all ESPP Participants who become employed by the Buyer on the Closing Date and the Seller undertakes to cause shares to be issued, and to pay interest on payroll deposits from and after the Closing Date, all in accordance with the 1993 ESPP, to the ESPP Participants who continue in the 1993 ESPP. The Buyer agrees to continue, or cause to be continued, the payroll administration related to such continued participation in the 1993 ESPP, promptly forwarding all cash withholdings to the Seller with appropriate records. The Seller has the right to refrain from issuing any of the shares under the 1993 ESPP to any then-participating ESPP Participant until the Buyer has remitted to the Seller the amount of any payroll deduction due on behalf of such participant. Except as provided in this Section 5.12(j), the Buyer shall not have any obligation to continue the 1993 ESPP after -41- 46 the Closing Date and shall have no obligation to offer any other stock purchase plan to Employees. Except for any damage, loss, liability or expense (including, without limitation, reasonable expenses of investigation and reasonable attorney fees and expenses) which is the result of, arises from or relates to the gross negligence or willful misconduct of Buyer or the Company, or their affiliates and subsidiaries, with respect to their compliance with the provisions of this Section 5.12(j), Seller hereby indemnifies Buyer and its Affiliates against and agrees to hold each of them harmless from any and all damage, loss, liability and expense (including, without limitation, reasonable expenses of investigation and reasonable attorney fees and expenses) incurred or suffered by Buyer or any of its Affiliates (including the Company) as a result of, arising out of or relating to the 1993 ESPP and the Seller Stock Plans. (k) As of the Closing Date, Seller shall retain all assets of the Cameron Iron Works, USA Inc. Employee Benefit Trust and all liabilities associated with the Seller Self-Insured LTD Benefits. Seller shall be solely responsible for the funding and provision of the Seller Self-Insured LTD Benefits. Buyer and the Company shall have no right or entitlement to any of the assets of the Cameron Iron Works, USA Inc. Employee Benefit Trust. Buyer, Seller and the Company hereby agree to take any and all necessary steps to assign all assets and liabilities associated with the Seller Self-Insured LTD Benefits to Seller. 5.13 Public Announcements. Neither the Buyer nor the Seller will issue any press release or otherwise make any public statement with respect to the transactions contemplated hereby without the other party's prior consent, except as required by law or stock exchange or NASDAQ rules or regulations. 5.14 Use of the Company Name. (a) Except as provided in this Section 5.14, no interest in or right to use the "Cameron" name is being conveyed pursuant to this Agreement, and following the Closing Date the Buyer, the Company and the Company Subsidiaries shall not use the "Cameron" name in any manner in connection with their businesses or operations, provided, however, the Buyer, the Company and the Company Subsidiaries shall have the right (i) to use the name "Cameron Forged Products" in conjunction with the name "Wyman- Gordon Company" for three years following the Closing Date, and (ii) to dispose of or consume existing inventory, stationery, promotional or advertising literature, labels, office forms and packaging materials (other than that which relates to oil field equipment forgings) which may be labeled with the "Cameron" name for up to six months following the Closing Date. (b) Immediately following the Closing, the Buyer shall cause the Company to file with the office of the Secretary of State of the State of Delaware all documents necessary to change the name of the Company to a name reasonably satisfactory to the Seller. Pending the effectiveness of the Company's name change, the Buyer shall file all necessary documentation with the appropriate -42- 47 Governmental Entities to evidence its doing business as an entity using a name other than "Cameron Forged Products Company". The Buyer shall take the equivalent action with respect to such name in any other jurisdiction where it has been or is used. 5.15 Company Books and Records. For a period of eight years after the Closing Date, the Buyer shall, or shall cause the Company, the Company Subsidiaries and their successors and assigns, to (i) retain and, as reasonably requested, permit the Seller and its employees or agents to inspect and copy all books and records of the Company or any Company Subsidiary which relate to the period prior to the Closing Date and (ii) cooperate in arranging discussions with (and the calling as witnesses) officers, directors, employees and agents of the Company, the Company Subsidiaries and their successors and assigns, on matters which relate to the Company or the Company Subsidiaries with respect to the period prior to the Closing Date. 5.16 Disclosure Supplements. Prior to the Closing Date, the Buyer will, by giving written notice to the Seller, supplement or amend the Buyer Disclosure Schedule with respect to any matters hereinafter arising which, if existing or occurring at or prior to the date of this Agreement, would have been required to be set forth or described in the Buyer Disclosure Schedule or which is necessary to correct any information in the Buyer Disclosure Schedule or in any representation and warranty of the Buyer which has been rendered inaccurate thereby. Prior to the Closing Date, the Seller will, by giving written notice to the Buyer, supplement or amend the Seller Disclosure Schedule with respect to any matters hereafter arising which, if existing or occurring at or prior to the date of this Agreement, would have been required to be set forth or described in the Seller Disclosure Schedule or which is necessary to correct any information in the Seller Disclosure Schedule or in any representation and warranty of the Seller which has been rendered inaccurate thereby. For purposes of determining the accuracy of the representations and warranties of the Seller contained in Article III and the accuracy of the representations and warranties of the Buyer contained in Article IV in order to determine the fulfillment of the conditions set forth in Sections 6.2 and 6.3, respectively, the Buyer Disclosure Schedule and the Seller Disclosure Schedule shall be deemed to include only that information contained therein on the date of this Agreement and shall be deemed to exclude any information contained in any subse- quent supplement or amendment thereto. 5.17 Ancillary Agreements. (a) As promptly as practicable after the date hereof, the Buyer and the Seller will negotiate in good faith the terms of the following agreements (collectively the "Ancillary Agreements"): (i) a lease agreement pursuant to which the Buyer or the U.K. Sub will lease space and certain oil tool equipment to the Seller or an Affiliate of the Seller at the Livingston, Scotland facility, in the event the Buyer deems such lease agreement to be necessary or appropriate; -43- 48 (ii) a lease agreement pursuant to which the Seller or a Seller Subsidiary will lease space and certain equipment to the Company or an Affiliate of the Buyer at the Katy Road Site; (iii) a supply agreement pursuant to which the Buyer will cause the Company to supply forgings to the Seller or an Affiliate of the Seller; (iv) a license agreement pursuant to which the Seller will grant to the Company a non-exclusive license to make and sell certain products covered by the Seller's hot isostatic pressing patents; (v) a license agreement pursuant to which the Seller will grant to the Company a non-exclusive license to make and sell to RMI Titanium Company certain forgings to be used in a titanium riser covered by the Seller's patent therefor; (vi) a computer services agreement pursuant to which the Seller will permit the Company to continue to use the Seller's Cooper Oil Tool computer; and (vii) an agreement providing for the Seller to factor the Company's receivables (the "Factoring Agreement"). (b) The Ancillary Agreements will include the terms set forth in the term sheets appearing as Annex VIII hereto, and such other terms to which the parties may agree in writing. 5.18 WARN Act. The Buyer agrees to indemnify, defend and hold harmless the Seller, its present or former officers and directors, agents and Affiliates, against any claims, damages, wages, fines, penalties and expenses, including attorneys' fees, arising from the failure to comply with the Worker Adjustment and Retraining Notification Act (the "WARN Act") arising from or relating to a "plant closing" or "mass layoff" (as those terms are defined in the WARN Act) by the Company occurring on or after the Closing Date. 5.19 Taxes. (a) With respect to Seller's sale of the Company Common Stock hereunder, if Seller gives Buyer written notice within 30 days after the Closing Date ("Seller's Notice"), Seller and Buyer shall jointly make each available Section 338(h)(10) Election in accordance with applicable Tax Laws and as set forth herein, provided that Seller does not own, and is not deemed to own, and as a result of the transactions contemplated by this Agreement will not own and will not be deemed to own, fifty percent (50%) or more of Buyer's issued and outstanding common stock. If the Section 338(h)(10) Election is to be made, Seller and Buyer will supply in advance to one another copies of all correspondence, filings or communications (or memoranda setting forth the substance thereof) to be sent or made by Buyer or Seller or their respective representatives to or with the Internal Revenue Service relating to such election. Buyer and Seller agree to report the transfers -44- 49 under this Agreement consistent with such Section 338(h)(10) Elec- tion, and shall take no position or action contrary thereto (unless required to do so by applicable Tax Laws or an administrative settlement with Tax Authorities), including but not limited to any dissolution, merger, consolidation, or liquidation of the Company into the Buyer for a period of two years following the Closing Date without the prior written consent of the Seller, which consent may be withheld in its sole discretion. If the Section 338(h)(10) Election is to be made, Seller agrees to cause the Company and the Company Subsidiaries to recognize the gain, and to pay all tax on such gain, with respect to any intangible asset deemed sold pursuant to such election to the extent necessary to enable Buyer, the Company and the Company Subsidiaries to amortize such intangible asset pursuant to the provisions of Section 197 of the Code. (b) Buyer and Seller shall be jointly responsible for the preparation and filing of all Section 338 Forms in accordance with applicable Tax Laws and the terms of this Agreement, and each party shall deliver to the other party such Forms and related documents at least 30 days prior to the date such Section 338 Forms as are required to be filed under applicable Tax Laws. (c) The parties hereby agree that, for purposes of the allocation of the Aggregate Deemed Sale Price ("ADSP") (as defined under applicable Treasury Regulations), the fair market value of the machinery and equipment, dies, land and buildings of the U.K. Sub is $24,415,000, and the fair market value of the remaining assets of the U.K. Sub is at net book value. (d) Seller shall be liable for, shall pay and shall indemnify and hold Buyer and the Company and the Company Subsidiaries harmless against all Taxes of the Company and the Company Subsidiaries for any taxable year or taxable period ending on or before the Closing Date, including, without limitation, any Taxes resulting from the making of the Section 338(h)(10) Election and any liability for Taxes pursuant to Treasury Regulation Section 1.1502-6. All liabilities and obligations between the Company and the Company Subsidiaries on the one hand, and the Seller and any of Seller's Affiliates on the other hand, under any tax allocation agreement or arrangement in effect on or prior to the Closing Date (other than this Agreement or as set forth herein) shall cease to exist as of the date hereof. (e) Buyer shall be liable for, shall pay and shall indemnify and hold Seller harmless against, any and all Taxes of the Company and the Company Subsidiaries for any taxable year or taxable period commencing after the Closing Date. (f) Any Taxes for a taxable period beginning before the Closing Date and ending after the Closing Date (the "Straddle Period") with respect to the Company or any Company Subsidiary shall be apportioned between Seller and Buyer based on the actual operations of the Company or the Company Subsidiary, as the case may be, during the portion of such period ending on the Closing -45- 50 Date (the "Pre-Closing Straddle Period") and the portion of such period beginning on the date following the Closing Date, and for purposes of Sections 5.19(d) and 5.19(e), each portion of such period shall be deemed to be a taxable period. With respect to any Taxes for the Straddle Period, at least thirty days prior to the due date for the payment of such Taxes, Buyer shall present Seller with a schedule detailing the computation of the Pre-Closing Straddle Period Tax; and within ten days after Buyer presents Seller with such schedule, Seller shall pay the Company the amount of the Pre-Closing Straddle Period Tax as computed by Buyer. In the event Seller disputes Buyer's computation of the Pre-Closing Straddle Period Tax, Seller shall not be relieved of its obligation to pay, in the first instance, any such disputed amount. Whether any such disputed amount was in fact due from Seller shall be resolved in accordance with Section 5.19(m). If upon such resolution it is determined that any of such disputed amount was not payable to Buyer and such amount has been paid to Buyer, then Buyer shall refund to Seller such amount, plus interest at the rate required to be paid under Section 6621 of the Code. (g) Seller shall (x) prepare and file all Federal income Tax and unitary state Tax returns for the Company and the Company Subsidiaries with respect to all periods, or partial periods, ending on or prior to the Closing Date (including all tax returns, reports and forms relating thereto which are due after the Closing Date) and (y) prepare and file or cause the Company and the Company Subsidiaries to prepare and file all other Tax returns, reports and forms for the Company which are due prior to the Closing Date, and shall pay all Taxes with respect to clause (x) and at the time of such filing shall pay or shall cause the Company or the Company Subsidiaries to pay all Taxes with respect to clause (y). To the extent requested by Seller, the Company and the Company Subsidiaries shall participate in the filing of and shall file any required Tax returns with respect to any period ending on or prior to the Closing Date. Buyer shall prepare or cause to be prepared the schedules in respect of the Company and the Company Subsidiaries containing the information necessary for Seller to prepare any consolidated or combined returns. (h) Buyer or the Company and the Company Subsidiaries shall prepare and file all state and local Tax returns, forms and reports, other than returns with respect to unitary state Taxes, for the Company and the Company Subsidiaries with respect to any tax period for which such return, form or report is due after the Closing Date, and shall remit all Taxes with respect thereto and shall be free to make, or cause to be made, any tax elections in respect of such Taxes and to claim any deductions or credits, in connection therewith; provided that all returns filed by Buyer or the Company and the Company Subsidiaries for any period beginning prior to the Closing Date shall be prepared by Buyer, or the Company and the Company Subsidiaries, in a manner consistent with the Company's and the Company's Subsidiaries prior practices, except for changes necessary to comply with changes in Law. -46- 51 (i) Seller shall have exclusive control over any dispute relating to any Tax liability or return of Seller or any Affiliate of Seller (including the Company and the Company Subsidiaries for periods prior to the Closing Date) filed by Seller for or with respect to any period, or partial period, ending on or prior to the Closing Date, provided that Seller shall keep Buyer currently informed of the progress of any such dispute. In the event that the Section 338(h)(10) Election is not made, Buyer shall be entitled to participate in any such dispute at its own expense to the extent the same relate to the Company or any Company Subsidiary; and Seller, with the consent of Buyer, which will not be unreasonably withheld, may settle any or all such disputes, accept any determination as final, pay any Tax claim or take such other action to contest or concede any Tax claimed. If Buyer shall withhold its consent to any action desired to be taken by Seller in connection with any such dispute, (x) Buyer shall be responsible for, and shall indemnify and hold Seller and its Affiliates harmless from and against, any Taxes required to be paid by Seller in connection therewith in excess of the amount which Seller would otherwise have paid if Buyer's consent had not been so withheld, (y) Buyer shall thereafter control the content of all submissions made by Seller to any administrative or judicial authority to the extent they relate to the Company and (z) (i) if such dispute involves issues other than those relating solely to the Company or the Company Subsidiaries, Seller shall control all other aspects of such dispute, or (ii) if such dispute involves only issues relating solely to the Company or the Company Subsidiaries, Buyer shall thereafter control such dispute. Buyer shall cooperate and shall cause its Affiliates to cooperate with Seller and its Affiliates in connection with any and all such disputes and will execute all lawful, true and correct powers-of-attorney, affidavits, and other papers necessary in connection therewith, and will provide Seller reasonable access during normal business hours to the employees and business, financial and Tax records or other similar information of the Company and the Company Subsidiaries to the extent relating to such dispute. (j) Buyer and the Company shall have exclusive control over any dispute relating to any Tax liability or return of Buyer or the Company or any Company Subsidiary filed for or with respect to any tax period for which a return is due after the Closing Date (other than Federal income Taxes and unitary state Taxes relating to periods or partial periods ending on or prior to the Closing Date). Seller and its Affiliates shall cooperate with Buyer and its Affiliates in connection with any and all such disputes and will execute all lawful, true and correct powers-of-attorney, affidavits, and other papers necessary in connection therewith, and will provide Buyer, the Company and the Company Subsidiaries reasonable access during normal business hours to the employees and business, financial and Tax records or other similar information of Seller and its Affiliates to the extent relating to such dispute. -47- 52 (k) Buyer shall cause the Company and the Company Subsidiaries to elect, where permitted by law, to carryforward any net operating loss, net capital loss, charitable contribution or other item arising after the Closing Date that could, in the absence of such an election (collectively, "Carrybacks"), be carried back to a taxable period of the Company or the Company Subsidiaries ending on or before the Closing Date in which the Company or the Company Subsidiaries filed a consolidated, combined or unitary tax return with Seller or any of Seller's Affiliates. Buyer, on its own behalf and on behalf of its tax Affiliates, hereby waives any right to use or apply any net operating loss, net capital loss, charitable contribution or other item of the Company for any tax year ending on any date following the Closing Date to part or all of the period prior to the Closing Date. (l) As soon as practicable, but in any event within 15 days after Seller's or Buyer's request, as the case may be, Buyer shall deliver to Seller, or Seller shall deliver to Buyer, as the case may be, such information and other data relating to the Tax returns and Taxes of the Company and shall make available such knowledgeable employees of Seller, Buyer, the Company or any of their Affiliates, as the case may be, as Seller or Buyer, as the case may be, may reasonably request, including providing the information and other data customarily required by Seller or Buyer, as the case may be, to cause the completion and filing of all Tax returns for which it has responsibility or liability under this Agreement or to respond to audits by any Taxing Authority with respect to any Tax returns or Taxes for which it has any responsibility or liability under this Agreement or to otherwise enable Seller or Buyer, as the case may be, to satisfy its accounting or tax requirements. (m) If Seller and Buyer disagree as to the amount of Taxes for which either of them is liable to the other under this Section 5.19, Seller and Buyer shall promptly consult each other in an effort to resolve such dispute. If any such point of disagreement cannot be resolved within 15 days of the date of consultation, Seller and Buyer shall within ten days after such 15-day period jointly select a firm of nationally recognized independent public accountants who has not represented either Buyer or Seller for three years prior to the date of the dispute (the "Neutral Auditors") to act as an arbitrator to resolve all points of disagreement concerning tax accounting matters with respect to this Agreement. If the parties cannot agree on the selection of the Neutral Auditors within such ten-day period, then such Neutral Auditors shall be selected by the American Arbitration Association. All fees and expenses relating to the work performed by the arbitrator in accordance with this Section 5.19(m) shall be borne equally by Seller and Buyer. (n) Seller and Buyer shall (x) each give the other prompt written notice of the receipt of any claim by any taxing authority that, if successful, may result in an indemnity payment pursuant to this Section 5.19 and (y) each transmit to the other a written description reasonably detailing the nature of the claim, a copy of all papers served with respect to such claim and the basis of its claim for indemnification under this Section 5.19. -48- 53 (o) Seller will not allow the Company or any Company Subsidiary to elect to be excluded from any consolidated federal income tax return of the Seller and its Affiliates with respect to which it is otherwise includible on account of any taxable period, whether of 30 days or less or otherwise. (p) For purposes of this Agreement, the following terms shall have the following meanings: (i) "Code" means the Internal Revenue Code of 1986, as amended. (ii) "Returns" means any and all returns, decla- rations, reports, statements and other documents required to be filed in respect of any Tax. (iii) "Section 338 Forms" means all returns, documents, statements, and other forms that are required to be submitted to any Federal, state, county, or other local Taxing Authority in connection with a Code Section 338(h)(10) Election. Section 338 Forms shall include, without limitation, any "statement of section 338 election" and United States Internal Revenue Service Form 8023 (together with any schedules or attachments thereto) that are required pursuant to relevant Treasury Regulations and any substantially similar forms under a state or local statute corresponding to Federal laws. (iv) "Section 338(h)(10) Election" means an election described in Section 338(h)(10) of the Code with respect to Seller's sale of the Company Common Stock to Buyer pursuant to this Agreement. "Section 338(h)(10) Election" shall also include any substantially similar election under a state or local statute corresponding to Federal laws. (v) "Tax" means any of the Taxes. (vi) "Taxes" means all federal, state, local and foreign income, profits, franchise, unincorporated business, withholding, capital, general corporate, customs duties, environmental (including taxes under Section 59A of the Code), disability, registration, alternative, add-on, minimum, estimated, sales, goods and services, use, occupation, property, severance, production, excise, recording, ad valorem, gains, transfer, value-added, unemployment compensation, social security premium, privilege and any and all other taxes (including interest, additions to tax and penalties thereon, and interest on such addi- tions to tax and penalties); (vii) "Tax Laws" means the Code, Federal, state, county, local, or foreign laws relating to Taxes and any regulations or official administrative pronouncements released thereunder. (viii) "Taxing Authority" means any Governmental Entity having jurisdiction over the assessment, determination, collection, or other imposition of Tax. -49- 54 5.20 Existing Insurance Coverage. As of the Closing Date, the Seller or its Affiliates will cancel insurance coverage applicable to the Company or the Company Subsidiaries for occurrences (with respect to any "occurrence" policies) or claims made (with respect to any "claims-made" policies) after the Closing Date (other than insurance policies in the name of the Company Subsidiaries); provided, however, that the remaining insurance coverage shall be available to the Buyer, the Company and the Company Subsidiaries with respect to insured occurrences or series of occurrences relating to the Company, the Company Subsidiaries or the Business on or prior to the Closing Date, if and only to the extent that the Buyer or the Company has assumed or paid the loss or liability attributed to such occurrences. If after the Closing, the Seller actually receives from an insurer cash proceeds (excluding any return of premium or reimbursed attorneys or investigation or other fees) attributable to such insurance coverage with respect to any insured occurrences or any series of occurrences on or prior to the Closing Date or any claims that were asserted on or prior to the Closing Date, then such cash proceeds shall be paid to the Buyer net of any deductible, co-payment, retro fees, self-insured premiums, defense costs or other charges paid or payable to the insurance carrier or obligations to reimburse the insurance carrier for which the Seller (or any of its Affiliates) is liable, to the extent that the Buyer or the Company has assumed or paid the loss or liability attributed to such occurrence or series of occurrences. The Buyer shall reimburse the Seller for any administrative costs, retro fees, premiums, self-insured or deductible loss costs or other expenses that the Seller is charged after the Closing by such insurance carrier relating to insurance coverage applicable to the Company or the Company Subsidiaries prior to Closing. 5.21 Certain Obligations. "Seller's Company Obligations" shall mean any obligation, commitment, liability or responsibility of the Seller, its Affiliates or their Predecessors (whether or not also an obligation, commitment, liability, or responsibility of or claim against, in whole or in part, the Company, the U.K. Sub or the Pipeline Sub) arising, undertaken or created before the Closing Date in connection with, on behalf of or for the benefit of any Cameron Entity, or arising from the conduct of the Business, including without limitation (i) any consulting, employment or severance agreements, guarantees, letters of credit, performance bonds, or indemnities, or obligations or indemnities to officers or directors of any Cameron Entity, (ii) any agreements with any transferors to the Seller, its Affiliates, or their Predecessors, of any assets of any Cameron Entity or of the Business, (iii) any labor or collective bargaining agreements relating to any Cameron Entity, (iv) any contracts with any Governmental Entity relating to any Cameron Entity, (v) any sales or purchase agreements relating to any Cameron Entity, (vi) any leases of real or personal proper- ty relating to any Cameron Entity, and (vii) any other agreements or commitments relating to any Cameron Entity under which the Seller, its Affiliates or Predecessors will have any liability after the Closing Date; provided, however, that the Seller's Company Obligations shall exclude the matters that the Seller is -50- 55 required to indemnify pursuant to Section 5.22(b) or Section 5.22(f). The Seller shall cause the Company to assume the Seller's Company Obligations, effective on the Closing Date, and the Company shall thereafter discharge the same in accordance with their terms. 5.22 Survival; Indemnification. (a) Survival of Representations, Warranties and Covenants. Except for the representation and warranty of the Seller in Section 3.23 hereof and the Buyer in Section 4.16 hereof which will survive the Closing and remain in full force and effect thereafter until 18 months after the Closing, the representations and warranties of the parties contained in this Agreement shall expire with, and be terminated and extinguished by, the Closing of the transactions contemplated hereby and shall not survive the Closing Date. Any claim for indemnification with respect to the representation and warranty of the Seller in Section 3.23 hereof and the Buyer in Section 4.16 hereof that is not asserted by notice given as herein provided within the 18-month period may not be pursued and hereby is irrevocably waived and released after such time. Subject to the preceding 18-month limitation on the indemnity with respect to Sections 3.23 and 4.16, the covenants of the parties in Article V hereof (including without limitation the indemnities contained therein) will survive the Closing and remain in full force and effect thereafter without limitation as to time, except in connection with (i) any applicable statute of limitations or (ii) any such covenant that, by its terms, is otherwise limited with respect to time. (b) Cross Indemnity. Subject to the terms and conditions of this Section 5.22, the Seller hereby agrees to indemnify and hold the Buyer, its Affiliates, and their directors, officers or employees (collectively, "Buyer's Group") harmless from and against all demands, claims, causes of action, assessments, losses, damages (including without limitation fines, penalties and punitive damages), liabilities and costs and expenses, including without limitation attorneys' fees and any expenses incident to the enforcement of this Section 5.22 (collectively, "Losses"), which the Buyer's Group may suffer, sustain or become subject to by reason of or resulting from (i) any inaccuracy in the representation or warranty of the Seller contained in Section 3.23 of this Agreement, or (ii) any breach of any covenant by the Seller in Article V of this Agreement. Subject to the terms and con- ditions of this Section 5.22, the Buyer hereby agrees to indemnify and hold the Seller, its Affiliates, and their directors, officers or employees (collectively, "Seller's Group") harmless from and against all Losses which the Seller's Group may suffer, sustain or become subject to by reason of or resulting from (i) any inaccuracy in the representation or warranty of the Buyer contained in Section 4.16 of this Agreement, (ii) any breach of any covenant by the Buyer in Article V of this Agreement, or (iii) the Seller's Company Obligations. The party seeking indemnification pursuant to this Section 5.22 is hereinafter referred to as an "Indemnified Party" and the party from whom indemnification is sought is hereinafter referred to as an "Indemnifying Party." -51- 56 (c) Limitation of Indemnification. Notwithstanding any contrary provision, no claim by either party against the other for indemnification arising under this Article V shall be valid and assertible unless the aggregate amount of Losses associated with such claim shall exceed $100,000. Further, any claims by the Indemnified Party against the Indemnifying Party shall be determined net of any tax benefit actually recognized and utilized to offset or reduce the tax liability of the Indemnified Party or the other members of its group. All payments pursuant to this Section 5.22 shall be treated as adjustments to the purchase price of the Company Common Stock. (d) Sole Remedy. Other than the rights, obligations, and remedies provided for in Article I, Article V, Article VII and Article VIII hereof, the Buyer and the Seller agree that the rights to indemnification provided in this Section 5.22 and elsewhere in this Article V will be the exclusive rights, obligations and remedies with respect to all provisions of this Agreement. Each party, on behalf of itself and its Affiliates, irrevocably waives any claim, cause of action or theory of liability it might otherwise be entitled to assert in respect of such provisions except for the right to seek indemnification on the terms and subject to the conditions set forth in this Section 5.22 and elsewhere in this Article V. (e) Additional Indemnification by the Buyer. Subject to the terms and conditions of this Section 5.22 and in addition to the indemnification provided for in Section 5.22(b), the Buyer agrees, other than the Losses that the Seller is required to indemnify pursuant to Section 5.22(b) or Section 5.22(f), the employee benefit matters addressed in Section 5.12 and the tax matters addressed in Section 5.19, to indemnify and hold the Seller's Group harmless from and against all Losses which the Seller's Group may suffer, sustain or become subject to by reason of or resulting from any liabilities or obligations of or relating to, or claims against, any Cameron Entity or the Business on, before or after the Closing Date, including without limitation (i) to indemnify and hold the Seller's Group harmless from and against all Losses which the Seller's Group may suffer, sustain or become subject to by reason of or resulting from any Product Liability Claims arising out of or resulting from Products sold or furnished by the Seller, any of its Affiliates or any Cameron Entity (including without limitation any product liability assumed in connection with the acquisition of any business or product line) on, before or after the Closing Date; (ii) to indemnify and hold the Seller's Group harmless from and against all Losses which the Seller's Group may suffer, sustain or become subject to by reason of or resulting from (A) any noncompliance of the operations, properties or business activities of any Cameron Entity or the Business with any Environmental Law on, before or after the Closing Date or (B) any liabilities or obligations of or relating to, or claims against, any Cameron Entity or the Business based upon any Environmental Law, or arising from the disposal of any Regulated Materials, on, before, or after the Closing Date; and (iii) to indemnify and hold the Seller's Group harmless from and against all -52- 57 Losses which the Seller's Group may suffer, sustain or become subject to by reason of or resulting from (A) any workers' compensation claim filed against any Cameron Entity on, before or after the Closing Date, and (B) any employment or severance agreements entered into by the Seller or the Company relating to employees of the Company on, before or after the Closing Date, other than severance payments under the Employment Agreement listed on Section 5.22(e) of the Seller Disclosure Schedule. It is the intention of the parties that the indemnity provided herein shall survive the Closing and shall, with respect to environmental claims under CERCLA, be an agreement expressly not barred by 42 U.S.C. Section 9607(e)(1). (f) Additional Indemnification by the Seller. Subject to the terms and provisions of this Section 5.22 and in addition to the indemnification provided for in Section 5.22(b), the Seller agrees, other than the Losses that the Buyer is required to indemnify pursuant to Section 5.22(b), the employee benefit matters addressed in Section 5.12 and the tax matters addressed in Section 5.19, (i) to indemnify and hold the Buyer's Group harmless from and against all Losses which the Buyer's Group may suffer, sustain or become subject to by reason of or resulting from any liabilities or obligations of or relating to, or claims against, the Seller or the Seller Subsidiaries on, before or after the Closing Date to the extent that such liabilities, obligations or claims (x) do not relate to the Business and (y) arise from the activity of (a) any Cameron Entity (other than the Company or the Pipeline Sub) before the Closing Date, or (b) the Seller or any of the Seller's subsidiaries (other than the Cameron Entities), (ii) except to the extent the actions of the Buyer, the Company or their Affiliates may cause or increase any such Losses after the Closing Date, to indemnify and hold the Buyer's Group harmless from and against all Losses which the Buyer's Group may suffer, sustain or become subject to by reason of or resulting from any Regulated Materials disposed of on, or discharged into the environment at, the Katy Road Site or the Gulf Metals Site on or before the Closing Date; and (iii) to indemnify and hold the Buyer's Group harmless from and against all Losses which the Buyer's Group may suffer, sustain or become subject to by reason of or resulting from severance payments under the Employment Agreement listed on Section 5.22(e) of the Seller Disclosure Schedule. It is the intention of the parties that the indemnity provided herein shall survive the Closing and shall, with respect to environmental claims under CERCLA, be an agreement expressly not barred by 42 U.S.C. Secion 9607(e)(1). (g) Conditions of Indemnification of Third Party Claims. The obligations and liabilities of the parties under this Article V with respect to claims of Losses resulting from the assertion of liability by third parties ("Third-Party Claim") shall be subject to the following terms and conditions: (i) The Indemnified Party shall give written notice to the Indemnifying Party of any such Claim promptly after the Indemnified Party receives notice thereof, which written notice shall state the nature and basis of such Claim and, if -53- 58 determinable, the amount thereof, provided that failure to so notify the Indemnifying Party shall in no case prejudice the rights of the Indemnified Party under this Agreement unless the Indemnifying Party shall actually be prejudiced by such failure and then only to the extent of such actual prejudice. Upon receipt of notice of any such Claim from the Indemnified Party, the Indemni- fying Party will undertake the defense thereof by representatives of its own choosing. (ii) In the event that the Indemnifying Party, within a reasonable time after notice of any such Claim, fails to defend the same, the Indemnified Party shall (upon further notice to the Indemnifying Party) have the right to undertake the defense, compromise or settlement of such Claim on behalf of and for the account and risk of the Indemnifying Party, subject to the right of the Indemnifying Party to assume the defense of such Claim at any time prior to settlement, compromise or final determination thereof. (iii) Anything in this Section 5.22 to the contrary notwithstanding, the Indemnifying Party shall have the right, at its own cost and expense, to defend, compromise or settle such Claim; provided, however, that the Indemnifying Party shall not, without the Indemnified Party's written consent, settle or compromise any Claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the Indemnified Party a release from all liability in respect of such Claim. The Indemnified Party shall have the right at its own expense to participate in the defense of the Claim. (h) Certain Definitions. As used in this Agreement: (i) "Product Liability Claim" means any claim or cause of action, regardless of form and whether absolute, accrued, contingent or otherwise, arising out of injury to persons or damage to property, relating to the design or manufacture of or the introduction into commerce by sale, exchange or assignment of the Products. (ii) "Business" means research, development, engi- neering, melting, refining, remelting, forging, extrusion, machining, manufacturing, distribution, sales, marketing, service or repair operations associated with the Products. (iii) "Products" means closed die forgings (includ- ing rotating parts for aircraft engines or industrial turbines, aircraft landing gear, structural airframe parts, ordnances and related parts, military and power plant nuclear forgings, valves, heavy wall pipe and fittings, power generation forgings and oilfield equipment forgings), extrusions (including for aircraft engines, pipe, oilfield equipment, bar stock and ordnances), super alloy powder products, skid rails and related components for use in metallurgical reheat furnaces, including custom-shaped insulators and high velocity burners, and other forged products. -54- 59 (iv) "Cameron Entities" means (x) the Company, (y) the Pipeline Sub and (z) that portion of each of the following companies to the extent that it presently conducts or previously conducted all or part of the Business: (i) the U.K. Sub, (ii) the forged products division of Cameron Iron Works, Inc., (iii) the forged products division of Cameron Iron Works USA, Inc., (iv) Cameron Forge Company, (v) the forged products division of Cameron Iron Works Limited, (vi) Cooper Industries, Inc., (vii) Cooper (Great Britain) Ltd., (viii) Cameron Iron Works, Inc., (ix) Cameron Iron Works USA, Inc., and (x) Cameron Iron Works Limited, and (xi) any direct or indirect Predecessor or successor to any of the foregoing that conducted or conducts all or part of the Business. (v) "Predecessor" means an entity which has previ- ously held an interest to which the entity to whom the reference is made has succeeded, including without limitation an entity which conveyed, transferred or assigned all or substantially all of its assets to the entity to whom the reference is made or an entity which was merged or amalgamated into or consolidated with the entity to whom the reference is made. (vi) "Katy Road Site" means the former Cameron Iron Works, Katy Road Facility located at 1000 Silber Road, Houston (Harris County), Texas. (vii) "Gulf Metals Site" means the Gulf Metals State Superfund Site in Houston (Harris County), Texas, located northeast of the intersection of Mykawa Road and Almeda-Genoa Road. (viii) "Affiliate" shall mean any person or entity that directly or indirectly controls or is controlled by or is under the common control of the party referred to. 5.23 Repurchase of Receivables. Pursuant to the Factoring Agreement, the Company has agreed to assign to the Seller prior to Closing its trade and notes receivables (the "Receivables"). The Buyer agrees to purchase from the Seller all Receivables that are outstanding 90 days after the Closing Date. Within five business days following the 90th day after the Closing Date, the Seller will prepare a statement listing the balance of the outstanding Receivables on such date, deducting the same reserve amount previously deducted in determining the Receivables Purchase Price. Within five business days after receipt of such statement, subject to the terms of the Factoring Agreement, the Company shall pay to the Seller such amount at its bank account designated in this Agreement. ARTICLE VI CONDITIONS 6.1 Conditions to Each Party's Obligation to Effect the Transactions Contemplated by this Agreement. The respective obligations of each party to effect the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing Date of the following conditions: -55- 60 (a) Each of the Seller and the Buyer shall have executed and delivered the Investment Agreement. (b) The transactions contemplated by this Agreement shall have been approved by the requisite affirmative vote of the holders of the Buyer Common Stock and the requisite consent to the transactions contemplated by this Agreement shall have been obtained from the holders of the 10 3/4% Senior Notes due 2003 issued pursuant to the Indenture, dated as of March 16, 1993, by and among the Buyer, certain subsidiaries of the Buyer and State Street Bank and Trust Company, as Trustee, and by The CIT Group/Business Credit, Inc. (c) Articles of amendment, signed in accordance with the Massachusetts Business Corporation Law and setting forth the Authorized Shares Amendment, the Fair Price Charter Amendment, and the due adoption thereof, shall have been filed with the Secretary of the Commonwealth of Massachusetts and shall be in full force and effect. (d) The Buyer's Board of Directors shall have adopted and approved the Control Share Acquisitions Amendment and it shall be in full force and effect. (e) The Rights Agreement shall have been executed and delivered by the Buyer and the other party thereto and shall be in full force and effect. (f) No statute, rule, regulation, executive order, decree or injunction shall have been enacted, entered, promulgated or enforced, and no action, suit or proceeding shall be pending or threatened, by any Governmental Entity of competent jurisdiction which prohibits or challenges the consummation of the transactions contemplated by this Agreement, or conditions such consummation on the matters referred to in the last sentence of Section 5.6(b) hereof, and is in effect. (g) The Ancillary Agreements shall have been negotiated on terms mutually satisfactory to the Buyer and the Seller and executed and delivered by each of the parties thereto. 6.2 Conditions of Obligations of the Seller to Effect the Transactions Contemplated by this Agreement. The obligations of the Seller to effect the transactions contemplated by this Agreement are further subject to the satisfaction at or prior to the Closing Date of the condition that the representations and warranties of the Buyer set forth in this Agreement and qualified as to materiality or Material Adverse Effects shall be true and correct and those not so qualified shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date, as if made at and as of the Closing Date (except for representations and warranties that expressly speak only as of some other time), the Buyer shall have delivered the documents and other items to be delivered pursuant to Section 2.3, and the Buyer shall have performed and complied, in all material respects, with all obligations and covenants required to be performed or complied with by it under this Agreement at or prior to the Closing Date. -56- 61 6.3 Conditions of Obligations of the Buyer to Effect the Transactions Contemplated by this Agreement. The obligations of the Buyer to effect the transactions contemplated by this Agreement are further subject to the satisfaction at or prior to the Closing Date of the condition that the representations and warranties of the Seller set forth in this Agreement and qualified as to materiality or Material Adverse Effects shall be true and correct and those not so qualified shall be true and correct in all material respects as of the date of this Agreement (except to the extent that the transactions set forth on Annex IV have not been consummated as of such date) and as of the Closing Date, as if made at and as of the Closing Date (except for representations and warranties that expressly speak only as of some other time), the Seller shall have delivered the documents and other items to be delivered pursuant to Section 2.2, and the Seller shall have performed and complied, in all material respects, with all obliga- tions and covenants required to be performed or complied with by them under this Agreement at or prior to the Closing Date. ARTICLE VII TERMINATION AND ABANDONMENT 7.1 Termination. This Agreement may be terminated at any time prior to the Closing Date, whether before or after approval by the shareholders of the Buyer of the transactions contemplated by this Agreement: (a) by mutual consent of the parties hereto; (b) by the Seller or the Buyer, if the transactions contemplated by this Agreement shall not have been consummated before June 30, 1994 (unless the failure to consummate the transactions contemplated by this Agreement by such date shall be due to the breach of this Agreement by the party seeking to terminate this Agreement); (c) by the Seller, if there has been a material violation or breach by the Buyer of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Seller impossible and such violation or breach has not been waived by the Seller; (d) by the Buyer, if there has been a material violation or breach by the Seller of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Buyer impossible and such violation or breach has not been waived by the Buyer; or (e) by either of the parties hereto if this Agreement and the transactions contemplated hereby are not duly approved by the shareholders of the Buyer at a meeting of shareholders (or any adjournment thereof) duly called and held for such purpose. -57- 62 7.2 Procedure and Effect of Termination. In the event of termination of this Agreement and abandonment of the transactions contemplated hereby by either or both of the parties pursuant to Section 7.1, written notice thereof shall forthwith be given to the other party hereto and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by either of the parties hereto. If this Agreement is terminated as provided herein: (a) upon request therefor, each party will redeliver all documents, work papers and other material of the other party relating to the transactions contemplated hereby, whether obtained before or after the execution hereof, to the party furnishing the same or will destroy such documents; (b) all information received by the Seller and the Company with respect to the business of the Buyer or by the Buyer with respect to the business of the Company (other than information which is a matter of public knowledge or which has heretofore been or is hereafter published in any publication for public distri- bution or filed as public information with any Governmental Entity) shall not at any time be used for the advantage of the Person receiving the information or to the detriment of the Person furnishing such information; and each of the Seller and the Buyer will use its reasonable best efforts to prevent the disclosure thereof to third Persons except as may be required by law; (c) neither party hereto shall have any liability or fur- ther obligation to the other party hereto pursuant to this Agreement except as stated in this Section 7.2 and in Sections 5.4(d), 5.10 and 5.11; and (d) all filings, applications and other submissions made pursuant to Sections 5.6, 5.7 and 5.8 shall, to the extent practicable, be withdrawn from the agency or other Person to which made. ARTICLE VIII MISCELLANEOUS 8.1 Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of each of the parties. 8.2 Waiver of Compliance; Consents. Except as otherwise provided in this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party or parties entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 8.2. -58- 63 8.3 Investigations; Survival Upon Termination. Subject to Section 5.22(a), the respective representations and warranties of the parties contained herein or in any certificates, schedules, exhibits or other documents delivered prior to or at the Closing shall not be deemed waived or otherwise affected by any investigation made by any party hereto. Each and every such representation and warranty shall expire with, and be terminated and extinguished by, the termination of this Agreement pursuant to Section 7.1 or otherwise; and thereafter none of the parties hereto or any of their respective officers or directors shall be under any liability whatsoever with respect to any such representations or warranties. This Section 8.3 shall have no effect upon any other obligation of the parties hereto, whether to be performed before or after the Closing Date. 8.4 Notices. All notices and other communications hereunder shall be validly given, made or served, if in writing and delivered personally, sent by facsimile transmission (receipt of which is confirmed) or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the fol- lowing addresses (or at such other address for a party as shall be specified by like notice; provided that notices of a change of address shall be effective only upon receipt thereof): (a) if to Seller or the Company, to: Cooper Industries, Inc. First City Tower, Suite 4000 1001 Fannin Street Houston, Texas 77002 Attention: General Counsel Facsimile No.: 713-739-5882 (b) if to the Buyer, to: Wyman-Gordon Company 244 Worcester Street Box 8001 North Grafton, Massachusetts 01536-8001 Attention: Wallace F. Whitney, Jr., Esq. Facsimile No.: (508) 839-7500 with a copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Attention: Adam O. Emmerich, Esq. Facsimile No.: (212) 403-2000 Notice given by facsimile shall be deemed delivered on the business day after it is sent to the recipient. Notice given by mail as set out above shall be deemed delivered five calendar days after the same is mailed. -59- 64 8.5 Annexes, Schedules and Exhibits. All annexes, schedules and exhibits attached hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. All references to "this Agreement" shall be deemed to include all annexes, schedules and exhibits to this Agreement. Information set forth in any section to the Seller Disclosure Schedule or the Buyer Disclosure Schedule is deemed set forth in all other sections of such Disclosure Schedule. Disclosure of any fact or item in any annex, schedule or exhibit hereto referenced by a particular paragraph or section in this Agreement shall, should the existence of the fact or item or its contents be relevant to any other paragraph or section, be deemed to be disclosed with respect to that other paragraph or section whether or not a specific cross reference appears. Disclosure of any fact or item in any annex, schedule or exhibit hereto shall not necessarily mean that such item or fact individually is material to (i) the Seller or the Company individually or the Seller and the Company taken as a whole or (ii) the Buyer or its subsidiaries individually or the Buyer and its subsidiaries taken as a whole. 8.6 Descriptive Headings. The descriptive headings herein are inserted for convenience only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 8.7 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall be considered one and the same agreement. 8.8 Entire Agreement; Assignment. The Confidentiality Agreement, the Investment Agreement, this Agreement, including the annexes, schedules and exhibits hereto and thereto, and the other instruments, agreements, documents, schedules and certificates referred to herein and therein, embody the entire agreement and understanding of the parties hereto and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties hereto without the prior written consent of the other party. 8.9 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York without regard to any applicable principles of conflicts of law. 8.10 Specific Performance. The parties hereto agree that if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, irreparable damage would occur, no adequate remedy at law would exist and damages would be difficult to determine, and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. -60- 65 8.11 Alternative Dispute Resolution. (a) The parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by negotiations between executives who have authority to settle the controversy. Any party may give the other party written notice of any dispute not resolved in the normal course of business. Within 20 days after delivery of said notice, executives of both parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to exchange relevant information and to attempt to resolve the dispute. If the matter has not been resolved within 60 days of the disputing party's notice, or if the parties fail to meet within 20 days, either party may initiate mediation of the controversy or claims as provided in Section 8.11(c). (b) If a negotiator intends to be accompanied at a meeting by an attorney, the other negotiator shall be given at least three working days' notice of such intention and may also be accompanied by an attorney. All negotiations pursuant to this clause are confidential and shall be treated as compromise and settlement negotiations for purposes of the Federal Rules of Evidence and state rules of evidence. (c) If negotiation fails within the time limits provided in Section 8.11(a), either party may initiate a mediation proceeding by a request in writing to the other party. Thereupon, both parties will be obligated to engage in a mediation. The proceeding will be conducted in accordance with the presently effective CPR Model Procedure for Mediation of Business Disputes, with the following exceptions: (i) The mediator shall be an attorney experienced in mediating large commercial disputes, who shall be compensated at his normal hourly or per diem rates for all time spent by him in connection with the proceedings, and whose fees shall be borne equally by the parties. If the parties have not agreed within 30 days of the request for mediation on the selection of a mediator willing to serve, the Center for Public Resources, upon the request of either party, shall appoint a member of the CPR Panels of Neutrals who meets the above qualifications as the mediator. (ii) Efforts to reach a settlement will continue until the conclusion of the proceeding, which is deemed to occur when: (a) a written settlement is reached, (b) the mediator concludes and informs the parties in writing that further efforts would not be useful, or (c) after making a good faith effort to mediate, either party or both parties assert in writing that an impasse has been reached. Neither party may withdraw before the conclusion of the proceeding. Thereafter, if a settlement has not been reached, the parties shall be free to pursue such rights and remedies, at law or in a equity, as may be available to them. (d) The parties regard the obligations in this Section 8.11 as an essential provision of this Agreement and one that is legally binding on them. In case of a violation of such -61- 66 obligation by either party, the other may bring an action to seek enforcement of such obligation in any court of law having jurisdiction thereof. This Section 8.11 shall in no way affect the arbitration procedures set forth in Article I or Article V of this Agreement. 8.12 Non-Competition. (a) The Seller agrees that, until the later to occur of (i) the Seller's ceasing to own at least 10% of the outstanding shares of Buyer Common Stock and (ii) the expiration of a period of three years commencing on the Closing Date, the Seller will not, and the Seller will not permit any of its subsidiaries (regardless of whether such Person is a subsidiary of the Seller on the date hereof) to, engage in the manufacturing or marketing of the Products currently manufactured or marketed by the Company or the U.K. Sub in competition with the Buyer or any subsidiary of the Buyer (a "Competing Business"); provided, however, that (i) the Seller or any Affiliate of the Seller (other than the Company and the Company Subsidiaries) may continue any existing non-aerospace forging operations and may make any reasonable maintenance, improvements and refinements thereto; and (ii) the Seller or any Affiliate of the Seller may acquire any business which includes ancillary forging operations in support of its main business; provided further that this covenant shall not prevent the Seller or its Affiliates from acquiring shares in or the business or assets of any company, business or entity (the "Target") having a Competing Business (i) if no more than $10,000,000 of the Target's sales revenue (as recorded in the then latest available audited accounts) arises from the Competing Business or (ii) if the sales revenue of the Competing Business is greater than $10,000,000 of the Target's sales revenue, if the Seller uses its reasonable commercial efforts to dispose of the Competing Business within a two-year period from the date of acquisition of the Target. If the Seller cannot dispose of the Competing Business on terms reasonably acceptable to it during such two-year period, then the Seller shall be free to retain and operate the Competing Business without any restriction of this Agreement. The Seller ac- knowledges and agrees that the foregoing restrictions are rea- sonably designed to protect the Buyer's substantial investment and are reasonable with respect to duration, geographical area and scope. (b) In the event of breach by the Seller or any sub- sidiary of the Seller of any of the provisions of Section 8.12(a), the Buyer may, in addition to any other rights or remedies existing in its favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions of Section 8.12(a). 8.13 Further Assurances. Each party shall execute and deliver both before and after the Closing such instruments, agreements and other documents and take such other actions as the other party may reasonably request to consummate or implement the transactions contemplated hereby or to evidence such events or matters. -62- 67 8.14 No Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to confer upon any other Person, other than the Buyer's Group and the Seller's Group in connection with Section 5.22, any rights or remedies of any nature whatsoever under or by reason of this Agreement. Nothing in this Agreement is intended to relieve or discharge the obligation of any third Person to (or to confer any right of subrogation or action over against) any party to this Agreement. 8.15 Remedies; Waiver. All rights and remedies existing under this Agreement and any related agreements or documents are cumulative to and not exclusive of, any rights or remedies otherwise available under applicable law. No failure on the part of any party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof, nor shall any single or partial exercise preclude any further or other exercise of such or any other right. 8.16 Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable by any Governmental Entity, the remaining provisions of this Agreement to the extent permitted by Law shall remain in full force and effect, provided that the economic and legal substance of the transactions contemplated by this Agreement are not affected in any manner materially adverse to any party. In the event of any such determination, the parties agree to negotiate in good faith to modify this Agreement to fulfill as closely as possible the original intents and purposes hereof. -63- 68 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. COOPER INDUSTRIES, INC. By: /s/ H. John Riley, Jr. H. John Riley, Jr. President and Chief Operating Officer WYMAN-GORDON COMPANY By: /s/ Luis E. Leon Luis E. Leon Vice President, Treasurer and Chief Financial Officer -64- 69 ANNEX V Fair Price Charter Amendment Article 6(e)2 of the Articles of Organization of the Buyer shall be amended to add the following sentence to the end thereof: Notwithstanding the foregoing, Cooper Industries, Inc. ("Cooper") and its Affiliates and Associates (together, the "Cooper Group") shall not be deemed to be an Interested Stockholder for so long as (A) the Cooper Group beneficially owns at least 10% or more of the outstanding shares of Common Stock continuously from and after the Closing Date (as defined in the Stock Purchase Agreement, dated as of January 10, 1994, between Cooper and the Company) and (B) the Cooper Group does not acquire beneficial ownership of any shares of Common Stock in breach of the Investment Agreement, dated as of January 10, 1994, between Cooper and the Company (other than an inadvertent breach which is remedied as promptly as practicable by a transfer of the shares of Common Stock so acquired to a person or entity which is not a member of the Cooper Group). -65- EX-99.2 3 1 EXHIBIT 99.2 INVESTMENT AGREEMENT BETWEEN COOPER INDUSTRIES, INC. AND WYMAN-GORDON COMPANY DATED AS OF JANUARY 10, 1994 -12- 2 TABLE OF CONTENTS
SECTION PAGE Parties B-1 Preambles B-1 ARTICLE I CERTAIN COVENANTS B-1 Section 1.1 Restrictions on Resale or Other Dispositions B-1 Section 1.2 Distribution of Shares B-2 Section 1.3 Undertaking to File Reports and Cooperate in Rule 144 Transactions B-3 Section 1.4 Delivery of Financial Statements B-3 Section 1.5 Amendments to the Company's Articles of Organization and By-Laws B-3 ARTICLE II VOTING, OWNERSHIP AND OTHER RESTRICTIONS B-4 Section 2.1 Obligation to be Counted for Quorum B-4 Section 2.2 Voting by Cooper B-4 Section 2.3 Cooper Standstill Agreements B-4 Section 2.4 Legend and Stop Transfer Order B-6 ARTICLE III REGISTRATION RIGHTS B-6 Section 3.1 Certain Definitions B-6 Section 3.2 Demand Registration B-7 Section 3.3 Piggyback Registration B-9 Section 3.4 Expenses B-11 Section 3.5 Registration and Qualifications B-11 Section 3.6 Conversion of other Securities, etc. B-14 Section 3.7 Underwriting; Due Diligence B-14 Section 3.8 Restrictions on Public Sale; Inconsistent Agreements B-15 Section 3.9 Indemnification and Contribution B-15 ARTICLE IV TERM AND EFFECTIVENESS OF AGREEMENT B-19 Section 4.1 Effectiveness of Agreement B-19 Section 4.2 Term of Agreement B-19 Section 4.3 Certain Provisions Regarding Termination B-19 ARTICLE V ELECTION OF DIRECTORS B-22 Section 5.1 B-22 ARTICLE VI GENERAL B-22 Section 6.1 Specific Enforcement; Other Remedies B-22 Section 6.2 Severability B-23 Section 6.3 Definitions B-23 Section 6.4 Amendment and Modifications B-23 Section 6.5 Descriptive Headings B-23 Section 6.6 Counterparts B-23 Section 6.7 Successors and Assigns B-23 Section 6.8 Accounting Matters B-24 Section 6.9 Notices B-24 Section 6.10 Governing Law B-25 SIGNATURES B-25
i 3 INVESTMENT AGREEMENT INVESTMENT AGREEMENT, dated as of January 10, 1994 (the "Agreement"), between Cooper Industries, Inc., an Ohio corporation ("Cooper"), and Wyman-Gordon Company, a Massachusetts corporation (the "Company"). W I T N E S S E T H: WHEREAS, simultaneously with the execution and delivery of this Agreement, Cooper and the Company are entering into the Stock Purchase Agreement, dated as of the date hereof (the "Acquisition Agreement"); and WHEREAS, the Acquisition Agreement provides, among other things, for the sale by Cooper of all of the outstanding shares of stock of Cameron Forged Products Company to the Company (the "Sale Transaction"); and WHEREAS, pursuant to the Acquisition Agreement, as consideration for the sale of the stock of Cameron Forged Products Company, Cooper will receive $5 million, payable as provided in the Acquisition Agreement, and 16,500,000 shares (the "Shares") of common stock, par value $1.00 per share, of the Company (the "Company Common Stock"); and WHEREAS, the Shares will represent approximately 48% of the total number of shares of Company Common Stock that will be outstanding following consummation of the Sale Transaction; and WHEREAS, Cooper and the Company wish to provide certain arrangements with respect to their relationship following consummation of the Sale Transaction and each of them requires that the other enter into this Agreement as an inducement to its entering into the Acquisition Agreement. NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I CERTAIN COVENANTS Section 1.1 Restrictions on Resale or Other Dispositions. So long as this Agreement remains in effect, Cooper covenants and agrees that it will not sell, transfer any beneficial interest in, pledge, hypothecate or otherwise dispose of or encumber any Company Voting Securities (as hereinafter defined); provided, that Cooper or any of its wholly-owned subsidiaries which hold Company Voting Securities may sell, transfer, pledge, hypothecate or otherwise dispose of or encumber Company Voting Securities: (a) to any direct or indirect wholly-owned subsidiary of Cooper which agrees to be bound by this Agreement; provided, that such subsidiary shall remain a direct or indirect wholly-owned subsidiary of Cooper for so long as it holds any Company Voting Securities or any beneficial interest therein; or B-1 4 (b) pursuant to a bona fide underwritten offering or other distribution of such Company Voting Securities registered under the Securities Act of 1933, as amended (the "Securities Act"); or (c) pursuant to a bona fide underwritten offering or other distribution of securities of Cooper convertible into or exercisable or exchangeable for Company Voting Securities registered under the Securities Act; or (d) pursuant to Rule 144 of the General Rules and Regulations under the Securities Act, or any successor rule of similar effect ("Rule 144"); provided, that Cooper shall notify the Company at least two days prior to the date of entering any sale or transfer order or agreement with respect to Company Voting Securities pursuant to Rule 144; provided, further that, if the Company shall thereupon notify Cooper of the pendency of a sale under any public offering by it of Company Common Stock or any other Company Voting Securities, neither Cooper nor any of its affiliates shall effect any sales under Rule 144 within 10 days prior to the commencement of or during such offering; or (e) pursuant to a tender offer or exchange offer if the Board of Directors of the Company has (i) recommended that shareholders of the Company accept such offer and such recommendation has not been withdrawn or (ii) expressed no opinion and remains neutral toward such offer; or (f) pursuant to a merger or consolidation in which the Company is acquired, or a sale of all or substantially all of the Company's assets to another corporation or any other transaction approved by the Board of Directors of the Company. For purposes of this Agreement, "Company Voting Securities" shall mean (i) the Company Common Stock, (ii) any other Company securities entitled to vote generally for the election of directors of the Company, or (iii) any securities of the Company convertible into or exchangeable for or exercisable for Company Common Stock or any other Company securities entitled to vote generally for the election of directors of the Company. Section 1.2 Distribution of Shares. In any transaction or transactions described in Section 1.1(b), 1.1(c) or 1.1(d), the seller of Company Voting Securities or securities of Cooper convertible into or exercisable or exchangeable for Company Voting Securities will use its reasonable best efforts to effect the sale or transfer of such securities in a manner which will effect the broadest possible distribution and such seller of Company Voting Securities will use its reasonable best efforts to make no sales or transfers of such Company Voting Securities to any one person or group within the meaning of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), who or which after such transfer shall own Company Voting Securities representing more than 4% of the voting power for the election of directors represented by all of the then-outstanding Company Voting Securities (whether directly or indirectly). Such seller shall use its reasonable best efforts to cause any underwriters with respect to any transaction or transactions described in Section 1.1(b) or 1.1(c) to comply with the distribution restrictions set forth in the preceding sentence. B-2 5 Section 1.3 Undertaking to File Reports and Cooperate in Rule 144 Transactions. The Company shall file, on a timely basis, all annual, quarterly and other reports required to be filed under Sections 13 and 15(d) of the Exchange Act, and the Rules and Regulations of the Securities and Exchange Commission (the "Commission") promulgated thereunder, as amended from time to time. In the event of any proposed sale of Company Voting Securities by Cooper or its affiliates pursuant to Section 1.1(d) above, the Company shall cooperate with Cooper so as to enable such sales to be made in accordance with applicable laws, rules and regulations, the requirements of the Company's transfer agent, and the reasonable requirements of the broker, if any, through which the sales are proposed to be executed, and shall, upon request, furnish unlegended certificates representing Company Voting Securities in such numbers and denominations as Cooper shall reasonably require for delivery pursuant to such sales. Section 1.4 Delivery of Financial Statements. The Company will deliver to Cooper: (a) the quarterly consolidated financial statements of the Company, including any notes thereto, for the first three quarterly periods of each fiscal year, as soon as available but no later than the date such quarterly financial information is filed with the Commission; (b) the audited year-end consolidated financial statements of the Company, including any notes thereto and the report of the Company's independent certified public accountants thereon, as soon as available but no later than the date such audited financial statements are filed with the Commission; and (c) a written statement of the Consolidated Net Worth (as hereinafter defined and calculated in accordance with Section 4.3(a)(iv) hereof) of the Company (the "Net Worth Statement") each time that financial statements are delivered to Cooper pursuant to Section 1.4(a) or 1.4(b). The principal financial officer of the Company shall certify that the Net Worth Statement was prepared by him or under his direction and that it shows the Consolidated Net Worth of the Company as of immediately following the consummation of the Sale Transaction and the Consolidated Net Worth of the Company as of the end of the most recent fiscal quarter or fiscal year, as the case may be, based on the financial statements of the Company then being delivered to Cooper. Section 1.5 Amendments to the Company's Articles of Organization and By-Laws. The Company shall not amend, alter or otherwise modify (i) Article 6 of the Company's Articles of Organization in any manner which adversely affects Cooper or any other person to whom any of the Shares have been transferred in accordance with the terms of this Agreement; (ii) Article VI, Section 14 of the Company's By-Laws pursuant to which the Company shall have opted-out of Chapter 110D of the Massachusetts General Laws; and (iii) the Amended and Restated Rights Agreement in the form attached as an Annex to the Acquisition Agreement (the "Amended and Restated Rights Agreement") and the Company shall not adopt any other rights or similar agreement; provided, however, B-3 6 following prior consultation with Cooper, the Company may amend the Amended and Restated Rights Agreement in accordance with the terms thereof provided such amendment does not adversely affect Cooper or any other person to whom any of the Shares have been transferred in accordance with the terms of this Agreement. ARTICLE II VOTING, OWNERSHIP AND OTHER RESTRICTIONS Section 2.1 Obligation to be Counted for Quorum. Cooper agrees to cause all Company Voting Securities beneficially owned by it or any wholly-owned subsidiary to which it has transferred any Company Voting Securities, and agrees to use reasonable efforts to cause all Company Voting Securities known by Cooper to be beneficially owned by "affiliates" (as defined in Rule 12b-2 promulgated under the Exchange Act) of Cooper over which Cooper has control, to be present at all shareholder meetings of the Company at which the vote of common shareholders is sought so that they may be counted for the purpose of determining the presence of a quorum at such meetings. Section 2.2 Voting by Cooper. Cooper agrees to vote or cause to be voted all Company Voting Securities beneficially owned by it or any wholly-owned subsidiary to which it has transferred any Company Voting Securities, and agrees to use reasonable efforts to cause to be voted all Company Voting Securities known by Cooper to be beneficially owned by its affiliates over which it has control on all matters (including the election of directors) either in the manner recommended to shareholders by the Board of Directors of the Company, or, at Cooper's election, in the same proportion as the vote of the other shareholders of the Company. Notwithstanding the foregoing, Cooper, such wholly-owned subsidiaries of Cooper and such affiliates of Cooper over which it has control will not be obligated to vote as provided in this Section 2.2 if the matter being voted on by the shareholders of the Company would, if approved, result in a breach of this Agreement. Section 2.3 Cooper Standstill Agreements. So long as this Agreement remains in effect, Cooper and its controlled affiliates shall not, directly or indirectly, acting alone or in concert with others, unless specifically requested or approved in advance by the Board of Directors of the Company: (a) in any manner acquire or agree, attempt, seek or propose to acquire (or make any request for permission with respect thereto), by purchase, merger, through the acquisition of control of another person, by joining a partnership, limited partnership, syndicate or other "group" (within the meaning of Section 13(d)(3) of the Exchange Act), or otherwise, ownership (including, but not limited to, beneficial ownership as defined in Rule 13d-3 under the Exchange Act) of any of the assets or businesses of the Company or any securities issued by the Company (the "Company Securities"), or any rights or options to acquire such ownership (including from a third party), except (i) as expressly permitted by this Agreement or the Acquisition Agreement, or (ii) pursuant to customary business transactions in the ordinary course of the Company's and Cooper's business, or (iii) in the case of Company Securities, in B-4 7 connection with (A) a stock split or reverse stock split or other reclassification affecting outstanding Company Securities, or (B) a stock dividend or other pro rata distribution by the Company to holders of outstanding Company Securities; (b) make or cause to be made any proposal for the acquisition of the Company or any assets or businesses of the Company or Company Securities or for any other extraordinary transaction involving the Company, including, without limitation, any merger, or other business combination, restructuring, recapitalization, liquidation or similar transaction, except (i) as expressly permitted by this Agreement or the Acquisition Agreement or (ii) proposals pursuant to customary business transactions in the ordinary course of the Company's and Cooper's business; (c) form, join or in any way participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any Company Securities; (d) make, or in any way cause or participate in, any "solicitation" of "proxies" to vote (as such terms are defined in Regulation 14A under the Exchange Act) with respect to the Company, or communicate with, seek to advise, encourage or influence any person or entity, in any manner, with respect to the voting of, any Company Securities, or become a "participant" in any "election contest" (as such terms are defined or used in Rule 14a-11 under the Exchange Act) with respect to the Company, or execute any written consent with respect to the Company; (e) initiate, propose or otherwise solicit shareholders for the approval of one or more shareholder proposals with respect to the Company or induce or attempt to induce any other person to initiate any shareholder proposal, or (except as expressly permitted by this Agreement) seek election to or seek to place a representative on the Board of Directors of the Company or seek the removal of any member of the Board of Directors of the Company; (f) in any manner, agree, attempt, seek or propose (or make any request for permission with respect thereto) to deposit any Company Securities, directly or indirectly, in any voting trust or similar arrangement or to subject any Company Voting Securities to any other voting or proxy agreement, arrangement or understanding; (g) disclose any intention, plan or arrangement, or make any public announcement (or request permission to make any such announcement), or induce any third party to take any action, inconsistent with the foregoing; (h) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing; or (i) advise, assist or encourage or finance (or assist or arrange financing to or for) any other person in connection with any of the foregoing. B-5 8 Section 2.4 Legend and Stop Transfer Order. To assist in effectuating the provisions of this Agreement, Cooper hereby consents: (a) to the placement, if appropriate, of the following legend on all certificates representing the Company Voting Securities beneficially owned by it until such shares have been sold, transferred or disposed of: The securities represented by this certificate are subject to the provisions of an Agreement between Cooper Industries, Inc. and the issuer of such securities, and may not be sold, transferred, pledged, hypothecated or otherwise disposed of except in accordance therewith. A copy of such Agreement is on file at the office of the clerk of the issuer. (b) to the entry of a stop transfer order with the transfer agent or agents of Company Voting Securities against the transfer of the Company Voting Securities held by Cooper except in compliance with the requirements of this Agreement, or if the Company is its own transfer agent with respect to any Company Voting Securities, to the refusal by the Company to transfer any such securities except in compliance with the requirements of this Agreement. ARTICLE III REGISTRATION RIGHTS Section 3.1 Certain Definitions. As used in this Article III the following capitalized terms shall have the following meanings: (a) "Holder" means Cooper and any permitted transferee pursuant to Section 1.1(a). (b) "Registrable Securities" means the Shares and any securities issued in respect of or in exchange for any of the Shares, including, without limitation, by way of any stock split or reverse stock split or other reclassification or any stock dividend or other pro rata distribution; provided, that any such Shares or other securities shall not be Registrable Securities with respect to a proposed offer or sale thereof when a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with the plan of distribution set forth in such registration statement. (c) "Registration Expenses" means all expenses in connection with any registration of securities pursuant to this Agreement including, without limitation, the following: (i) the reasonable fees, disbursements and expenses of the Company's and Cooper's counsel(s) (United States and foreign) and accountants in connection with the registration of the Registrable Securities to be disposed of under the Securities Act; (ii) all expenses in connection with the preparation, printing and filing of the registration statement, any preliminary prospectus or final prospectus, any other offering document and amendments and supplements thereto and the mailing and delivering of copies B-6 9 thereof to any underwriters and dealers; (iii) the cost of printing or producing any agreement(s) among underwriters, underwriting agreement(s), and blue sky or legal investment memoranda, any selling agreements and any other documents in connection with the offering, sale or delivery of the Registrable Securities to be disposed of; (iv) all expenses in connection with the qualification of the Registrable Securities to be disposed of for offering and sale under state securities laws, including the reasonable fees and disbursements of counsel for the Holders of Registrable Securities in connection with such qualification and in connection with any blue sky and legal investment surveys; (v) the filing fees incident to securing any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of the Registrable Securities to be disposed of; (vi) transfer agents', depositaries' and registrars' fees and the fees of any other agent appointed in connection with such offering; (vii) all security engraving and security printing expenses; and (viii) all fees and expenses payable in connection with the listing of the Registrable Securities on each securities exchange or inter-dealer quotation system on which any class of Company Voting Securities is then listed. Section 3.2 Demand Registration. (a) Upon written notice from a Holder of Registrable Securities in the manner set forth in Section 6.9 hereof requesting that the Company effect the registration under the Securities Act of any or all of the Registrable Securities held by such Holder, which notice shall state that the Holder has a bona fide intent to dispose of such Registrable Securities and shall specify the intended method or methods of disposition, the Company will use its reasonable best efforts to effect (at the earliest possible date) the registration under the Securities Act of such Registrable Securities for disposition in accordance with the intended method or methods of disposition stated in such request (but not including any offering on a delayed or continuous basis pursuant to Rule 415 (or any successor rule to similar effect) promulgated under the Securities Act); provided, that: (i) if, upon receipt of a registration request pursuant to this Section 3.2(a), the Company and the Holder(s) requesting registration are advised by a nationally recognized investment banking firm selected by the Company that, in such firm's opinion, a registration at the time and on the terms requested would materially and adversely affect any immediately planned underwritten public offering by the Company of its equity securities or debt securities which are convertible into equity securities of the Company, which offering had been contemplated by the Company prior to receipt of notice requesting registration pursuant to this Section 3.2(a) (a "Transaction Blackout"), the Company, upon giving written notice of a Transaction Blackout to such Holder(s), shall not be required to effect a registration pursuant to this Section 3.2(a) until the earliest of (A) the abandonment of such financing, (B) 90 days after the completion of such financing, (C) the termination of any "hold back" period obtained by the underwriter(s) from any person in connection with such financing, and (D) 60 days after receipt by the Holder(s) of written notice from the Company of such B-7 10 Transaction Blackout if by such 60th day the Company shall not have filed a registration statement relating to such financing with the Commission; (ii) if, while a registration request is pending pursuant to this Section 3.2(a), the general counsel of the Company has determined in good faith that (A) the filing of a registration statement would require the disclosure of material information which the Company has a bona fide business purpose for preserving as confidential or (B) the Company is unable to comply with the Commission's registration requirements, the Company, upon giving written notice of any such event to the Holder(s) requesting registration, shall not be required to effect a registration pursuant to this Section 3.2(a) until the earlier of (1) the date upon which such material information is disclosed to the public or ceases to be material or the Company is able to so comply with the Commission's requirements, as the case may be, and (2) 30 days after the general counsel of the Company makes such good faith determination; and (iii) a Holder shall have the right to exercise registration rights pursuant to this Section 3.2 an unlimited number of times; provided, each demand will be subject to the following conditions: (A) each registration will include a minimum of 10% of the Company Voting Securities initially issued to Cooper in the Sale Transaction (except that this minimum condition will not be applicable to the Holders' last demand to sell all remaining Registrable Securities held by the Holders); and (B) the Holders will not demand more than two registrations in any twelve-month period and there will be at least 120 days between the effective date of a prior registration statement of the Company and the Holders' demand for a subsequent registration. (b) Notwithstanding any other provision of this Agreement to the contrary, a registration requested by a Holder of Registrable Securities pursuant to this Section 3.2 shall not be deemed to have been effected (and, therefore, not requested for purposes of subsection 3.2(a)), (i) if it is not declared effective by order of the Commission for any reason other than a misrepresentation or an omission by such Holder, (ii) if after it has become effective such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason other than a misrepresentation or an omission by such Holder and, as a result thereof, the Registrable Securities requested to be registered cannot be completely distributed in accordance with the plan of distribution set forth in the related registration statement, or (iii) if the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied or waived other than by reason of some act or omission by such Holder. (c) Notwithstanding clause (i) of subsection 3.2(a), the Company may not impose a Transaction Blackout during any offering of Registrable Securities requested by a Holder pursuant to this Section 3.2. B-8 11 (d) In the event that any registration pursuant to this Section 3.2 shall involve, in whole or in part, an underwritten offering, (i) the Company shall have the right to designate one nationally recognized investment banking firm, reasonably satisfactory to Cooper and the Holder(s) requesting registration, as the lead managing underwriter of such underwritten offering, (ii) the Holder(s) requesting registration shall have the right to designate one nationally recognized investment banking firm, reasonably satisfactory to the Company, as co-managing underwriter of such underwritten offering and (iii) any other co-managing underwriters of such underwritten offering shall be designated jointly by the Company and the Holder(s) requesting registration. (e) The Company shall have the right to cause the registration of additional securities for sale for the account of any person in any registration of Registrable Securities requested by a Holder pursuant to this Section 3.2; provided, that the Company shall not have the right to cause the registration of such additional securities if such Holder and the Company are advised by a nationally recognized investment banking firm selected by such Holder that, in such firm's opinion, registration of such additional securities would materially and adversely affect the offering and sale of the Registrable Securities then contemplated by such Holder. In the event that any such registration shall involve, in whole or in part, an underwritten offering, the Holder may require that any such additional securities be included in the offering proposed by such Holder on the same terms and conditions as the Registrable Securities are included therein. Section 3.3 Piggyback Registration. If the Company at any time proposes to register any of its Common Stock or any other of its common equity securities (collectively, "Other Securities") under the Securities Act (other than a registration on Form S-4 or S-8 or any successor or similar forms), whether or not for sale for its own account, in a manner which would permit registration of Registrable Securities for sale to the public under the Securities Act, it will give prompt written notice to the Holders of its intention to do so and of the rights of the Holders under this Section 3.3 at least 45 days (or, in the case of a registration on Form S-3 or any successor or similar form, 10 days) prior to the anticipated filing date of the registration statement relating to such registration (such notice shall also specify the anticipated filing date of such registration statement). Upon the written request of any Holder made within 15 days (or, in the case of a registration on Form S-3 or any successor or similar form, 5 days) after the receipt of the Company's notice (which request shall specify the number of Registrable Securities intended to be disposed of and the intended method of disposition thereof), the Company will use its reasonable best efforts to effect, in connection with such registration of the Other Securities, the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register, to the extent required to permit the disposition (in accordance with such intended methods thereof) of the Registrable Securities so requested to be registered; provided, that: B-9 12 (a) if, at any time after giving such written notice of its intention to register any Other Securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register the Other Securities, the Company may, at its election, give written notice of such determination to the Holders and thereupon the Company shall be relieved of its obligation to register such Registrable Securities in connection with the registration of such Other Securities (but not from its obligation to pay Registration Expenses to the extent incurred in connection therewith as provided in Section 3.4 hereof), without prejudice, however, to the rights of the Holders immediately to request that such registration be effected as a registration under Section 3.2 hereof; (b) (i) if the registration referred to in the first sentence of this Section 3.3 is to be an underwritten primary registration on behalf of the Company, and the managing underwriter(s) advise(s) the Company in writing that in their good faith opinion such offering would be materially and adversely affected by the inclusion therein of the Registrable Securities requested to be included therein, the Company shall include in such registration: (1) first, all securities the Company proposes to sell for its own account ("Company Registrable Securities"), (2) second, up to the full number of Registrable Securities held by the Holders and requested to be included in such registration in excess of the number or amount of Company Registrable Securities which, in the good faith opinion of such underwriter(s), can be sold without materially and adversely affecting such offering, and (3) third, the number or amount of other securities, if any, requested to be included therein in excess of the number or amount of Company Registrable Securities and such Registrable Securities which, in the opinion of such underwriter(s), can be sold without materially and adversely affecting such offering; and (ii) if the registration referred to in the first sentence of this Section 3.3 is to be an underwritten secondary registration on behalf of holders of securities(other than Registrable Securities) of the Company (the "Other Holders"), and the managing underwriter(s) advise(s) the Company in writing that in their good faith opinion such offering would be materially and adversely affected by the inclusion therein of the Registrable Securities requested to be included therein, the Company shall include in such registration: (1) first, all securities the Other Holders propose to sell for their own account (the "Secondary Securities") and (2) second, up to the full number of Registrable Securities held by Holders and requested to be included in such registration in excess of the number or amount of Secondary Securities which, in the good faith opinion of such underwriter(s), can be sold without materially and adversely affecting such offering and (3) third, the number or amount of other securities, if any, requested to be included therein in excess of the number or amount of Secondary Securities and such Registrable Securities which, in the good faith opinion of such underwriter(s), can be sold without materially and adversely affecting such offering; and B-10 13 (c) no registration of Registrable Securities effected under this Section 3.3 shall relieve the Company of its obligation to effect a registration of Registrable Securities pursuant to Section 3.2 hereof. Section 3.4 Expenses. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities pursuant to this Agreement, except that after the third demand registration pursuant to Section 3.2, the Holders will pay all Registration Expenses in connection with each demand registration of Registrable Securities held by the Holders. The Holders shall pay all underwriting discounts or commissions or transfer taxes, if any, relating to the sale or disposition of Registrable Securities by the Holders. Section 3.5 Registration and Qualification. If and whenever the Company is required to use its reasonable best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Section 3.2 or 3.3 hereof, the Company will as promptly as is practicable: (a) prepare, file and use its reasonable best efforts to cause to become effective a registration statement under the Securities Act relating to the Registrable Securities to be offered; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities until the earlier of (A) such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition set forth in such registration statement and (B) the expiration of 90 days after such registration statement becomes effective; provided, that such 90-day period shall be extended for such number of days that equals the number of days elapsing from (x) the date the written notice contemplated by Section 3.5(f) hereof is given by the Company to (y) the date on which the Company delivers to the Holders the supplement or amendment contemplated by Section 3.5(f) hereof; and provided, further, if such registration is in connection with an offering by the Holders, pursuant to Section 3.6 hereof, such registration statement shall be kept effective until the earlier of (A) above or (B) the expiration of the exercise, exchange or conversion period; (c) furnish to the Holders and to any underwriter of such Registrable Securities such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus), in conformity with the requirements of the Securities Act, such documents incorporated by reference in such registration statement or prospectus, and such other documents, as the Holders or such underwriter may reasonably request, and a copy of any and all B-11 14 transmittal letters or other correspondence to, or received from, the Commission or any other governmental agency or self-regulatory body or other body having jurisdiction (including any domestic or foreign securities exchange) relating to such offering; (d) use its reasonable best efforts to register or qualify all Registrable Securities covered by such registration statement under the securities or blue sky laws of such jurisdictions (domestic or foreign) as the Holders or any underwriter of such Registrable Securities shall reasonably request, and use its reasonable best efforts to obtain all appropriate registrations, permits and consents required in connection therewith, and do any and all other acts and things which may be necessary or advisable to enable the Holders or any such underwriter to consummate the disposition in such jurisdictions of its Registrable Securities covered by such registration statement; provided, that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, or to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction; provided, further, that, in the case of any such registration or qualification in any non-United States jurisdiction, (i) the Company shall have no obligation to use its reasonable best efforts to so register or qualify Registrable Securities if in the good faith opinion of the general counsel of the Company such registration or qualification shall impose on the Company an on-going material compliance obligation and (ii) the Company shall not be obligated to keep any such registration or qualification in effect except for so long as is necessary or appropriate in order to dispose of Registrable Securities in such jurisdiction; (e) furnish to the Holders included in such registration (i) on the date that the Registrable Securities are delivered to any underwriters for sale pursuant to such registration statement, an opinion of counsel representing the Company dated as of such date for the purposes of such registration, addressed to the underwriters and to the Holders, stating that such registration statement has become effective under the Securities Act and that (A) to the best knowledge of such counsel, no stop order suspending the effectiveness hereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act, (B) the registration statement, the related prospectus, and each amendment or supplement thereof, comply as to form in all material respects with the requirements of the Securities Act and the applicable rules and regulations thereunder (except that such counsel need express no opinion as to the financial statements or any other financial or statistical data or any engineering report contained or incorporated therein) and (C) to such other effects as may reasonably be requested by counsel for the underwriters or by the Holders or their counsel, and (ii) on the effective date of the registration statement, the date that the Registrable Securities are delivered to any underwriters for sale pursuant to such registration statement and on the effective date of each post-effective amendment to the registration B-12 15 statement, a "comfort" letter dated such date from the regular independent public accountants retained by the Company, addressed to the underwriters and to the Holders registering Registrable Securities thereunder, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included or incorporated by reference in the registration statement or the prospectus, or any amendment or supplement thereto, comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the published rules and regulations thereunder, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five business days prior to the date of such letter) included in the registration statement in respect of which such letter is being given as the underwriters or the Holders registering Registrable Securities thereunder may reasonably request; (f) immediately notify the Holders in writing (i) at any time when a prospectus relating to a registration pursuant to Section 3.2 or 3.3 hereof is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (ii) of any request by the Commission or any other regulatory body or other body having jurisdiction for any amendment of or supplement to any registration statement or other document relating to such offering, and in either such case (i) or (ii) at the request of any Holder prepare and furnish to such Holder a reasonable number of copies of an amendment of or a supplement to such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading; (g) if requested by the underwriters of any underwritten offering of Registrable Securities, use its reasonable best efforts to list all such Registrable Securities covered by such registration on each securities exchange and inter-dealer quotation system (in each case, domestic or foreign) on which a class of Company Voting Securities is then listed, and use its reasonable best efforts to obtain all appropriate registrations, permits and consents required in connection therewith, and do any and all other acts and things which may be necessary or advisable to effect such listing; and (h) furnish unlegended certificates representing ownership of the Registrable Securities being sold in such denominations as shall be requested by the Holders registering Registrable Securities thereunder or the underwriters. B-13 16 Section 3.6 Conversion of Other Securities, etc. If Cooper offers any options, rights, warrants or other securities issued by it that are offered with, convertible into or exercisable or exchangeable for any Registrable Securities, the Registrable Securities underlying such options, rights, warrants or other securities shall be eligible for registration pursuant to Section 3.2 and Section 3.3 of this Agreement. Section 3.7 Underwriting; Due Diligence. (a) If requested by the underwriters for any underwritten offering of Registrable Securities pursuant to a registration requested under this Agreement, the Company will enter into an underwriting agreement with such underwriters for such offering, such agreement to contain such representations and warranties by the Company and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including, without limitation, indemnities and contribution substantially to the effect and to the extent provided in Section 3.9 hereof and the provision of opinions of counsel and accountants' letters to the effect and to the extent provided in Section 3.5(e) hereof. The representations and warranties in such underwriting agreement by, and the other agreements on the part of, the Company to and for the benefit of such underwriters, shall also be made to and for the benefit of the Holders on whose behalf the Registrable Securities are to be distributed by such underwriters. (b) In the event that any registration pursuant to Section 3.3 shall involve, in whole or in part, an underwritten offering, the Company may require the Registrable Securities requested to be registered pursuant to Section 3.3 to be included in such underwriting on the same terms and conditions as shall be applicable to the other securities being sold through underwriters under such registration. If requested by the underwriters for any underwritten offering requested under this Agreement, the Holders on whose behalf the Registrable Securities are to be distributed by such underwriters will enter into an underwriting agreement with such underwriters, such agreement to contain such representations and warranties by such Holders and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including, without limitation, indemnities and contribution substantially to the effect and to the extent provided in Section 3.9 thereof. The representations and warranties in such underwriting agreement by, and the other agreements on the part of, such Holders to and for the benefit of such underwriters, shall also be made to and for the benefit of the Company. (c) In connection with the preparation and filing of each registration statement registering Registrable Securities under the Securities Act, the Company will give the Holders of such Registrable Securities and the underwriters, if any, and their respective counsel and accountants, such reasonable and customary access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified the Company's financial statements as shall be necessary, in the reasonable opinion of such B-14 17 Holders and such underwriters or their respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. Section 3.8 Restrictions on Public Sale; Inconsistent Agreements. (a) If any registration of Registrable Securities pursuant to Section 3.2 shall be in connection with an underwritten public offering, the Company agrees and agrees to cause any controlled affiliates of the Company not to effect any public sale or distribution of any of its securities of the same class or series as such Registrable Securities or any securities convertible into or exchangeable or exercisable for any securities of the same class or series as such Registrable Securities (other than any such sale or distribution of such securities in connection with any exchange offer, merger or consolidation by the Company or a subsidiary of the Company or in connection with the purchase of all or substantially all the assets of any other person or in connection with an employee stock option plan, employee stock ownership plan or other benefit plan) during the 30-day period prior to, and during the 90-day period beginning on, the effective date of such registration statement (except as part of such registration), or for such shorter period acceptable to the underwriters of such offering. (b) The Company agrees that any agreement entered into after the date of this Agreement pursuant to which the Company issues or agrees to issue any equity securities or any securities convertible into or ex changeable or exercisable for any equity securities of the Company which will be privately placed shall contain (i) a provision under which holders of such securities agree not to effect any public sale or distribution of any such securities during the period referred to in Section 3.8(a), including any sale pursuant to Rule 144 under the Securities Act (except as part of such registration, if permitted) and (ii) no terms or provisions inconsistent with any term or provision of this Agreement. Section 3.9 Indemnification and Contribution. (a) In the case of each offering of Registrable Securities made pursuant to this Agreement (whether pursuant to Section 3.2 or Section 3.3), the Company agrees to indemnify and hold harmless the Holders of Registrable Securities, its officers and directors, each underwriter of Registrable Securities so offered and each person, if any, who controls any of the foregoing persons within the meaning of the Securities Act, from and against any and all claims, liabilities, losses, damages, expenses and judgments, joint or several, to which they or any of them may become subject, under the Securities Act or otherwise, including any amount paid in settlement of any litigation commenced or threatened, and shall promptly reimburse them, as and when incurred, for any reasonable legal fees (including disbursements and related expenses) or other reasonable out-of-pocket expenses incurred by them in connection with investigating any claims and defending any actions, insofar as such losses, claims, damages, liabilities or actions shall arise out of, or shall be based upon, any untrue statement or alleged untrue statement of a material fact contained in the registration statement (or in any preliminary or final prospectus included B-15 18 therein), or any amendment thereof or supplement thereto, or in any document incorporated by reference therein, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or shall arise out of or be based upon any violation or alleged violation by the Company of the Securities Act, any blue sky laws, securities laws or other applicable laws of any state or country in which the Registrable Securities are offered and relating to action or inaction required of the Company in connection with such offering; provided, that the Company shall not be liable to any Holder of Registrable Securities in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement, or any omission, if such statement or omission shall have been made in reliance upon and in conformity with information relating to such Holder furnished to the Company in writing by or on behalf of such Holder specifically for use in the preparation of the registration statement (or in any preliminary or final prospectus included therein), or any amendment thereof or supplement thereto. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Holders of Registrable Securities and shall survive the transfer of such securities. The foregoing indemnity agreement is in addition to any liability which the Company may otherwise have to the Holders of Registrable Securities, its officers and directors, underwriters of the Registrable Securities, or any controlling person of the foregoing; provided, further, that, in the case of an offering with respect to which any Holder has designated the lead managing underwriter(s), this indemnity does not apply to any loss, liability, claim, damage or expense arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission in any preliminary prospectus if a copy of a prospectus was not sent or given by or on behalf of an underwriter to such person asserting such loss, claim, damage, liability or action at or prior to the written confirmation of the sale of the Registrable Securities as required by the Securities Act and such untrue statement or omission had been corrected in such prospectus. (b) In the case of each offering made pursuant to this Agreement (whether pursuant to Section 3.2 or Section 3.3), each Holder of Registrable Securities included in such offering, by exercising its registration rights hereunder, agrees to indemnify and hold harmless the Company, its officers and directors and each person, if any, who controls any of the foregoing within the meaning of the Securities Act (and if requested by the underwriters, each underwriter who participates in the offering and each person, if any, who controls any such underwriter within the meaning of the Securities Act), from and against any and all claims, liabilities, losses, damages, expenses and judgments, joint or several, to which they or any of them may become subject, under the Securities Act or otherwise, including any amount paid in settlement of any litigation commenced or threatened, and shall promptly reimburse them, as and when incurred, for any reasonable legal fees (including disbursements and related expenses) or other B-16 19 reasonable out-of-pocket expenses incurred by them in connection with investigating any claims and defending any actions, insofar as any such losses, claims, damages, liabilities or actions shall arise out of, or shall be based upon, any untrue statement or alleged untrue statement of a material fact contained in the registration statement (or in any preliminary or final prospectus included therein) or any amendment thereof or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that such untrue statement of a material fact is contained in, or such material fact is omitted from, information relating to such Holder furnished in writing to the Company by or on behalf of such Holder specifically for use in the preparation of such registration statement (or any preliminary or final prospectus included therein), or any amendment thereof or supplement thereto. The foregoing indemnity is in addition to any liability which such Holder may otherwise have to the Company, or any of its directors, officers or controlling persons; provided, that, in the case of an offering with respect to which the Company has designated the lead managing underwriter(s), this indemnity does not apply to any loss, liability, claim, damage or expense arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission in any preliminary prospectus if a copy of a prospectus was not sent or given by or on behalf of an underwriter to such person asserting such loss, claim, damage, liability or action at or prior to the written confirmation of the sale of the Registrable Securities as required by the Securities Act and such untrue statement or omission had been corrected in such prospectus. (c) Procedure for Indemnification. Each party indemnified under paragraph (a) or (b) of this Section 3.9 shall, promptly after receipt of notice of any claim or the commencement of any action against such indemnified party in respect of which indemnity may be sought, notify the indemnifying party in writing of the claim or the commencement thereof; provided, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party on account of the indemnity agreement contained in paragraph (a) or (b) of this Section 3.9, unless the indemnifying party was prejudiced by such failure, and in no event shall relieve the indemnifying party from any other liability which it may have to such indemnified party. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 3.9 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, that the indemnified parties, shall have the right, as a group, to employ one law firm as separate counsel to represent them if, in the reasonable B-17 20 judgment of the indemnified parties, it is advisable for them to be represented by separate counsel, and in that event the fees and expenses of such separate counsel shall be paid by the indemnifying party. If the indemnified parties employ such separate counsel they will not agree to any settlement of any such claim or action without the prior written consent of the indemnifying party, such consent not to be unreasonably withheld. If the indemnifying party so assumes the defense thereof, it may not agree to any settlement of any such claim or action as the result of which any remedy or relief, other than monetary damages for which the indemnifying party shall be responsible hereunder, shall be applied to or against the indemnified parties, without the prior written consent of the indemnified parties, such consent not to be unreasonably withheld. If the indemnifying party does not assume the defense thereof, it shall be bound by any settlement to which the indemnified parties agree, irrespective of whether the indemnifying party consents thereto. In any action hereunder as to which the indemnifying party has assumed the defense thereof with counsel satisfactory to the indemnified party, the indemnified party shall continue to be entitled to participate in the defense thereof, with counsel of its own choice, but, except as set forth above, the indemnifying party shall not be obligated hereunder to reimburse the indemnified party for the costs thereof. If the indemnification provided for in this Section 3.9 shall for any reason be unavailable to an indemnified party in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, in such proportion as shall be appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the indemnifying party on the one hand or the indemnified party on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission, but not solely by reference to any indemnified party's stock ownership in the Company. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this paragraph shall be deemed to include, for purposes of this paragraph, any reasonable legal fees (including disbursements and related expenses) or other reasonable out-of-pocket expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. B-18 21 ARTICLE IV TERM AND EFFECTIVENESS OF AGREEMENT Section 4.1 Effectiveness of Agreement. This Agreement shall be effective only upon consummation of the Sale Transaction contemplated by the Acquisition Agreement. Neither party shall have any obligation to the other pursuant to this Agreement until such consummation has occurred, and this Agreement shall terminate simultaneously with any termination of the Acquisition Agreement in accordance with its terms. Section 4.2 Term of Agreement. Except as otherwise provided in Section 4.3, the respective covenants and agreements of Cooper and the Company contained in Article I and Article II of this Agreement will continue in full force and effect from the date of effectiveness of this Agreement pursuant to Section 4.1 until the earlier of (i) the tenth anniversary of such date, and (ii) the first date on which Cooper beneficially owns less than 5% of the outstanding Company Voting Securities. Section 4.3 Certain Provisions Regarding Termination. (a) The limitations on Cooper and its affiliates set forth in Articles I and II will terminate immediately and be of no further force and effect on the date that a "Trigger Event" shall have occurred. For these purposes, "Trigger Event" shall mean the occurrence of one or more of the following events, without Cooper's prior written consent: (i) in connection with the issuance of Company Voting Securities (other than (x) issuances pursuant to the Company's current employee benefit plans or other customary employee benefit plans of the Company or (y) issuances in connection with bona fide capital raising programs pursuant to which the securities are sold for fair value, as approved by the Board of Directors of the Company, and the proceeds of which are invested in the businesses in which the Company or one or more of its subsidiaries are then engaged or (z) issuances for fair value, as determined by the Board of Directors of the Company, in connection with acquisitions by the Company or one of its wholly-owned subsidiaries primarily involving one or more Similar Businesses (as hereinafter defined)) the failure to provide Cooper with the right to purchase, at the same price as the Company Voting Securities are being issued, that number or amount of Company Voting Securities which would enable Cooper to maintain its proportionate interest in the Company following such issuance; (ii) a "Change in Control" of the Company (as hereinafter defined); (iii) a material acquisition or investment by the Company or one of its subsidiaries, other than an acquisition or investment by the Company or one of its wholly-owned subsidiaries primarily involving one or more Similar Businesses; B-19 22 (iv) a decline of at least 35% in the "Consolidated Net Worth" of the Company from the Consolidated Net Worth of the Company immediately following the consummation of the Sale Transaction after giving effect to the Sale Transaction (including the issuance of the Shares to Cooper), but not taking into account (A) any reduction in the Company's Consolidated Net Worth attributable to or taken in connection with or as a result of the Sale Transaction or the combination of the business acquired from Cooper with the Company's business and recorded in the Company's financial statements for any period ending on (and including) the end of the first full fiscal year of the Company after the consummation of the Sale Transaction or (B) any adjustments following the date of consummation of the Sale Transaction as a result of any changes in generally accepted accounting principles ("GAAP") (including the implementation of Statement of Financial Accounting Standards ("SFAS") No. 106) or any other regulatory changes or requirements applicable to the Company or its financial statements or (C) any adjustment resulting from any liability arising from or growing out of any matter or circumstance existing as of the time of the consummation of the Sale Transaction and relating to the business or assets acquired by the Company from Cooper but not reflected on the balance sheet of such business and assets or (D) any change in the translation component of shareholders' equity or (E) adjustments as a result of sales of the Company's accounts receivables pursuant to a bona fide receivables securitization program pursuant to which fair value is received for receivables so sold (as determined by the Company's Board of Directors, taking into account, among other things, any discount or credit enhancement features required by any securities rating agency) or (F) any adjustment resulting from a SFAS No. 109 valuation allowance recorded or reserved by the Company with respect to deferred tax assets that were included in or excluded from the Company's final Accounting Practice Bulletin No. 16 acquisition date balance sheet; (v) any default or defaults by the Company or one of its subsidiaries under any indebtedness of the Company or its subsidiaries for money borrowed with a principal amount then outstanding, individually or in the aggregate, in excess of $5 million, which default shall constitute a failure to pay any portion of the principal of each indebtedness at final maturity or shall have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable without such indebtedness having been discharged, or such acceleration having been rescinded or annulled within a period of 30 days after maturity or acceleration; (vi) an "Event of Bankruptcy" (as hereinafter defined); or (vii) the failure of the Board of Directors of the Company to nominate at least two of Cooper's representatives for election to the Company's Board of Directors. B-20 23 Notwithstanding clause (i) above, the Company may not issue any securities having more than one vote per share (other than pursuant to the Amended and Restated Rights Agreement) without the prior written consent of Cooper. (b) For purposes of this Section 4.3: (i) A "Change in Control" shall mean a merger or consolidation involving the Company or a sale of all or substantially all of the assets of the Company, in each case except for a transaction in which the Company's shareholders receive at least 50% of the stock of the surviving, resulting or acquiring corporation; the acquisition by an individual, entity or group (excluding the Company or an employee benefit plan of the Company or a corporation controlled by the Company's shareholders) of shares of capital stock of the Company entitled to cast a majority of the votes entitled to be cast on matters submitted to the shareholders of the Company; or a change in a majority of the members of any class of the Company's Board of Directors in connection with an "election contest" (as used in Rule 14a-11 under the Exchange Act). (ii) "Consolidated Net Worth" shall mean, as at any date of determination, the consolidated shareholders' equity of the Company and those of its subsidiaries that would be accounted for as consolidated subsidiaries in the Company's financial statements in accordance with GAAP (as in effect from time to time), as determined on a consolidated basis in accordance with GAAP (as in effect from time to time); provided, that the Consolidated Net Worth of the Company immediately following the consummation of the Sale Transaction shall include 60% of the "LIFO reserve" as of that date, and thereafter for purposes of calculating Consolidated Net Worth the earnings or loss of the Company shall be computed utilizing the FIFO (first-in, first-out) method of accounting for inventory. (iii) An "Event of Bankruptcy" shall mean (A) the commencement by the Company of a voluntary proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Company to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the admission by the Company in writing of its inability to pay its debts generally as they become due; or (B) the entry by a court having jurisdiction in the premises of (1) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or (2) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or B-21 24 in respect of the Company under any applicable law, or ordering the winding up or liquidation of the affairs of the Company, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days. (iv) "Similar Businesses" shall mean businesses in which the Company or one or more of its subsidiaries are engaged and any businesses involving products related to or complementary to the products of the Company or one or more of its subsidiaries or any similar businesses providing customers of the Company or one or more of its subsidiaries with products or services similar to those provided by the Company or one or more of its subsidiaries. ARTICLE V ELECTION OF DIRECTORS Section 5.1 (a) The Company agrees that it will use its best efforts to cause two persons designated by Cooper and reasonably acceptable to the Company to be elected to the Board of Directors of the Company and to serve as directors of the Company until their successors are duly elected and qualified. In the event that any such designee shall cease to serve as a director for any reason, the Company will use its best efforts to cause such vacancy resulting thereby to be filled by a designee of Cooper reasonably acceptable to the Company. In order to effect the purposes and intent of this Section 5.1, the Company, among other things, shall vote all shares for which the Company's management or Board of Directors holds proxies or is otherwise entitled to vote in favor of the election of the designees of Cooper except as may otherwise be provided by shareholders submitting such proxies. (b) The Company agrees that any designees of Cooper who are elected to serve on the Company's Board of Directors shall be furnished with all information generally provided to the Company's Board of Directors and shall have access to information regarding the Company on a basis equal to that of the other outside or its inside directors. The Company agrees that Cooper's designees serving on the Company's Board of Directors shall, in connection with the performance of their duties as directors of the Company, be (i) compensated at a level commensurate with the compensation of the Company's other outside directors, (ii) reimbursed for all out-of-pocket charges and expenses incurred, (iii) entitled to the benefit of insurance policies of the Company which provide coverage to its other outside directors and (iv) furnished with and entitled to the same perquisites as the Company's other outside directors. ARTICLE VI GENERAL Section 6.1 Specific Enforcement; Other Remedies. (a) Cooper acknowledges and agrees that the Company would be irreparably damaged in the event any of the provisions of this Agreement were not performed by Cooper in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Company shall be entitled to an injunction or injunctions B-22 25 to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state thereof having jurisdiction, in addition to any other remedy to which the Company may be entitled at law or equity. (b) The Company acknowledges and agrees that Cooper would be irreparably damaged in the event any of the provisions of this Agreement were not performed by the Company in accordance with their specific terms or were otherwise breached. It is accordingly agreed that Cooper shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or seek recovery of money damages in any court of the United States or any state thereof having jurisdiction, in addition to any other remedy to which Cooper may be entitled at law or equity. Section 6.2 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants and restrictions shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable. Section 6.3 Definitions. As used herein the term "affiliate" shall have the meaning set forth in Rule 12b-2 under the Exchange Act and the term "person" shall mean any individual, partnership, joint venture, corporation, trust or other entity. Section 6.4 Amendment and Modification. This Agreement may be amended, modified or supplemented only by an agreement in writing signed by both of the parties hereto. Section 6.5 Descriptive Headings. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. Section 6.6 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. Section 6.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors and permitted assigns of the parties hereto, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties hereto without the prior written consent of the other party. Notwithstanding the foregoing, Cooper may assign its rights under this Agreement to any of its direct or indirect wholly-owned subsidiaries as long as such subsidiary remains a direct or indirect wholly-owned subsidiary of Cooper, but no such assignment shall relieve Cooper of its obligations hereunder. B-23 26 Section 6.8 Accounting Matters. The Company will furnish to Cooper all information that is required by GAAP to enable Cooper to account for its investment in the Company in whatever manner it shall deem appropriate. To the extent reasonably requested by Cooper, the Company will, and will cause its employees, independent public accountants and other representatives to provide information regarding the Company to, and otherwise cooperate with, Cooper so as to enable Cooper to prepare financial statements in accordance with generally accepted accounting principles and to comply with its reporting requirements and other disclosure obligations under applicable United States securities laws and regulations. Section 6.9 Notices. All notices and other communications provided for herein shall be validly given, made or served, if in writing and delivered personally, sent by facsimile transmission (receipt of which is confirmed) or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice; provided that notices of a change of address shall be effective only upon receipt thereof): (i) if to Cooper or a Holder of Registrable Securities, to Cooper Industries, Inc. First City Tower, Suite 4000 1001 Fannin Houston, Texas 77002 Attention: General Counsel Telephone No.: (713) 739-5902 Facsimile No.: (713) 735-5882 (ii) if to the Company, to Wyman-Gordon Company 224 Worcester Street Box 8001 Grafton, Massachusetts 01536 Attention: Wallace F. Whitney, Jr. Telephone No.: (508) 839-4441 Facsimile No.: (508) 839-7500 with a copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Attention: Adam O. Emmerich Telephone No.: (212) 403-1000 Facsimile No.: (212) 403-2000 (iii) if to a Holder of Registrable Securities, to the name and address as the same appear in the security transfer books of the Company. B-24 27 Notice given by facsimile shall be deemed delivered on the business day after it is sent to the recipient. Notice given by mail as set out above shall be deemed delivered five calendar days after the date the same is mailed. Section 6.10 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York without regard to any applicable principles of conflicts of law. IN WITNESS WHEREOF, Cooper and the Company have caused this Agreement to be duly executed by their respective officers, each of whom is duly and validly authorized and empowered, all as of the day and year first above written. COOPER INDUSTRIES, INC. By: /s/H. John Riley, Jr. Name: H. John Riley, Jr. Title: President and Chief Operating Officer WYMAN-GORDON COMPANY By: /s/John M Nelson Name: John M. Nelson Title: Chairman and Chief Executive Officer B-25 EX-99.3 4 1 EXHIBIT 99.3 Wyman-Gordon Company 244 Worcester Street Box 8001 North Grafton, MA 01536-8001 May 26, 1994 Cooper Industries 1001 Fannin Suite 4000 Houston, Texas 77002 Ladies and Gentlemen: Cooper Industries, Inc. ("Cooper") and Wyman-Gordon Company (the "Company") have entered into an Investment Agreement, dated as of January 10, 1994 (the "Agreement"). Cooper and the Company desire to amend the Agreement in order to avoid the necessity of a mid-week accounting close as of May 26, 1994 and thereby to simplify the administration of the Agreement. Accordingly, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intended to be legally bound hereby, the parties hereto agree as follows: 1. Section 4.3(a)(iv) of the Agreement is hereby amended by deleting the words "immediately following the consummation of the Sale Transaction after giving effect to the Sale Transaction (including the issuance of the Shares to Cooper") and substituting therefor the words "as of May 28, 1994 adjusted to include the effect of the Sale Transaction as of the consummation date of the Sale Transaction (including the issuance of the Shares to Cooper)." 2. Section 4.3(a)(iv) of the Agreement is hereby further amended by adding the following clause at the end thereof "but taking into account any unusual material events or transactions occurring on or after May 26, 1994 and on or before May 28, 1994." 3. As so amended, the Agreement is hereby ratified and confirmed in all respects. 4. This Amendment shall be governed and construed in accordance with the laws of the State of New York without regard to any applicable principles of conflicts of law. -13- 2 If the foregoing is acceptable to you, please sign the enclosed copy of this letter and return it to us. WYMAN-GORDON COMPANY By /s/Luis E. Leon Name: Luis E. Leon Title: Vice President, Chief Financial Officer and Treasurer Accepted and Agreed to: COOPER INDUSTRIES, INC. By /s/David A. White, Jr. Name: David A. White, Jr. Title: Vice President, Corp Planning & Development -2- EX-99.4 5 1 EXHIBIT 99.4 NEWS RELEASE Wyman-Gordon Company 244 Worcester Street Box 8001 North Grafton, Massachusetts 01536-8001 Contact: Luis E. Leon Vice President Chief Financial Officer and Treasurer Business 508-839-4441 MAY 24, 1994... WYMAN-GORDON COMPANY ANNOUNCED today that, at a Special Meeting, its shareholders voted to approve the company's acquisition of Cameron Forged Products Company, a subsidiary of Cooper Industries, Inc. for 16.5 million new Wyman-Gordon shares of common stock and $5 million cash payable in installments. Management now expects to complete this acquisition before the end of this week. As a result of the acquisition, Cooper will hold approximately 48% of Wyman-Gordon's outstanding common stock. Dewain K. Cross, Senior Vice President, Finance of Cooper, and H. John Riley, Jr., President and Chief Operating Officer of Cooper, have joined Wyman-Gordon's Board of Directors. David P. Gruber, who assumed the duties of Chief Executive Officer beginning with today's meeting, commented: "Consolidation within the aerospace forging industry was imperative to bring capacity more in balance with demand and, from resulting efficiency improvements, to further reduce costs." The Company also announced it has formulated plans for the integration of the two companies' operations. These plans will include the closure of duplicate facilities, reductions in employment levels and adoption of the best manufacturing processes at all locations. The Company will record a provision for the costs of this integration plan of approximately $30 million and an additional $15 million of non-recurring and mostly non-cash charges relating to other events which occurred during the period. The most significant of these other charges include $5 million incidental to the closure of a casting facility and $5 million for certain employee benefit related accruals and unamortized fees relating to the termination of the former credit facility described below. Further, Wyman-Gordon announced today that it will change its fiscal year from the traditional calendar year to a year which begins June 1 and ends May 31. Accordingly, the Company will end a five-month "short-1994 fiscal year" on May 31, 1994 and begin its new fiscal year on June 1, 1994. Mr. Gruber stated: "This change will enable us to conform our year to our customers' needs and will facilitate a whole year of reporting our combined results." During this short-1994 fiscal year, the Company will record the acquisition and all charges discussed above. -14- 2 Finally, the Company announced the completion of a new five- year $65 million trade receivables securitization facility through its wholly-owned, special-purpose subsidiary, Wyman-Gordon Receivables Corporation. This facility is available for general corporate purposes and replaces a $40 million revolving credit agreement. This new facility, which received an AAA rating from Standard & Poors, improves the Company's already strong liquidity. The Company's current cash position approximates $25 million. Wyman-Gordon is a leading manufacturer of high quality technically advanced forgings, investment castings and composite structures for the commercial transportation and defense equipment industries. -2- EX-99.5 6 1 EXHIBIT 99.5 SUPPLEMENTAL INDENTURE This SUPPLEMENTAL INDENTURE, dated as of May 19, 1994, is entered into by and among Wyman-Gordon Company, a Massachusetts corporation (the "Issuer"), the Subsidiary Guarantors and State Street Bank and Trust Company, a Massachusetts banking corporation, as Trustee (the "Trustee"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Indenture, dated as of March 16, 1993, by and among the Issuer, the Subsidiary Guarantors and the Trustee (the "Indenture"). W I T N E S S E T H : WHEREAS, the Issuer has heretofore issued its 10 % Senior Notes due 2003 (the "Securities") in the aggregate principal amount of $90,000,000 pursuant to the Indenture; WHEREAS, the Issuer has entered into a Stock Purchase Agreement dated as of January 10, 1994 (the "Stock Purchase Agreement") with Cooper Industries, Inc., an Ohio corporation ("Cooper"), providing for the acquisition by the Issuer from Cooper (the "Acquisition") of all of the outstanding shares of common stock, par value $.208 per share, of Cameron Forged Products Company, a Delaware corporation ("Cameron"), for a purchase price equal to (i) 16,500,000 shares of the Issuer's common stock, par value $1.00 per share, and (ii) $5,000,000, payable, and subject to adjustment, as provided in the Stock Purchase Agreement; WHEREAS, the Issuer desires, on or prior to the completion of the Acquisition, to replace certain of its existing working capital financing arrangements by entering into a revolving, receivables- backed credit facility through the establishment of a special- purpose Subsidiary which would purchase the U.S. dollar-denominated trade receivables of the Issuer and certain of its Subsidiaries on a daily basis (the "Receivables Financing"); WHEREAS, the Issuer further desires, following the Acquisition, to cause Cameron's wholly-owned United Kingdom subsidiary to enter into certain working capital financing arrangements (the "U.K. Financing"); WHEREAS, to complete the Acquisition, the Receivables Financing and the U.K. Financing, certain existing provisions in the Indenture must be amended; WHEREAS, to amend such provisions a supplemental indenture to the Indenture must be executed; WHEREAS, to execute a supplemental indenture consents must be obtained from Holders of not less than a majority in aggregate principal amount of the Securities outstanding; -15- 2 WHEREAS, the Issuer has obtained sufficient consents from Holders of the Securities to permit the execution of this Supplemental Indenture to the Indenture, which in substance amends certain provisions in the Indenture to permit the Acquisition, the Receivables Financing and the U.K. Financing; WHEREAS, this Supplemental Indenture shall, upon execution, become an effective, valid, binding and legal instrument, in accordance with its terms and for the purposes herein expressed; WHEREAS, the Issuer has complied with the requirements of Sections 9.02 and 9.04 of the Indenture with respect to the execution of this Supplemental Indenture and Section 9.02 of the Indenture permits the execution and delivery of this Supplemental Indenture; and WHEREAS, all acts and proceedings required by law and the Restated Articles of Organization and By-laws of the Issuer to make this Supplemental Indenture in the form hereof a valid, binding and legal instrument have been done and performed, and the execution and delivery hereof have been in all respects duly authorized; NOW, THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Securities: 1. The Indenture is hereby amended as follows: (a) Article One of the Indenture is hereby amended by adding the following definitions to Section 1.01 immediately following the definition of "Business Day": "Cameron" means Cameron Forged Products Company, a Delaware corporation. "Cameron Acquisition" means the acquisition by the Issuer of all of the outstanding shares of common stock, par value $.208 per share, of Cameron from Cooper Industries, Inc., an Ohio corporation ("Cooper"), pursuant to a Stock Purchase Agreement and an Investment Agreement, each dated as of January 10, 1994, by and between Cooper and the Issuer, as the same may be amended or supplemented from time to time (the "Cameron Acquisition Documents"), and the transactions contemplated thereby, including without limitation the payment of the consideration specified in the Cameron Acquisition Documents and the adjustment of such consideration as provided therein, certain leasing, supply and licensing arrangements by and among Cooper and its affiliates and the Issuer and its Subsidiaries (including Cameron) and an arrangement by which Cooper will factor and the Issuer may repurchase certain of Cameron's accounts receivable. -2- 3 (b) Article One of the Indenture is hereby further amended by deleting in its entirety the definition of "Eligible Accounts Receivable" in Section 1.01 and by substituting the following in its place: "Eligible Accounts Receivable" means, at any date, all accounts receivable which are not more than 180 days past due their due date under their normal payment terms. (c) Article One of the Indenture is hereby further amended by deleting in its entirety the language in the definition of "Permitted Indebtedness" in Section 1.01 which follows the word "Holders;" at the end of clause (viii) thereof and by substituting the following in its place: (ix) Indebtedness incurred in connection with the Cameron Acquisition in an aggregate principal amount not to exceed $4.6 million at any time outstanding and, subject to the restrictions of clause (viii), any extension, renewal, replacement or refunding thereof; and (x) Indebtedness of the Issuer other than Indebtedness permitted under clauses (i) through (ix), provided that the aggregate amount of such Indebtedness may not exceed $10 million at any time outstanding. (d) Article One of the Indenture is hereby further amended by deleting in its entirety the existing clause (ix) in the definition of "Permitted Liens" in Section 1.01 and by substituting the following in its place: (ix) Liens on cash, accounts receivable, inventory, general intangibles (including, without limitation, instruments, documents, contract rights and other legal rights incident thereto) and other current assets, and patents, trademarks and other intangibles and, with respect to the U.K. Subsidiary, Liens on all of the assets, capital stock and intercompany notes of such entity, and the proceeds and products of all of the foregoing, in connection with Indebtedness permitted to be incurred pursuant to clause (i) of the definition of "Permitted Indebtedness"; (e) Article One of the Indenture is hereby further amended by adding the following definitions to Section 1.01 immediately following the definition of "Properties": Receivables Securitization Facility Documents" means (i) any agreement or agreements governing or entered into in connection with Indebtedness incurred or participation interests issued by any Receivables Securitization Subsidiary to facilitate the provision of working capital through the sale or pledge to such Subsidiary, from time to time, of accounts receivable of the Issuer or its Subsidiaries (or of notes received in consideration of accounts receivable), and all agreements, guarantees, books and records and returned or repossessed goods related to such accounts receivable (collectively, "Receivables"), including without limitation a -3- 4 receivables purchase and sale agreement, a revolving credit agreement, promissory notes, letters of credit, lock-box account agreements, a tax sharing agreement and an ancillary services and lease agreement, and (ii) any agreement or agreements governing or entered into in connection with Indebtedness incurred or participation interests issued to extend, renew, replace or refund all or any portion of the Indebtedness incurred or participation interests issued under clause (i), and in the case of each of clauses (i) and (ii), as the same may be amended, restated, supplemented, assigned or otherwise modified from time to time. "Receivables Securitization Subsidiary" means any Subsidiary of the Issuer the sole purposes of which are (i) to provide working capital financing for the Issuer and its Subsidiaries through the sale or pledge to such Subsidiary, from time to time, of Receivables pursuant to the Receivables Securitization Facility Documents, and (ii) such other activities as may be necessary or incidental to such purpose as contemplated by the Receivables Securitization Facility Documents. (f) Article One of the Indenture is hereby further amended by adding the following language immediately following the end of the definition of "Restricted Payments" in Section 1.01: Notwithstanding the foregoing, the term "Restricted Payments" shall not include: (a) transactions contemplated by the Cameron Acquisition; (b) the formation and capitalization of, and payments to the Issuer or Subsidiaries from time to time by, a Receivables Securitization Subsidiary pursuant to the terms of the Receivables Securitization Facility Documents; nor (c) (1) Investments in cash, cash equivalents, obligations of the United States of America or any agency or instrumentality thereof, certificates of deposit, commercial paper, repurchase agreements, acceptances, time deposits, money market funds and comparable types of short-term investments if made in the ordinary course of business in accordance with the Issuer's past practices; (2) payroll advances and advances for business and travel expenses in the ordinary course of business; (3) Investments by the Issuer or a Subsidiary in a Wholly-owned Subsidiary, including a transaction by which such entity becomes a Wholly-owned Subsidiary; and (4) Investments in connection with interest rate swaps and caps and currency swaps, contracts or options and other similar hedging agreements, including without limitation raw materials hedging or futures contracts, if not made for speculative purposes but made solely for the purpose of hedging against fluctuations in interest or -4- 5 foreign exchange rates or changes in the prices of raw materials to which, in the ordinary course of business, the Issuer and its Subsidiaries would otherwise be exposed. (g) Article One of the Indenture is hereby further amended by adding the following definition to Section 1.01 immediately following the definition of "Trustee": "U.K. Subsidiary" means CFPD, Ltd., a wholly-owned subsidiary of Cameron incorporated under the laws of England, or any successor entity to CFPD, Ltd. following the Cameron Acquisition. (h) Article Four of the Indenture is hereby amended by deleting from subclause (y) of clause (iv) of the last full paragraph of Section 4.04 the language "clause (i)" and by substituting the following in its place: clauses (i) or (ix) (i) Article Four of the Indenture is hereby further amended by deleting in its entirety the language in clause (z) of the first paragraph of Section 4.07 (up to but not including the words "(an Asset Disposition )") and by substituting the following in its place: (z) a sale or other disposition of Receivables or of participation interests therein pursuant to the terms of the Receivables Securitization Facility Documents or in connection with the incurrence of Indebtedness pursuant to clause (i) of the definition of Permitted Indebtedness) (j) Article Four of the Indenture is hereby further amended by deleting the word "or" that immediately precedes clause (iv) of Section 4.09 and by adding the following language immediately before the period at the end of Section 4.09: ; or (v) restrictions or encumbrances on the payment of dividends or distributions, the transfer of cash or assets, the making of loans or advances or the payment of Indebtedness contained in or directly or indirectly resulting from (x) the Receivables Securitization Facility Documents or the organizational documents of any Receivables Securitization Subsidiary, or (y) any term or provision of any document governing or evidencing Indebtedness incurred by the U.K. Subsidiary pursuant to clause (i) of the definition of Permitted Indebtedness or the grant of security therefor (k) Article Four of the Indenture is hereby further amended by inserting in Section 4.10, immediately following the words "except for", the following language: transactions contemplated by the Cameron Acquisition and other transactions with Cooper and its affiliates the terms of which are at least as favorable to the Issuer and its Subsidiaries as the terms which could be obtained in a comparable transaction on an arm's-length basis between unaffiliated parties, -5- 6 (l) Article Four of the Indenture is hereby further amended by adding the following language immediately following the end of Section 4.16: Notwithstanding the foregoing, the provisions of this Section 4.16 shall not apply to any Receivables Securitization Subsidiary or to the transactions contemplated by the Receivables Securitization Facility Documents. 2. The Indenture shall be deemed to be modified and amended in accordance herewith and the respective rights, limitations of rights, obligations, duties and immunities under the Indenture of the Trustee, the Issuer, the Subsidiary Guarantors and the Holders of outstanding Securities shall, as of the date hereof, be determined, exercised and enforced under the Indenture, subject in all respects to such modifications and amendments, and all the terms and conditions of this Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes. 3. The Trustee accepts the amendment of the Indenture effected by this Supplemental Indenture and agrees to execute the trust created by the Indenture as hereby amended, but only upon the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee, which terms and provisions shall in like manner define and limit its liabilities and responsibilities in the performance of the trust created by the Indenture as hereby amended, and, without limiting the generality of the foregoing, the Trustee makes no representation as to (i) the proper authorization hereof by the Issuer or the Subsidiary Guarantors by corporate action or otherwise, (ii) the due execution hereof by the Issuer or the Subsidiary Guarantors or (iii) the validity, accuracy or sufficiency of this Supplemental Indenture. The recitals contained herein are the statements of the Issuer and the Subsidiary Guarantors, and the Trustee assumes no responsibility for their correctness. 4. This Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all of such counterparts shall together constitute one and the same instrument. 5. Except as hereby expressly amended or supplemented, the Indenture and the Securities issued thereunder are in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. -6- 7 IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed, all as of the date and year first above written. WYMAN-GORDON COMPANY By: /s/Luis E. Leon Name: Luis E. Leon Title: Vice President, Chief Financial Officer and Treasurer Attest: By: /s/Wallace F. Whitney, Jr., Esq. Name: Wallace F. Whitney, Jr., Esq. SUBSIDIARY GUARANTORS: PRECISION FOUNDERS INC. REISNER METALS, INC. SCALED COMPOSITES, INC. W-G ROME CORPORATION WYMAN-GORDON COMPOSITES, INC. WYMAN-GORDON COMPOSITE TECHNOLOGIES, INC. WYMAN-GORDON FISC LIMITED WYMAN-GORDON INVESTMENT CASTINGS, INC. WYMAN-GORDON SECURITIES CORPORATION By: /s/Luis E. Leon Name: Luis E. Leon Title: Treasurer (for each of the above-listed Subsidiary Guarantors) Attest: By: /s/Wallace F. Whitney, Jr., Esq. Name: Wallace F. Whitney, Jr., Esq. (for each of the above-listed Subsidiary Guarantors) -7- 8 STATE STREET BANK AND TRUST COMPANY, as Trustee By: /s/Arthur J. MacDonald Name: Arthur J. MacDonald Title: Assistant Vice President Attest: By: /s/Andrew M. Sinasky Name: Andrew M. Sinasky -8- EX-99.6 7 1 EXHIBIT 99.6 SECOND SUPPLEMENTAL INDENTURE AND GUARANTEE This SECOND SUPPLEMENTAL INDENTURE AND GUARANTEE, dated as of May 27, 1994, is entered into by and among Wyman-Gordon Company, a Massachusetts corporation (the "Issuer"), CFPD Ltd (to be known as Wyman-Gordon Limited), a corporation registered under the laws of England (the "U.K. Subsidiary"), and State Street Bank and Trust Company, a Massachusetts banking corporation, as Trustee (the "Trustee"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Indenture, dated as of March 16, 1993, by and among the Issuer, the Subsidiary Guarantors party thereto and the Trustee, as amended by a Supplemental Indenture dated May 19, 1994 (as so amended, the "Indenture"). W I T N E S S E T H : WHEREAS, the Issuer has heretofore issued its 10 % Senior Notes due 2003 (the "Securities") in the aggregate principal amount of $90,000,000 pursuant to the Indenture; WHEREAS, the Issuer has consummated the "Cameron Acquisition," as defined in the Indenture, and the U.K. Subsidiary has become an indirect, wholly-owned Subsidiary of the Issuer; WHEREAS, the U.K. Subsidiary desires to enter into certain financing arrangements with a United Kingdom lender and to secure such financing arrangements through the granting of Liens to such lender on certain of the assets of the U.K. Subsidiary; WHEREAS, Section 4.16 of the Indenture requires that, as a condition of the granting of such Liens by the U.K. Subsidiary, the Issuer, the U.K. Subsidiary and the Trustee must execute and deliver a supplemental indenture to the Indenture evidencing the U.K. Subsidiary's Guarantee of the Securities; WHEREAS, Section 4.16 of the Indenture further provides that neither the Issuer nor the U.K. Subsidiary is required to make any notation on the Securities to reflect such Guarantee; WHEREAS, this Second Supplemental Indenture and Guarantee shall, upon execution and delivery, become an effective, valid, binding and legal instrument evidencing the U.K. Subsidiary's Guarantee as required by Section 4.16 of the Indenture; WHEREAS, the Issuer has complied with the requirements of Sections 9.01 and 9.04 of the Indenture with respect to the execution of this Second Supplemental Indenture and Guarantee and Section 9.01(f) of the Indenture permits the execution and delivery of this Second Supplemental Indenture and Guarantee; and -16- 2 WHEREAS, all acts and proceedings required by law and the Restated Articles of Organization and By-laws of the Issuer to make this Second Supplemental Indenture and Guarantee in the form hereof a valid, binding and legal instrument have been done and performed, and the execution and delivery hereof have been in all respects duly authorized; NOW, THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Securities: 1. The U.K. Subsidiary hereby acknowledges and agrees that, upon the execution and delivery of this Second Supplemental Indenture and Guarantee, the U.K. Subsidiary shall be deemed to be a "Subsidiary Guarantor" within the meaning of clause (ii) of the definition of "Subsidiary Guarantors" set forth in Article One, Section 1.01 of the Indenture, and that the U.K. Subsidiary shall in all respects be bound by and subject to the terms of Article Eleven of the Indenture. 2. In furtherance and not in limitation of paragraph 1 above, the U.K. Subsidiary unconditionally guarantees (i) the due and punctual payment of the principal of and interest on the Securities, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal and interest, if any, on the Securities, to the extent lawful, and the due and punctual performance of all other obligations of the Issuer to the Holders or the Trustee all in accordance with the terms set forth in Article Eleven of the Indenture and (ii) in the case of any extension of time of payment or renewal of any Securities or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise, subject, however, in the case of clauses (i) and (ii) above, to the limitations set forth in Section 11.04 of the Indenture. 3. The Indenture shall be deemed to be modified and amended in accordance herewith and the respective rights, limitations of rights, obligations, duties and immunities under the Indenture of the Trustee, the Issuer, the Subsidiary Guarantors (including the U.K. Subsidiary) and the Holders of outstanding Securities shall, as of the date hereof, be determined, exercised and enforced under the Indenture, subject in all respects to such modifications and amendments, and all the terms and conditions of this Second Supplemental Indenture and Guarantee shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes. 4. The Trustee accepts the amendment of the Indenture effected by this Second Supplemental Indenture and Guarantee and agrees to execute the trust created by the Indenture as hereby amended, but only upon the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting -2- 3 the liabilities and responsibilities of the Trustee, which terms and provisions shall in like manner define and limit its liabilities and responsibilities in the performance of the trust created by the Indenture as hereby amended, and, without limiting the generality of the foregoing, the Trustee makes no representation as to (i) the proper authorization hereof by the Issuer or the U.K. Subsidiary by corporate action or otherwise, (ii) the due execution hereof by the Issuer or the U.K. Subsidiary or (iii) the validity, accuracy or sufficiency of this Second Supplemental Indenture and Guarantee. The recitals contained herein are the statements of the Issuer and the U.K. Subsidiary, and the Trustee assumes no responsibility for their correctness. 5. This Second Supplemental Indenture and Guarantee may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all of such counterparts shall together constitute one and the same instrument. 6. Except as hereby expressly amended or supplemented, the Indenture and the Securities issued thereunder are in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. -3- 4 IN WITNESS WHEREOF, the parties have caused this Second Supplemental Indenture and Guarantee to be duly executed, all as of the date and year first above written. WYMAN-GORDON COMPANY, as Issuer By: /s/Luis E. Leon Name: Luis E. Leon Title: Vice President, Chief Financial Officer and Treasurer Attest: By: /s/Wallace F. Whitney, Jr. Name: Wallace F. Whitney, Jr. CFPD LTD, as a Subsidiary Guarantor By: /s/Luis E. Leon Name: Luis E. Leon Title: Authorised Director Attest: By: /s/Wallace F. Whitney, Jr. Name: Wallace F. Whitney, Jr. STATE STREET BANK AND TRUST COMPANY, as Trustee By: /s/Arthur J. MacDonald Name: Arthur J. MacDonald Title: Assistant Vice President Attest: By: /s/Andrew M. Sinasky Name: Andrew M. Sinasky -4- EX-99.7 8 1 EXHIBIT 99.7 REVOLVING CREDIT AGREEMENT Dated as of May 20, 1994 among WYMAN-GORDON RECEIVABLES CORPORATION THE FINANCIAL INSTITUTIONS PARTIES HERETO (the "Banks"), and SHAWMUT BANK, N.A. as Issuing Bank, as Facility Agent and as Collateral Agent. -17- 2 TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS Section 1.01 Certain Definitions 1 Section 1.02 Accounting Terms 1 Section 1.03 Other Terms 2 Section 1.04 Computation of Time Periods 2 ARTICLE II THE REVOLVING LOAN FACILITY Section 2.01 Revolving Loan Facility 2 Section 2.02 Making of Revolving Loans 2 Section 2.03 Notice of Borrowings 3 Section 2.04 Disbursement of Funds 4 Section 2.05 Conversion and Continuation of Borrowings 5 Section 2.06 Termination, Reduction and Renewal of Commitments 6 Section 2.07 Mandatory and Voluntary Prepayments and Mandatory Reductions in Aggregate Net Outstandings 8 Section 2.08 Revolving Loans in Connection with Letters of Credit 9 Section 2.09 Additional Banks, Increase in Facility Amount 10 Section 2.10 Replacement of Certain Banks 11 ARTICLE III THE LETTER OF CREDIT FACILITY Section 3.01 Obligation to Issue; Renewal of L/C Facility 13 Section 3.02 Types and Amounts 13 Section 3.03 Conditions 14 Section 3.04 Issuance of Letters of Credit 14 Section 3.05 Reimbursement Obligations 18 Section 3.06 Payments under the Letters of Credit 19 Section 3.07 Indemnification; Exoneration 22 ARTICLE IV INTEREST, FEES AND OTHER PAYMENT TERMS Section 4.01 Interest 24 Section 4.02 Fees 24 Section 4.03 Payments and Computations 25 Section 4.04 Yield Protection 26 Section 4.05 Illegality; Unavailability 28 Section 4.06 Indemnity 29 Section 4.07 Pro Rata Treatment 29 Section 4.08 Taxes 30
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Page ARTICLE V CONDITIONS OF REVOLVING LOANS AND LETTERS OF CREDIT Section 5.01 Conditions Precedent to Initial Borrowing or Letter of Credit 32 Section 5.02 Conditions Precedent to Each Revolving Loan and Letter of Credit 34 ARTICLE VI REPRESENTATIONS AND WARRANTIES Section 6.01 Representations and Warranties of WGRC 35 ARTICLE VII AFFIRMATIVE COVENANTS Section 7.01 Reports, Certificates; Other Information 39 Section 7.02 Inspection 41 Section 7.03 Books and Records of WGRC 42 Section 7.04 Corporate Existence 43 Section 7.05 Compliance with Laws 43 Section 7.06 Obligations and Taxes 43 Section 7.07 Facility Documents 43 Section 7.08 Location of Records 43 Section 7.09 Separate Corporate Existence 43 ARTICLE VIII NEGATIVE COVENANTS Section 8.01 Liens, Sales of Collateral 45 Section 8.02 Indebtedness 46 Section 8.03 Minimum Net Worth 46 Section 8.04 Guarantees 46 Section 8.05 Limitation on Investments 46 Section 8.06 Limitation on Transactions with Affiliates 46 Section 8.07 Facility Documents 47 Section 8.08 Charter and By-Laws 47 Section 8.09 Lines of Business 47 Section 8.10 Bank Accounts 47 Section 8.11 Lock-Box Banks; Change in Payment Instructions to Obligors 47 Section 8.12 Accounting Treatment 48 Section 8.13 ERISA Matters 48 Section 8.14 Merger, Consolidation, etc. 48 ARTICLE IX SECURITY INTEREST; ADMINISTRATION AND COLLECTION OF RECEIVABLES Section 9.01 Grant of Security Interest 48 Section 9.02 Continuing Liability of WGRC 50 Section 9.03 Collection of Receivables 50
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Page Section 9.04 Responsibilities of WGRC 52 Section 9.05 Further Action Evidencing Security Interest 52 Section 9.06 Applications of Collections 53 Section 9.07 Administration of Collection Account Prior to the Liquidation Period 53 Section 9.08 Administration of Collection Account During the Liquidation Period 55 Section 9.09 Remittances and Investment of Funds 57 ARTICLE X TERMINATION; REMEDIES; INDEMNIFICATION Section 10.01 Termination; Remedies 57 Section 10.02 Binding Effect 58 Section 10.03 Indemnities by WGRC 58 ARTICLE XI THE AGENTS Section 11.01 Authorization and Action 61 Section 11.02 Nature of Agents' Duties 61 Section 11.03 UCC Filings 61 Section 11.04 Agent's Reliance, Etc 61 Section 11.05 Agent and Affiliates 62 Section 11.06 Credit Decision 63 Section 11.07 Indemnification 63 Section 11.08 Successor Agent 63 Section 11.09 Direction by the Banks 64 Section 11.10 Notice of Liquidation Events 64 Section 11.11 Duty of Care 65 Section 11.12 Delegation of Agency 65 ARTICLE XII MISCELLANEOUS Section 12.01 Amendments, Etc 66 Section 12.02 No Waiver; Remedies 67 Section 12.03 Successors and Assigns; Assignment; Participations 67 Section 12.04 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF PERSONAL SERVICE AND VENUE; WAIVER OF JURY TRIAL 68 Section 12.05 Notices 69 Section 12.06 Survival of Agreement 69 Section 12.07 Expenses; Indemnification 70 Section 12.08 Confidentiality 70 Section 12.09 No Recourse 71 Section 12.10 No Proceedings 72 Section 12.11 Execution in Counterparts; Severability 73 Section 12.12 Entire Agreement 74 Section 12.13 Exhibits and Schedules 75
iii 5 ANNEXES, EXHIBITS, AND SCHEDULES Annex I Defined Terms v 6 EXECUTION COPY REVOLVING CREDIT AGREEMENT Dated as of May 20, 1994 This REVOLVING CREDIT AGREEMENT (the "Agreement"), dated as of May 20, 1994, is entered into by and among Wyman-Gordon Receivables Corporation, a Delaware corporation (hereinafter "WGRC"), the financial institutions listed on the signature pages hereof (the "Banks"), and Shawmut Bank, N.A. ("Shawmut"), in its separate capacities as the issuing bank hereunder (the "Issuing Bank"), as collateral agent for the Banks (in such capacity, the "Collateral Agent") and as facility agent for the Banks (in such capacity, the "Facility Agent"). W I T N E S S E T H: WHEREAS, Wyman-Gordon Company, a Massachusetts corporation ("Wyman"), and certain consolidated subsidiaries of Wyman own all of the issued and outstanding capital stock of WGRC; and WHEREAS, the regular business activities of WGRC consists and/or will consist of the purchase of accounts receivable and certain related assets from Wyman and from certain other consolidated subsidiaries of Wyman (collectively, the "Sellers") and other activities incidental thereto; and WHEREAS, WGRC, in order to finance its purchases of receivables and other assets from the Sellers, has entered into this Agreement whereby the Banks will, subject to the terms and conditions set forth herein, agree to make Revolving Loans and to issue and/or participate in letters of credit for the account of WGRC; NOW THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Certain Definitions. For all purposes of this Agreement, except as otherwise specifically provided herein, capitalized terms used in this Agreement without definition (including its preamble and recitals) shall have the meanings ascribed to such terms in Annex I hereto, the terms of which are incorporated by reference herein and made a part hereof. SECTION 1.02. Accounting Terms. Under this Agreement, all accounting terms not specifically defined herein shall be interpreted, all accounting determinations made and all financial statements prepared in accordance with GAAP. -1- 7 SECTION 1.03. Other Terms. All other undefined terms contained in this Agreement shall, unless the context indicates otherwise, have the meanings provided for by the UCC to the extent the same are used or defined therein. The words "herein," "hereof," and "hereunder" and other words of similar import refer to this Agreement as a whole, including the exhibits and schedules hereto, as the same may from time to time be amended or supplemented and not to any particular section, subsection, or clause contained in this Agreement, and all references to Sections, Exhibits and Schedules shall mean, unless the context clearly indicates otherwise, the Sections hereof and the Exhibits and Schedules attached hereto, the terms of which Exhibits and Schedules are hereby incorporated into this Agreement. Whenever appropriate, in the context, terms used herein in the singular also include the plural, and vice versa. SECTION 1.04. Computation of Time Periods. In this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." ARTICLE II THE REVOLVING LOAN FACILITY SECTION 2.01. Revolving Loan Facility. (a) Subject to the terms and conditions and in reliance upon the representations and warranties hereinafter set forth, each Bank severally agrees, at any time and from time to time after the Effective Date until the earlier of the Termination Date and the termination of the Commitment of such Bank in accordance with the terms hereof, to make a loan or loans (each such loan, a "Revolving Loan" and, collectively, the "Revolving Loans"), in an amount such that the aggregate amount of Revolving Loans made by such Bank at any time outstanding shall not exceed (i) the Commitment set forth opposite its name on Schedule 2.02, as the same may be reduced from time to time pursuant to Section 2.06, minus (ii) such Bank's Pro Rata Share of the outstanding face amount of any Letters of Credit. In addition, the Banks shall not be required to make any Revolving Loan at any time if, after giving effect to such Revolving Loans, the Aggregate Net Outstandings would exceed the lesser of (i) the Facility Amount or (ii) the Base Amount as determined by reference to the most recent Daily Report delivered by the Servicer to the Facility Agent in accordance with Article IX hereof. SECTION 2.02. Making of Revolving Loans. (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Banks ratably in accordance with their respective Pro Rata Shares and each such Borrowing shall, at the option of WGRC, be either a Base Rate Borrowing or a Eurodollar Borrowing; provided, however, that the failure of any Bank to make any Revolving Loan shall not in itself relieve any other Bank of its obligation to make Revolving Loans hereunder (it being understood, however, that no Bank shall be responsible or liable for the failure of any other Bank to make any Revolving Loan required to be made by such other Bank). The Revolving Loans comprising each Borrowing shall be in an aggregate amount that is -2- 8 equal to (i) in the case of any Base Rate Borrowing, $1,000,000 or an integral multiple of $500,000 in excess thereof and (ii) in the case of any Eurodollar Borrowing, $3,000,000 or an integral multiple of $1,000,000 in excess thereof; provided, however, that notwithstanding the foregoing numerical requirements, WGRC may at any time request a Base Rate Borrowing in an aggregate principal amount equal to the excess of (i) the lesser of the Facility Amount or the Base Amount over (ii) the sum of the Aggregate Loan Amount and the Aggregate L/C Amount then in effect and the Banks shall, subject to the satisfaction of the other terms and conditions hereunder, make available the Revolving Loans comprising such Base Rate Borrowing. (b) WGRC's obligations to pay the principal of and interest on all of the Revolving Loans made by each Bank shall be evidenced by a promissory note payable to each such Bank substantially in the form of Exhibit 2.02(b) hereto (each, a "Revolving Note" and collectively, the "Revolving Notes") which Revolving Note shall be dated the Effective Date and be in a stated principal amount equal to such Bank's Commitment. The Revolving Notes will mature on the Final Collection Date and be otherwise entitled to the benefits of this Agreement. Notwithstanding the stated principal amount of any Revolving Note, the aggregate outstanding principal amount of the Revolving Loans made by any Bank at any time shall be the aggregate principal amount owing on such Bank's Revolving Note at such time. Each Bank shall and is hereby authorized to record on the grid attached to its Revolving Note (or, alternatively, in its internal books and records) the date and amount of each Revolving Loan made by the Banks, the interest rate and Interest Period applicable thereto and each repayment thereof; and such books and records shall, as between WGRC and such Bank, absent manifest error, constitute prima facie evidence of the accuracy of the information contained therein. Failure by any Bank to so record any Revolving Loan made by it or any payment thereon shall not affect the obligations of WGRC under this Agreement or under the Revolving Notes and shall not adversely affect such Bank's rights under this Agreement with respect to the repayment thereof. SECTION 2.03. Notice of Borrowings. Whenever WGRC wishes for the Banks to make Revolving Loans, WGRC shall give the Facility Agent written or telecopy notice, promptly confirmed by telephone (or telephone notice promptly confirmed in writing or by telecopy) (a) in the case of a Base Rate Borrowing, not later than 4:00 p.m., Boston time, two Business Days prior to such proposed Borrowing, and (b) in the case of a Eurodollar Borrowing, not later than 1:00 p.m., Boston time, three Business Days before such proposed Borrowing (a copy of which notice of a Eurodollar Borrowing shall be concurrently sent by WGRC to any Bank which does not maintain a Eurodollar Lending Office in the United States). Each such notice (each, a "Notice of Borrowing") shall be substantially in the form attached hereto as Exhibit 2.03, shall be irrevocable and shall in each case refer to this Agreement and specify (a) whether the Borrowing then being requested is to be a Eurodollar Borrowing or a Base Rate Borrowing; (b) the date of such Borrowing (which shall be a Business Day) and the amount thereof; and (c) if such Borrowing is to be a Eurodollar Borrowing, the -3- 9 Interest Period with respect thereto. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be a Base Rate Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, then WGRC shall be deemed to have selected an Interest Period of one month's duration. The Facility Agent shall promptly advise the Banks of any notice given pursuant to this Section 2.03 and of each Bank's portion of the requested Borrowing. SECTION 2.04. Disbursement of Funds. (a) After receiving notice from the Facility Agent of any Notice of Borrowing given pursuant to Section 2.03, each Bank shall make a Revolving Loan in the amount of its pro rata portion of each Borrowing, ratably according to its Pro Rata Share, on the proposed date thereof by wire transfer of immediately available funds to the Facility Agent in Boston, Massachusetts not later than 10:00 a.m. Boston time, and the Facility Agent shall, by 12:00 noon, Boston time, make available to WGRC by wire transfer of immediately available funds the aggregate amount of the Borrowing funded by the Banks on such date. Unless the Facility Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Facility Agent such Bank's portion of such Borrowing, the Facility Agent may (but shall not be required to) assume that such Bank has made such portion available to the Facility Agent on the date of such Borrowing in accordance with this Section 2.04 and the Facility Agent may (but shall not be required to) make available to WGRC on such date a corresponding amount in reliance upon such assumption. If and to the extent that any Bank shall not have made its portion of a Borrowing available to the Facility Agent and the Facility Agent has made available a corresponding amount to WGRC, such Bank and WGRC each severally agrees to repay to the Facility Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to WGRC until the date such amount is repaid to the Facility Agent at (i) in the case of WGRC, the rate at which interest accrues on the Revolving Loans comprising such Borrowing and (ii) in the case of such Bank, (1) the Federal Funds Rate for such date and the next succeeding Business Day, and (2) the Federal Funds Rate plus two percent (2%) for each day thereafter. Any such repayment of principal by WGRC shall be made from Available Cash pursuant to Section 9.07(c) hereof. If such Bank shall repay to the Facility Agent such corresponding amount, such amount shall constitute such Bank's Revolving Loan as part of such Borrowing for purposes of this Agreement. Nothing contained in this paragraph shall be construed to relieve any Bank from its obligations hereunder to make Revolving Loans to WGRC and to make available to the Facility Agent its ratable portion of each Borrowing. (b) In the event that any Bank fails to fund its Pro Rata Share of any Revolving Loan requested by WGRC which such Bank is obligated to fund under the terms of this Agreement (the funded portion of such Revolving Loan being hereinafter referred to as a "Non-Pro Rata Loan"), then until the earlier of (i) such Bank's cure of such failure and (ii) the Collection Date, the proceeds of all amounts thereafter paid or repaid to the Facility Agent by WGRC and otherwise required to be applied to such Bank's share of any -4- 10 other Obligations pursuant to the terms of this Agreement shall, unless otherwise required to be advanced to the Issuing Bank under Section 3.06(b)(ii), be advanced to WGRC by the Facility Agent on behalf of such Bank in the event that WGRC has repaid such amounts (or shall be retained by the Facility Agent in the event that WGRC has not repaid such amounts) to cure, in full or in part, such failure by such Bank, but shall nevertheless be deemed to have been paid to such Bank in satisfaction of such other Obligations. Notwithstanding anything in this Agreement to the contrary: (1) the foregoing provisions of this Section 2.04(b) shall apply only with respect to the proceeds of payments of Obligations and shall not affect the conversion or continuation of any Revolving Loans hereunder; (2) a Bank shall be deemed to have cured its failure to fund its Pro Rata Share of any Revolving Loan at such time as an amount equal to such Bank's Pro Rata Share (determined as of the time of the Facility Agent's receipt of the Notice of Borrowing with respect to such Revolving Loan) of the requested principal portion of such Revolving Loan is fully funded to WGRC, whether made by such Bank itself or by operation of the terms of this Section 2.04(b); and (3) any amounts advanced to WGRC under this Section 2.04(b) to cure, in full or in part, any such Bank's failure to fund its Pro Rata Share of any Revolving Loan, shall be deemed a part of the same Borrowing as the applicable Non-Pro Rata Loan. SECTION 2.05. Conversion and Continuation of Borrowings. (a) Subject to the terms and conditions set forth in this Section 2.05, WGRC shall have the option: (i) on any day, to convert all or part of a Base Rate Borrowing to a Eurodollar Borrowing and (ii) on the last day of any Interest Period of a Eurodollar Borrowing, to convert all or any part of the Eurodollar Loans comprising such Borrowing to Base Rate Loans and/or to continue all or any remaining part of such Eurodollar Loans as a new Eurodollar Borrowing the Interest Period for which shall commence on the last day of such prior Interest Period; provided, however, that: (i) each conversion or continuation shall be made ratably among the Banks in accordance with their respective Pro Rata Shares; (ii) if less than all the outstanding amount of any Borrowing shall be converted or continued, the aggregate amount of such Borrowing converted or continued shall be in an integral multiple of $500,000 for any Base Rate Borrowing and $1,000,000 for any Eurodollar Borrowing; (iii) no outstanding Eurodollar Borrowing may be continued as a Eurodollar Borrowing, and no outstanding Base Rate Borrowing may be converted into a Eurodollar Borrowing, at any time that a Liquidation Event or Unmatured Liquidation Event has occurred and is continuing; and -5- 11 (iv) there shall not be more than eight (8) separate Eurodollar Borrowings outstanding at any one time. (b) Whenever WGRC wishes to convert and/or continue a Borrowing under this Section 2.05, WGRC shall give the Facility Agent written or telecopy notice, promptly confirmed by telephone (or telephone notice promptly confirmed in writing or by telecopy), (a) in the case of a conversion to a Base Rate Borrowing, not later than 1:00 p.m., Boston time, one Business Day prior to the proposed Conversion/Continuation Date, and (b) in the case of a conversion to or continuation of a Eurodollar Borrowing, not later than 1:00 p.m., Boston time, three Business Days before such proposed Conversion/Continuation Date (a copy of which notice of conversion to or continuation of a Eurodollar Borrowing shall be concurrently sent by WGRC to any Bank which does not maintain a Eurodollar Lending Office in the United States). Each such notice ("Notice of Conversion/Continuation") shall be substantially in the form of Exhibit 2.05(b) hereto, shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Borrowing that WGRC requests be converted or continued, (ii) whether such Borrowing is to be converted to or continued as a Eurodollar Borrowing or a Base Rate Borrowing, (iii) the proposed Conversion/Continuation Date (which shall be a Business Day) and (iv) if such Borrowing is to be converted to or continued as a Eurodollar Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Borrowing, WGRC shall be deemed to have selected an Interest Period of one month's duration. If WGRC shall not have delivered a timely Notice of Conversion/Continuation in accordance with this Section 2.05 with respect to any Borrowing, such Borrowing shall, on the last day of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be converted into or continued as a Base Rate Borrowing. The Facility Agent shall promptly advise the other Banks of any notice given pursuant to this Section 2.05 and of each Bank's portion of any converted or continued Borrowing. SECTION 2.06. Termination, Reduction and Renewal of Commitments. (a) The Commitments shall be automatically and permanently terminated on the Termination Date (prompt notice of which shall be given by WGRC to the Rating Agency). (b) Upon at least three Business Days' prior irrevocable written or telecopy notice to the Facility Agent (promptly confirmed by telephone), WGRC may at any time terminate in whole or reduce in part the Commitments, which reduction shall cause a corresponding irrevocable reduction in the Facility Amount; provided, however, that (i) each such partial reduction of the Commitments shall be in an integral multiple of $1,000,000, (ii) no such partial reduction shall reduce the Facility Amount to an amount less than $32,000,000, and (iii) no such termination or reduction shall be made which would reduce the Facility Amount to an amount less than the Aggregate Net Outstandings outstanding at such time. Each reduction in the Commitments hereunder shall be made ratably among the Banks in accordance with their respective Pro Rata Shares. The Facility Agent shall promptly advise the Banks and the Rating Agency of any notice given pursuant to this Section 2.06(b). -6- 12 (c) Unless earlier terminated pursuant to Section 2.06(a), the agreement of the Banks to make Revolving Loans and to issue and/or participate in Letters of Credit hereunder shall be effective from the Effective Date through the Commitment Termination Date. No more than ninety days and no less than sixty days prior to the second anniversary of the Effective Date, and (if and when applicable) no more than ninety days and no less than sixty days prior to any successive anniversary of the Effective Date, WGRC may notify the Facility Agent and the Banks in writing of its request (each such request an "Extension Request") to extend the then effective Commitment Termination Date by one additional year, and each Bank shall notify WGRC in writing whether it agrees to such extension not later than thirty days after the receipt of such Extension Request. If (i) the Required Banks give timely written notice of such agreement in accordance with the immediately preceding sentence, and (ii) the aggregate Commitments of the Banks agreeing to such extension is not less than 50% of the aggregate Commitments in effect on the Effective Date, then the Commitment Termination Date shall be so extended (and WGRC shall give concurrent notice thereof to the Rating Agency); provided, however, that (1) the failure of any Bank to respond to an Extension Request shall be deemed to constitute such Bank's denial of such Extension Request; and (2) no Bank which has denied its consent to an Extension Request (each such Bank, a "Dissenting Bank") shall be bound by the Required Banks' approval of such Extension Request and the Commitment of each Dissenting Bank shall expire on the Commitment Termination Date which was applicable hereunder at the time of such Bank's receipt of the Extension Request. (d) WGRC shall have the right, at any time prior to the expiration of a Dissenting Bank's Commitment, to request that all or a portion of such Commitment be purchased in accordance with the provisions of this Section 2.06(d) and Section 2.10 hereof. In the event that the entire Commitment of any Dissenting Bank is not so purchased prior to such expiration, then as of the date of such expiration, but only if and so long as the Liquidation Period has not commenced in accordance with the terms of this Agreement, and the transactions described below would not cause a Liquidation Event or Unmatured Liquidation Event to occur and would not cause the Aggregate Net Outstandings of any remaining Bank to exceed its Commitment, (1) the Facility Amount and the aggregate amount of the Commitments shall be reduced by the aggregate amount of the expiring and unpurchased Commitments of all such Dissenting Banks, (2) the Pro Rata Shares of the Banks (including any purchasing Banks) shall be readjusted accordingly, (3) such Dissenting Bank shall be released from any further funding obligation with respect to the Revolving Loans and the Participated Letters of Credit (whether issued theretofore or thereafter), and the other Banks shall, up to the amounts of their respective Commitments, be deemed to have purchased such Dissenting Bank's interest in the Participated Letters of Credit in accordance with their recalculated Pro Rata Shares, and (4) WGRC shall direct that, in accordance with the terms of Section 9.07(c) hereof, but subject to Section 9.08 hereof, all Available Cash and other funds of WGRC shall be paid on such day and each Business Day thereafter (x) first, to each such Dissenting Bank (pro rata, relative to the amount of all such Dissenting Banks' expiring and unpurchased -7- 13 Commitments, in accordance with the amount of each such Dissenting Bank's expiring and unpurchased Commitment) until all then outstanding Revolving Loans, all accrued interest thereon and all amounts due and owing to each such Dissenting Bank hereunder or under any other Facility Document have been paid in full, and (y) second, to the Collateral Agent to cash collateralize each such Dissenting Bank's portion of any outstanding Syndicated Letters of Credit (unless WGRC shall have arranged for the surrender or replacement of such Letter of Credit or made such other arrangements in respect thereof as shall be mutually satisfactory to WGRC, such Dissenting Bank and the Facility Agent). To the extent that WGRC may borrow Revolving Loans under this Agreement following the expiration of such Dissenting Banks' Commitments, WGRC agrees to so borrow and apply the funds obtained thereby to the payment of the amounts described above. Upon the purchase and/or expiration of any Dissenting Bank's Commitment in accordance with the foregoing and payment in full of the amounts described above, such Dissenting Bank shall cease to be a party hereto (subject to any rights of indemnification which survive the termination of this Agreement). In the event that the Liquidation Period commences prior to payment in full of the amounts described above to any Dissenting Bank, then (1) such Dissenting Bank shall be deemed to have a Pro Rata Share equal to a fraction, the numerator of which equals the sum of the amount of outstanding Revolving Loans owing to such Dissenting Bank plus the amount of Syndicated Letters of Credit with respect to which such Dissenting Bank remains liable and which has not yet been cash collateralized as set forth above, and the denominator of which equals the aggregate outstanding Revolving Loans and Letters of Credit, (2) the Pro Rata Shares of all of the other Banks shall be adjusted accordingly, and (3) all Available Cash and other funds of WGRC shall thereafter be paid in accordance with the terms of Section 9.08 hereof. SECTION 2.07. Mandatory and Voluntary Prepayments and Mandatory Reductions in Aggregate Net Outstandings. (a) On any date on which the sum of the Aggregate Loan Amount and the Aggregate L/C Amount exceeds the Base Amount, Available Cash shall be retained by the Collateral Agent and distributed in accordance with this Section 2.07(a) unless and until the Aggregate Net Outstandings are equal to or less than the Base Amount. Any Available Cash so retained shall, in accordance with Section 2.07(b) below, be either retained in the Collection Account or remitted on such date to the Banks to prepay or cash collateralize the Revolving Loans and/or to cash collateralize the outstanding Letters of Credit (according to the provisions of Section 9.07(b) hereof) in such amount as shall be necessary so that, after giving effect to such retention and application or cash collateralization, the Aggregate Net Outstandings will no longer exceed the Base Amount. To the extent such Available Cash is not sufficient to eliminate such excess, Available Cash on each succeeding Business Day shall continue to be retained and applied by the Collateral Agent in accordance with the foregoing provisions of this Section 2.07(a) unless and until the Aggregate Net Outstandings no longer exceed the Base Amount or the Liquidation Period commences, at which time such Available Cash shall be distributed and applied in accordance with Section 9.07 or Section 9.08, respectively. -8- 14 (b) Each mandatory prepayment pursuant to Section 2.07(a) and applicable to Revolving Loans shall be applied first to all Base Rate Loans then outstanding and second to all Eurodollar Loans with Interest Periods ending on the date of such mandatory reduction. To the extent that, after making all applications pursuant to the immediately preceding sentence, the sum of the Aggregate Loan Amount and the Aggregate L/C Amount continues to exceed the Base Amount, then, in such event, all Available Cash shall be retained in the Collection Account in such amount as shall be necessary so that, after giving effect to such retention, the Aggregate Net Outstandings will be less than or equal to the Base Amount then in effect. Any such Available Cash still so retained on the last day of the Interest Period for any Eurodollar Loans shall, up to the amount of the Eurodollar Loans the Interest Period of which ends on such day, be remitted by the Facility Agent to the Banks for application against such Eurodollar Loans. (c) In addition to the foregoing, WGRC may from time to time, on two Business Days' notice to the Facility Agent, request a voluntary prepayment of the Revolving Loans by directing the Facility Agent to remit to the Banks all Available Cash and/or other funds of WGRC for application against the Revolving Loans designated for prepayment by WGRC in such notice. Each such notice of voluntary prepayment shall be binding and irrevocable on WGRC. (d) All mandatory and voluntary prepayments under this Section 2.07 shall be without premium or penalty of any kind except for any indemnification which may be owed in connection with the prepayment of Eurodollar Loans pursuant to Section 4.06. SECTION 2.08. Revolving Loans in Connection with Letters of Credit. Whenever the Banks severally or the Issuing Bank individually issues a Letter of Credit pursuant to Article III hereof, each Bank shall, automatically and without further action of any kind upon the effective date of issuance of such Letter of Credit, have irrevocably agreed to make a Revolving Loan hereunder in the event and at such time that such Letter of Credit is subsequently drawn. In the event of such a draw, all such Revolving Loans shall comprise Base Rate Borrowings in an amount equal to the amount of such draw (without regard to the numerical requirements set forth in Section 2.02(a)), shall be made ratably by the Banks according to their Pro Rata Shares, shall accrue interest as provided in Article IV and may be converted, continued, or repaid according to the other provisions of this Article II. Upon the making of any such Revolving Loans pursuant to this Section 2.08, the Aggregate Loan Amount shall automatically increase by the amount of such Revolving Loans and the Aggregate L/C Amount shall decrease accordingly. In the event that any Letter of Credit expires or is surrendered without being drawn (in whole or in part) then, in such event, the foregoing commitment to make Revolving Loans shall expire and each of the Aggregate L/C Amount and the Aggregate Net Outstandings shall automatically reduce by the amount of the Letter of Credit which is no longer outstanding. -9- 15 SECTION 2.09. Additional Banks; Increase in Facility Amount. From time to time, WGRC shall have the right, subject to the terms set forth herein, to request an increase in the Facility Amount as follows: (i) WGRC shall first request that the Facility Agent, in its sole discretion, increase its Commitment in an amount up to the amount of the requested increase in the Facility Amount. (ii) To the extent that the Facility Agent has not agreed to increase its Commitment by the full amount of the requested increase in the Facility Amount within fifteen (15) days of the written request of WGRC, WGRC may request that the Banks, in their sole discretion, increase their Commitments in an aggregate amount up to the amount of the requested increase in the Facility Amount which is remaining after giving effect to clause (i) above. Any such request shall be made to all Banks. In the event that more than one Bank so agrees to increase its Commitment and the aggregate thereof exceeds the amount of the increase in the Facility Amount requested under this clause (ii), each such Bank shall receive an additional Commitment ratably equal to (a) the amount of such Bank's requested increase in its Commitment times (b) the amount of the increase in the Facility Amount requested under this clause (ii) divided by (c) the aggregate amount of the requested increases in Commitments by the Banks under this clause (ii). (iii) To the extent that the Banks have not agreed to increase their Commitments by the remaining amount of the requested increase in the Facility Amount within fifteen (15) days of the written request of WGRC, WGRC shall have the right to select an additional financial institution to become a party hereto as a Bank with a Commitment equal to any remaining requested increase in the Facility Amount, which Bank is reasonably acceptable to the Facility Agent and is an Eligible Assignee. Notwithstanding the foregoing, (a) any increase in the Facility Amount shall be subject to the prior written confirmation by the Rating Agency that such increase will not cause the Rating Agency rating of the Facility, as set forth in the letter described in Section 5.01(xiv), to be reduced or withdrawn, (b) any increase in the Facility Amount shall be in an aggregate amount of not less than $1,000,000, and (c) in no event may the Facility Amount be increased to an amount in excess of $75,000,000 without the prior written consent of Banks whose Pro Rata Shares aggregate at least seventy-five percent (75%) (which consent shall not be unreasonably withheld). Upon receipt of confirmation from the Rating Agency and, if necessary, consent from the Required Banks, the Facility Agent shall promptly notify the Banks and the Collateral Agent of the increase in the Facility Amount and WGRC, the Agents, the Issuing Bank, the Banks and, if applicable, each additional Bank shall enter into an amendment to this Agreement and the other applicable Facility Documents which shall effectuate such increase and, if applicable, incorporate each such additional Bank as a Bank -10- 16 for all purposes of the Facility Documents and pursuant to which each such additional Bank shall purchase from each other Bank a participation interest in the Letters of Credit then outstanding, which participation interest shall be in a percentage equal to such additional Bank's or Banks' Pro Rata Share or Shares (as calculated below). Immediately upon the effectiveness of such amendment, (1) the Facility Amount shall be increased by the amount of the additional Commitments; (2) the respective Pro Rata Shares of the Banks (including the additional Banks, if applicable) shall be recalculated accordingly; and (3) each additional Bank and/or any Bank increasing its Commitment shall (x) purchase, by wire transfer of immediately available funds to the other Banks, its Pro Rata Share of all outstanding Revolving Loans made by the other Banks and (y) shall purchase from each other Bank a participation interest in the Letters of Credit, in each case in an amount necessary so that the Revolving Loans of all the Banks (including, if applicable, any additional Bank) and each Bank's obligations in respect of the Letters of Credit shall be outstanding according to their respective Pro Rata Shares as the same have been recalculated pursuant to the preceding provisions of this Section 2.09. SECTION 2.10. Replacement of Certain Banks. In the event that any Bank (i) has denied its consent to an Extension Request pursuant to Section 2.06 hereof, which has been consented to by the Required Banks, or (ii) requested compensation from WGRC pursuant to Section 4.04 or Section 4.08 hereof to recover additional costs or Taxes incurred by such Bank which are not being incurred generally by the other Banks, (iii) delivered a notice pursuant to Section 4.05 hereof claiming that such Bank is unable to make Eurodollar Loans for reasons not generally applicable to the other Banks, (iv) become unable to honor its Commitment hereunder because the funding of such Commitment has become unlawful, or (v) failed to fund its Pro Rata Share of any Revolving Loan or any draw under a Letter of Credit, then, in any such case, WGRC may make written demand on such Bank (each such Bank, a "Departing Bank") (with a copy to the Facility Agent) for such Departing Bank to assign all of its Revolving Loans and all of its other rights and obligations under this Agreement as follows: (i) WGRC shall first request that the Facility Agent, in its sole discretion, purchase the Commitment, or any portion thereof, of such Departing Bank. (ii) To the extent that the Facility Agent has not agreed to purchase all of the Commitment of such Departing Bank within fifteen (15) days of a written request from WGRC, WGRC may request that one or more of the other Banks, in their sole discretion, purchase the remaining Commitment, or any portion thereof, of such Departing Bank. In the event that more than one Bank so agrees to purchase all or a portion of the Commitment of the Departing Bank which is not purchased by the Facility Agent under clause (i) above, and the aggregate amount requested under this clause (ii) exceeds the remaining Commitment of such Departing Bank, each such Bank shall purchase a portion of such Departing Bank's Commitment equal to (a) the amount of such Bank's requested purchase times (b) the Commitment of such Departing Bank not purchased by the -11- 17 Facility Agent under clause (i) above, divided by (c) the aggregate amount of the requested purchases thereof by the Banks. (iii) To the extent that the Banks have not agreed to purchase all of such remaining Commitment, if any, of such Departing Bank within fifteen (15) days of a written request from WGRC, WGRC shall have the right, at any time, to select an Eligible Assignee reasonably acceptable to the Facility Agent to purchase any remaining Commitment, or any portion thereof, of such Departing Bank (each such new financial institution, a "Replacement Bank"). Each such assignment shall be executed pursuant to one or more duly executed Assignments and Acceptances in the form of Exhibit 12.03 hereto, and shall be consummated within ten (10) Business Days after the date the Banks and Replacement Banks, as applicable, agree to purchase the Departing Bank's Commitment as described above, at an aggregate purchase price equal to the principal amount of such Departing Bank's outstanding Revolving Loans, all accrued interest thereon and all other amounts due and owing to such Departing Bank hereunder or under any other Facility Document. Each such assignment shall become effective upon payment of such aggregate purchase price and, with respect to the replacement of a Dissenting Bank pursuant to Section 2.06(d), the expiration of such Dissenting Bank's Commitment. Notwithstanding the foregoing, no assignment under this Section 2.10 shall be consummated if, as a result thereof, a Liquidation Event or Unmatured Liquidation Event would occur. Immediately upon such effectiveness, but only if the Liquidation Period shall not have commenced in accordance with the terms of this Agreement, (1) the purchasing Banks and/or the Replacement Banks, as the case may be, shall assume the Departing Bank's rights and obligations hereunder to the extent purchased (including, without limitation, obligations to make Revolving Loans and participate in Letters of Credit), (2) each remaining Bank's Pro Rata Shares shall be adjusted accordingly (including any adjustment for reductions in the Facility Amount as a result of the expiration of a Dissenting Bank's Commitment) and (3) such Departing Bank shall be released from any further funding obligations with respect to the Revolving Loans and the Participated Letters of Credit (whether issued theretofore or thereafter). Unless WGRC shall have arranged for the surrender or replacement of each Syndicated Letter of Credit under which the Departing Bank is an Issuer or made such other arrangements in respect thereof as shall be mutually satisfactory to WGRC, such Departing Bank, the proposed Replacement Bank and the Facility Agent, WGRC shall provide cash collateral to the Collateral Agent concurrently with the effectiveness of each assignment hereunder (or, in the case of Dissenting Banks, following such effectiveness in accordance with Section 2.06(d)) in an amount equal to each Departing Bank's portion of Syndicated Letters of Credit issued by such Departing Bank. Any cash collateral held for all Departing Banks' portions of Syndicated Letters of Credit (whether under this Section 2.10 or under Section 2.06(d)) shall be retained by the Collateral Agent in a separate interest-bearing account maintained on the corporate trust side of the Bank to be invested in Permitted Investments in the manner provided in Section 9.09 (with interest thereon to be returned to the Collection Account as and when the -12- 18 same is paid) and shall not otherwise be released unless and until, and only to the extent that either (i) a related Letter of Credit (or any Departing Bank's share thereof) has terminated, been replaced or expired undrawn, upon which termination or expiration the applicable portion of the cash collateral shall be returned to the Collection Account for distribution and application in accordance with Section 9.07 or Section 9.08, as applicable or (ii) the Syndicated Letters of Credit have been drawn, in which event the applicable portion of the cash collateral shall be wired to the applicable beneficiary or beneficiaries in satisfaction of the Departing Bank's funding obligations under such Syndicated Letters of Credit. Upon the replacement of a Departing Bank as described above, such Departing Bank shall cease to be a party hereto (subject to any rights of indemnification which survive the termination of this Agreement). The Facility Agent is hereby authorized to execute one or more Assignment and Acceptances as attorney-in-fact for any Departing Bank failing to execute and deliver the same within five (5) Business Days after the date on which the Departing Bank was tendered the purchase price and was required to execute such Assignment and Acceptance in accordance with the foregoing provisions of this Section 2.10. ARTICLE III THE LETTER OF CREDIT FACILITY SECTION 3.01. Obligation to Issue; Renewal of L/C Facility. Subject to the terms and conditions of this Agreement, and in reliance upon the representations and warranties set forth herein, each Bank hereby severally agrees, and the Issuing Bank individually agrees, to issue for the account of WGRC through such Issuer's branches as it and WGRC may jointly agree, one or more Letters of Credit in accordance with this Article III, from time to time during the period commencing on the Effective Date and ending on the Termination Date. SECTION 3.02. Types and Amounts. No Issuer shall have any obligation to issue any Letter of Credit at any time if: (i) such Issuer's Pro Rata Share of the aggregate maximum amount then available for drawing under the Syndicated Letters of Credit plus, in the case of (x) the Issuing Bank, the maximum amount then available for drawing under the Participated Letters of Credit, or (y) in the case of any other Bank, its Pro Rata Share of the maximum amount available for drawing under such Participated Letters of Credit after giving effect to the issuance of the requested Letter of Credit, shall exceed any limit imposed by law or regulation upon such Issuer or Bank, written notice of which limit has been given by such Issuer or Bank to WGRC and the Facility Agent; (ii) after giving effect to the issuance of the requested Letter of Credit, either: (A) the Aggregate L/C Amount would exceed the L/C Facility Sub-Amount, or (B) the Aggregate Net Outstandings would exceed the Base Amount; or (C) the sum of the Aggregate L/C Amount and the Aggregate Loan Amount would exceed the Facility Amount; -13- 19 (iii) such Letter of Credit has an expiration date (A) more than eighteen months after the date of issuance (subject to renewal for an additional eighteen months unless earlier terminated by sixty (60) days prior written notice from the Facility Agent in accordance with the terms of this Agreement) or (B) later than three (3) Business Days prior to the Commitment Termination Date; or (iv) the beneficiary under such Letter of Credit is a foreign government or an entity located in a foreign jurisdiction with whom, because of governmental hostilities or terrorist activities, such Issuer is restricted from doing business, prior written notice of which restriction has been given by such Issuer to WGRC and the Facility Agent. SECTION 3.03. Conditions. In addition to being subject to the satisfaction of the conditions contained in Article V, the obligation of the Issuers to issue any Letter of Credit is subject to the satisfaction in full of the following conditions: (i) WGRC shall have timely delivered to the Facility Agent and to each applicable Issuer at such times and in such manner as the Facility Agent and each such Issuer may prescribe a Letter of Credit application as described below in Section 3.04 and such other documents and materials as may be required pursuant to the terms thereof, and the terms of the proposed Letter of Credit shall be reasonably satisfactory to each applicable Issuer as to form and content; and (ii) as of the date of issuance no order, judgment or decree of any court, arbitrator or governmental authority shall purport by its terms to enjoin or restrain any applicable Issuer from issuing the Letter of Credit (or to enjoin or restrain any Bank from participating therein) and no law, rule or regulation applicable to any applicable Issuer or Bank and no request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over any applicable Issuer or Bank shall prohibit or request that such Issuer or Bank refrain from the issuance of (or participation in) letters of credit generally or the issuance of (or participation in) that Letter of Credit. SECTION 3.04. Issuance of Letters of Credit. (a) Request for Issuance. Except with respect to Letters of Credit to be issued on the Effective Date, WGRC shall give the Facility Agent at least ten (10) Business Days' prior written notice of any requested issuance of a Syndicated Letter of Credit under this Agreement and WGRC shall give each of the Facility Agent and the Issuing Bank at least three (3) Business Days' prior written notice of any requested issuance of a Participated Letter of Credit under this Agreement (except that, in lieu of each such written notice, WGRC may give telephonic notice -14- 20 of such request if confirmed promptly in writing). Each such notice shall be in the form of a Letter of Credit application attached hereto as Exhibit 3.04(a) and shall specify the stated amount of the Letter of Credit requested, the effective date (which day shall be a Business Day) of issuance of such requested Letter of Credit, the date on which such requested Letter of Credit is to be delivered (if different from the effective date), the date on which such requested Letter of Credit is to expire, the purpose for which such Letter of Credit is to be issued, the Person for whose benefit the requested Letter of Credit is to be issued, and, if available, a copy of the proposed Letter of Credit substantially in the form of Exhibit 3.04(c)(ii) or Exhibit 3.04(c)(iii) hereto (appropriately completed, including, if applicable, the form of draw certificate with respect thereto together with such other changes requested by the beneficiary as may be acceptable to each Issuer thereof). Such notice, to be effective, must be received by the Facility Agent (and, if applicable, the Issuing Bank) not later than 1:00 p.m. (Boston time) on the last Business Day on which notice can be given under the first sentence of this Section 3.04(a), and WGRC shall, in each such case, provide copies of such notices to the other Banks within one (1) Business Day. Prior to the close of business on the Business Day following the Business Day on which the Facility Agent makes the determination described below pursuant to Section 3.04(b), the Facility Agent shall confirm to WGRC by written or telex notice, or telephonic notice confirmed promptly thereafter in writing, whether the applicable Issuers are authorized to issue the requested Letter of Credit in accordance with Section 3.04(b), and, if they are so authorized, shall promptly advise each Bank (and, if applicable, the Issuing Bank) of such authorization and, with respect to Syndicated Letters of Credit, of each Bank's portion thereof. (b) Responsibilities of the Facility Agent; Issuance. The Facility Agent shall determine (based solely upon the information set forth in the applicable Daily Report provided by the Servicer to the Facility Agent), as of the close of business on the third Business Day immediately preceding the requested issuance date, each of (1) the excess of the L/C Facility Sub-Amount over the Aggregate L/C Amount, (2) the excess of the Base Amount over the Aggregate Net Outstandings and (3) the excess of the Facility Amount over the sum of the Aggregate L/C Amount and the Aggregate Loan Amount. If, and only if, the stated amount of the requested Letter of Credit is less than or equal to the amount of each such excess and subject to the satisfaction of the conditions set forth in Section 3.03 and Article V hereof, the Facility Agent shall authorize the Banks or the Issuing Bank, as applicable, to issue the requested Letter of Credit. Subject to the terms and conditions of this Article III, the Banks or the Issuing Bank, as applicable, shall, on the requested date, issue such Letter of Credit on behalf of WGRC. In this connection, the Facility Agent and each Issuer may conclusively assume that the applicable conditions set forth in Section 3.03 and Article V hereof have been satisfied (other than as set forth in this Section 3.04(b)) unless the primary loan officer of the Facility Agent or such Issuer, as the case may be, having day-to-day responsibility for matters relating to this transaction or, if different, the officer of the Facility Agent or such Issuer designated under Section 12.05 for -15- 21 receiving notices sent to such party, has actual knowledge to the contrary or unless the Facility Agent or such Issuer, as the case may be, shall have received written notice to the contrary from the Facility Agent or a Bank. (c) Forms of Letters of Credit. (i) Each Letter of Credit to be issued in a face amount of less than $5,000,000 shall be in the form of a Participated Letter of Credit and each Letter of Credit to be issued in a greater face amount shall be in the form of a Syndicated Letter of Credit. (ii) Each Participated Letter of Credit shall consist of a single letter of credit issued by the Issuing Bank, and shall have a face amount of less than $5,000,000. Each such Participated Letter of Credit shall be prepared by the Issuing Bank on the basis of the information provided in the request for issuance and shall be otherwise substantially in the form of Exhibit 3.04(c)(ii). Promptly upon such preparation, the Issuing Bank shall provide a copy of such Participated Letter of Credit to the Facility Agent. (iii) Each Syndicated Letter of Credit shall consist of a single letter of credit issued on the same day by the Banks in counterpart form ratably in accordance with their respective Pro Rata Shares, and shall have an aggregate face amount equal to or greater than $5,000,000. Promptly following the Facility Agent's receipt of a request for issuance of a Syndicated Letter of Credit pursuant to Section 3.04(a) above, the Facility Agent shall prepare a form of the Syndicated Letter of Credit on the basis of the information provided in the request for issuance and which is otherwise substantially in the form of Exhibit 3.04(c)(iii) and shall cause execution copies of such Syndicated Letter of Credit to be delivered to each Bank. Each Bank shall promptly, and in no event later than four (4) Business Days after receipt of the form prepared by the Facility Agent, advise the Facility Agent of any objections it has to the form of the proposed Syndicated Letter of Credit. Unless a Bank so notifies the Facility Agent of an objection, such Bank shall, not later than two (2) Business Days prior to the date of issuance of such Syndicated Letter of Credit, deliver to the Facility Agent a counterpart of such Syndicated Letter of Credit, duly executed by such Bank. After the Facility Agent's receipt of a counterpart of such Syndicated Letter of Credit from each Bank, but only if the Facility Agent shall have received such counterparts from all Banks, and upon fulfillment of the applicable conditions set forth in this Agreement, the Facility Agent shall make such Syndicated Letter of Credit available to WGRC on the requested issuance date. WGRC agrees that, if any Syndicated Letter of Credit is not issued on account of the failure of a Bank to forward its counterpart or on account of an objection by any Bank, then none of the Facility Agent, the Collateral Agent or the Banks other than the Bank or Banks failing to forward such counterpart or making such objection (to the extent such objection was wrongful) shall have any liability on account of such failure or non-issuance. (d) Notice of Issuance. (i) The Issuing Bank shall give the Facility agent written or telex notice, or telephonic notice confirmed promptly thereafter in writing, of the issuance -16- 22 and delivery of a Participated Letter of Credit, together with a copy of each such Participated Letter of Credit as executed by the Issuing Bank. (ii) The Facility Agent shall give each Bank written or telex notice, or telephonic notice confirmed promptly thereafter in writing, of the issuance and delivery of a Participated Letter of Credit or Syndicated Letter of Credit, together with a copy of each such Letter of Credit, as executed by the Issuing Bank or the Banks, as applicable. (e) No Extension or Amendment. No Issuer may extend any Letter of Credit or amend any Letter of Credit to increase the face amount thereof unless the requirements of this Section 3.04 are met as though a new Letter of Credit was being requested and issued. If a Letter of Credit contains provisions for renewal absent written notice from the Facility Agent or the Issuing Bank, as applicable, (i) with respect to Participated Letters of Credit, the Issuing Bank shall give the Facility Agent, at least thirty Business Days prior thereto, written notice of the last Business Day on which the Issuing Bank is entitled to give such notice of non-renewal, and (ii) with respect to any Letter of Credit, the Facility Agent shall determine, as of the close of business on the third Business Day prior to the last Business Day on which the Facility Agent or the Issuing Bank is entitled to give such notice of non-renewal, whether extension of such Letter of Credit would be authorized in accordance with the first sentence of this Section 3.04(e). The Facility Agent shall promptly notify the applicable Issuers of the result of such determination. Neither the Facility Agent nor the Issuing Bank shall be required to give any such notice of non-renewal under this Section 3.04(e), and the Facility Agent and the Issuing Bank shall be entitled to assume that the applicable conditions set forth in Section 3.03 and Article V hereof have been satisfied (except as set forth in this Section 3.04(e)), unless the primary loan officer of the Facility Agent or the Issuing Bank, as the case may be, having day-to-day responsibility for matters relating to this transaction or, if different, the officer of the Facility Agent or Issuing Bank designated under Section 12.05 for receiving notices sent to such party, has actual knowledge to the contrary or unless it shall have received notice to the contrary from a Bank on or before the third Business Day prior to the last Business Day on which the Facility Agent or the Issuing Bank is entitled to give such notice of non- renewal. In the event a Letter of Credit contains provisions for renewal as described above, and the Termination Date has occurred, the Facility Agent or the Issuing Bank, as applicable, shall give any required notice of non-renewal at the earliest possible date on which the Facility Agent or the Issuing Bank is entitled to give such notice. The Issuing Bank shall have no liability to the Banks or the Agents with respect to the renewal or non-renewal of any Participated Letter of Credit in the event that the Issuing Bank has acted in accordance with the terms of this Agreement. (f) Participation by Banks in Participated Letters of Credit. Upon the issuance by the Issuing Bank of a Participated Letter of Credit, each Bank shall be deemed to have irrevocably and unconditionally purchased and received from the Issuing Bank, -17- 23 without recourse or warranty, an undivided interest and participation to the extent of such Bank's Pro Rata Share in such Participated Letter of Credit (including, without limitation, all obligations of WGRC and rights of the Issuing Bank with respect thereto and all security therefor, other than amounts owing to the Issuing Bank under Section 4.02(d), Section 4.02(e) or Section 4.04); provided, however, that a Participated Letter of Credit shall not be entitled to the benefits of this Section 3.04(f) or Section 3.06(b) if the Issuing Bank shall have received written notice from the Facility Agent or any Bank on or before the Business Day immediately prior to the date of the Issuing Bank's issuance of such Participated Letter of Credit that one or more of the conditions contained in Article V is not then satisfied, and, in the event the Issuing Bank receives such a notice, it shall have no further obligation to issue any Participated Letter of Credit until such notice is withdrawn by the Facility Agent or such Bank or it receives written notice from the Facility Agent that such condition has been effectively satisfied or waived in accordance with the provisions of this Agreement. The Issuing Bank shall have no liability to the Banks or the Agents with respect to the issuance or nonissuance of any Participated Letter of Credit in the event that the Issuing Bank has acted in accordance with the terms of this Agreement. SECTION 3.05. Reimbursement Obligations. (a) Reimbursement. Notwithstanding any provisions elsewhere to the contrary, (i) WGRC shall reimburse each applicable Issuer for drawings under any Letter of Credit unless and until such reimbursement obligations are extinguished as provided below, (ii) such reimbursement obligations for drawings under a Letter of Credit shall bear interest from the date of the relevant drawing until the date of the Revolving Loans described in Section 2.08 at the same rate at which interest would then accrue for any Base Rate Loans hereunder and (iii) WGRC's obligations to reimburse the applicable Issuers for the principal amount of all drawings under a Letter of Credit shall be extinguished upon the making of any Revolving Loans described in Section 2.08 or of payment of such amount in full in cash. (b) Duties of the Issuers. Any action taken or omitted to be taken by the Facility Agent or any Issuer under or in connec- tion with any Letter of Credit, if taken or omitted in the absence of willful misconduct or gross negligence, shall not put the Facility Agent or such Issuer under any resulting liability to any Bank, any other Issuer, any beneficiary or proposed beneficiary of a Letter of Credit, or (assuming that the Facility Agent or the Issuing Bank, as applicable, has complied with the procedures specified in Section 3.04) relieve any Issuer of its obligations hereunder in respect of such Letter of Credit. In determining whether to authorize payment under any Letter of Credit, the Facility Agent or the Issuing Bank, as applicable, shall have no obligation relative to the Banks or to WGRC other than to confirm that any documents required to have been delivered under such Letter of Credit appear to comply on their face with the require- ments of such Letter of Credit and, with respect to the Facility Agent, to provide notice as described in Section 3.06. Neither the -18- 24 Facility Agent nor the Issuing Bank shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit. WGRC agrees that any action taken or omitted by the Facility Agent or the Issuing Bank under or in connection with each Letter of Credit and the related drafts and documents, if done in good faith, shall be binding upon WGRC and shall not result in any liability on the part of the Facility Agent or the Issuing Bank to WGRC. (c) Reliance by Issuer. The Facility Agent and the Issuing Bank shall be entitled to rely, and shall be fully protected in relying upon any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document reasonably believed by the Facility Agent and/or the Issuing Bank to be genuine and correct and to have been signed, sent or made by the proper person or persons and upon advice and statements of legal counsel, independent accountants and other experts selected by the Facility Agent and/or the Issuing Bank. SECTION 3.06. Payments under the Letters of Credit. (a) Sharing of Syndicated Letter of Credit Payments. In the event that the Facility Agent receives a request for draw under any Syndicated Letter of Credit, then, unless WGRC shall have, at its election, previously made available to the Facility Agent the amount of such payment, the Facility Agent shall promptly notify each Bank of the amount of such requested draw and shall promptly forward to each Bank a copy of all documents accompanying such requested draw. Each Bank shall, no later than 11:00 a.m. (Boston time) on the third Business Day following the Facility Agent's receipt of such request for draw, either (i) notify the Facility Agent that it will dishonor such request and the reason for such dishonor or (ii) unconditionally pay to the Facility Agent the amount of such Bank's Pro Rata Share of such payment in Dollars and in same day funds. The Facility Agent shall promptly pay such amount, and any other amounts received by the Facility Agent pursuant to this Section 3.06(a), to the beneficiary thereof. In the event that the Banks or any Bank has refused to forward funds, the Facility Agent shall, but only to the extent that funds were not so forwarded, dishonor such request (in whole or in part, as applicable). Each such payment by the Banks to or for the benefit of the beneficiary shall constitute a Revolving Loan under this Agreement in accordance with Section 2.08 and shall cause a corresponding reduction in the Aggregate L/C Amount. Unless the Facility Agent shall have received notice from a Bank on or prior to 11:00 a.m. (Boston time) on the date of payment that such Bank will not make available to the Facility Agent such Bank's portion thereof, the Facility Agent may (but shall not be required to) assume that each Bank has made its Pro Rata Share of the amount of such payment available to the Facility Agent and the Facility Agent may (but shall not be required to) make available to the beneficiary of the Syndicated Letter of Credit a corresponding amount in reliance upon such assumption. If and to the extent that any Bank shall not have made its portion of such payment available -19- 25 to the Facility Agent and the Facility Agent has made available a corresponding amount to the applicable beneficiary, such Bank and WGRC each severally agrees to repay to the Facility Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the applicable beneficiary until the date such amount is repaid to the Facility Agent (i) in the case of WGRC, at the Base Rate and (ii) in the case of such Bank, at (1) the Federal Funds Rate for such date and the next succeeding Business Day and (2) the Federal Funds Rate plus two percent (2%) for each day thereafter. Any such repayment of principal by WGRC shall be made from Available Cash pursuant to Section 9.07(c) hereof. If such Bank shall repay to the Facility Agent such corresponding amount, such amount shall constitute a Revolving Loan in accordance with the terms of this Section 3.06 and Section 2.08. (b) Payments under Participated Letters of Credit. (i) In the event that the Issuing Bank receives a request for draw under any Participated Letter of Credit which the Issuing Bank decides, in its sole discretion, to honor, then, unless WGRC shall have made available to the Issuing Bank the amount of such payment, the Issuing Bank shall promptly notify each Bank of the amount of such requested draw and shall promptly forward to each Bank a copy of all documents accompanying such requested draw. Each Bank shall, no later than 11:00 a.m. (Boston time) on the third Business Day following the Issuing Bank's receipt of such request for draw, unconditionally pay to the Issuing Bank the amount of such Bank's Pro Rata Share of such payment in Dollars and in same day funds. The Issuing Bank shall promptly pay such amount, together with any other amounts received by the Issuing Bank pursuant to this Section 3.06(b), to the beneficiary of such Participated Letter of Credit in accordance with the terms thereof. Each such payment by the Banks to the Issuing Bank shall constitute a Revolving Loan under this Agreement in accordance with Section 2.08 and shall cause a corresponding reduction in the Aggregate L/C Amount. If and to the extent that any Bank shall not have made its portion of such payment available to the Issuing Bank and the Issuing Bank has made available a corresponding amount to the applicable beneficiary (it being understood that the Issuing Bank's obligations to such beneficiary under such Letter of Credit will not, unless the beneficiary has otherwise agreed, be conditioned on the performance by the Banks of their obligations under this Section 3.06(b)), such Bank and WGRC each severally agrees to repay to the Issuing Bank forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the applicable beneficiary until the date such amount is repaid to the Facility Agent (1) in the case of WGRC, at the Base Rate and (2) in the case of such Bank, at (x) the Federal Funds Rate for such date and the next succeeding Business Day and (y) the Federal Funds Rate plus two percent (2%) for each day thereafter. Any such repayment of principal by WGRC shall be made from Available Cash pursuant to Section 9.07(c) hereof. If such Bank shall repay to the Issuing Bank such corresponding amount, such amount shall constitute a Revolving Loan in accordance with the terms of this Section 3.06 and Section 2.08. -20- 26 (ii) In the event that any Bank fails to fund its Pro Rata Share of any payment required to be made by such Bank to the Issuing Bank in accordance with the provisions of this Section 3.06(b), until the earlier of such Bank's cure of all such failures and the Collection Date, the proceeds of all amounts thereafter paid or repaid to the Facility Agent by WGRC and otherwise required to be applied to such Bank's share of any Obligations pursuant to the terms of this Agreement shall be advanced to the Issuing Bank by the Facility Agent on behalf of such Bank to cure, in full or in part, such failure by such Bank, but shall nevertheless be deemed to have been paid to such Bank in satisfaction of such Obligations. Notwithstanding anything in this Agreement to the contrary: (1) the foregoing provisions of this Section 3.06(b)(ii) shall apply only with respect to the proceeds of payments of Obligations and shall not affect the conversion or continuation of any Revolving Loans hereunder; and (2) a Bank shall be deemed to have cured its failure to fund its Pro Rata Share of any such required payment in respect of a Participated Letter of Credit at such time as an amount equal to such Bank's Pro Rata Share (determined as of the time of such Bank's failure to fund such required payment) of such required payment plus any interest accrued thereon in accordance with the provisions of this Agreement, is fully funded to such Issuing Bank, whether made by such Bank itself, by operation of the terms of this Section 3.06(b)(ii) or by WGRC directly to the Issuing Bank. (c) Sharing of Reimbursement Obligation Payments. If any Issuer receives a payment on account of a draw under a Letter of Credit, including any interest thereon, as to which the Facility Agent or the Issuing Bank, as applicable, has received any payments from the Banks pursuant to this Section 3.06, such Issuer shall promptly pay to the Facility Agent and the Facility Agent shall promptly pay to each Bank, in Dollars and in the kind of funds so received, an amount equal to such Bank's Pro Rata Share thereof. Each such payment shall be made by the Facility Agent on the Business Day on which the Facility Agent receives the funds paid to it pursuant to the preceding sentence, if received prior to 2:00 p.m. (Boston time) on such Business Day and otherwise on the next succeeding Business Day, and each such payment, when received, shall be applied by the Banks against the Revolving Loans. (d) Obligations Irrevocable. The obligations of a Bank to make payments to the Facility Agent or the Issuing Bank, as applicable, with respect to a Letter of Credit, and the obligation of WGRC to reimburse each Issuer for the amount of such payments made by it in respect of any draws on the Letters of Credit, shall be irrevocable, not subject to any qualification or exception whatsoever and shall be made in accordance with, but not subject to, the terms and conditions of this Agreement under all circum- stances, including, without limitation, any of the following circumstances: -21- 27 (i) any lack of validity or enforceability of this Agreement, any of the other Facility Documents, any Letter of Credit or any related documents; (ii) the existence of any claim, setoff, defense or other right which WGRC or any Seller may have at any time against a beneficiary named in a Letter of Credit or any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), or against either Agent, any Bank, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transactions between WGRC or any other party and the beneficiary named in any Letter of Credit); (iii) any draft, certificate or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inac- curate in any respect; (iv) any renewal, extension or modification of any Letter of Credit so long as the terms of such Letter of Credit after giving effect to such extension, renewal or modification would be permitted hereunder; (v) any lack of validity, effectiveness or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; (vii) any failure of the beneficiary of a Letter of Credit to substantially comply with the conditions required in order to draw upon any Letter of Credit; (viii) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Facility Documents; or (ix) the occurrence of any Liquidation Event or Unmatured Liquidation Event. SECTION 3.07. Indemnification; Exoneration. (a) Indemnification. In addition to amounts payable as elsewhere provided in this Article III, WGRC hereby agrees, subject to Section 3.07(d), to protect, indemnify, pay and save each Agent, each Bank and each Issuer harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) which such Agent, such Bank or such Issuer may incur or be subject to as a -22- 28 consequence, direct or indirect, of the issuance of any Letter of Credit. Any amounts owing by WGRC under this Section 3.07 shall be payable subject to the terms of Sections 9.07(c) and 9.08 hereof. (b) Assumption of Risk by WGRC. As between WGRC, the Issuers, the Banks and the Agents, WGRC assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of the Letters of Credit. In furtherance and not in limitation of the foregoing, subject to the provisions of the Letter of Credit applications and Section 3.07(d) hereof, the Agents, the Banks and the Issuers shall not be responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of the Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (iv) for errors in interpretation of technical terms; (v) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; (vi) for the misapplication by the benefi- ciary of a Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (vii) for any consequences arising from a Force Majeure Event beyond the control of the Agents, the Banks and the Issuers, including, without limitation, any act or omission, whether rightful or wrongful, of any present or future de jure or de facto governmental authority. None of the above shall affect, impair, or prevent the vesting of any of the Issuers' rights or powers under this Section 3.07. (c) Exoneration. In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by any Bank under or in connection with the Letters of Credit or any related certificates, if taken or omitted in good faith, shall not put the Issuers, the Banks or the Agents under any resulting liability to WGRC or its Affiliates or relieve WGRC of any of its obligations hereunder to any such Person. (d) Exceptions to Indemnity. Notwithstanding anything to the contrary contained in this Section 3.07, WGRC shall have no obligation to indemnify any Person or Issuer under this Section 3.07, and hereby waives no claims against any Person, Bank or Issuer, in respect of any liability arising primarily out of (i) the gross negligence or willful misconduct of such Person, (ii) the wrongful dishonor by any Issuer of a proper demand for payment made under a Letter of Credit issued by such Issuer, unless such dishonor was made at the request of WGRC, or (iii) the failure of any Issuer to exercise reasonable care in ascertaining whether the documents required to be delivered under any Letter of Credit appear on their face to be in compliance with the terms and conditions of such Letter of Credit. -23- 29 ARTICLE IV INTEREST, FEES AND OTHER PAYMENT TERMS SECTION 4.01. Interest. (a) Subject to the provisions of Section 4.01(d), interest shall accrue on the outstanding amount of all Revolving Loans comprising part of a Base Rate Borrowing at a rate per annum equal to the Alternate Base Rate. Such rate shall be computed on the basis of the actual number of days elapsed (including the first but excluding the day of payment) over a year of 365 or 366 days, as the case may be. (b) Subject to the provisions of Section 4.01(d), interest shall accrue on all the outstanding amount of Eurodollar Loans at a rate per annum equal to the Eurodollar Rate for the Interest Period relating to such Eurodollar Loans plus five-eighths of one percent (0.625%). Such rate shall be computed on the basis of the actual number of days elapsed (including the first but excluding the day of payment) over a year of 360 days. (c) Accrued and unpaid interest with respect to any Revolving Loan shall be payable in arrears on the last day of the Interest Period relating thereto except as otherwise provided in this Agreement. (d) From and after the Business Day following the Business Day upon which written notice of the occurrence of a Liquidation Event from the Facility Agent is received by WGRC and so long as such Liquidation Event continues, or at any time after the [third] Settlement Date following the Termination Date, interest will accrue on all Revolving Loans until paid at a per annum rate equal to two percent (2.0%) above the otherwise applicable rate described in Section 4.01(a) or (b) above (such additional interest being payable subject to the terms of Sections 9.07(c) and 9.08 hereof). SECTION 4.02. Fees. (a) WGRC shall pay to the Facility Agent, for the benefit of the Banks, the fees described hereinbelow: (i) A non-usage fee (the "Non-Usage Fee") for the period from and including the Effective Date until the Termination Date, equal to four-tenths of one percent (0.40%) per annum times the excess, if any, of (A) the Facility Amount over (B) the sum of the Aggregate Loan Amount and the Aggregate L/C Amount, computed on the basis of the actual number of days elapsed (including the first but excluding the day of payment) over a year of 365 or 366 days, as the case may be. (ii) A letter of credit fee (the "L/C Fee") with respect to each Letter of Credit for the period commencing upon issuance thereof until the same shall have been surrendered or expired, of five-eighths of one percent (0.625%) per annum on the outstanding face amount of each such Letter of Credit, computed on the basis of actual days elapsed (including the first but excluding the day of payment), over a year of 360 days. -24- 30 All of the foregoing specified fees shall be payable monthly in arrears on each Settlement Date with respect to the prior Collection Period and shall be forwarded by the Facility Agent ratably to the Banks according to their Pro Rata Shares; provided, that so long as any Departing Bank remains liable with respect to any Syndicated Letter of Credit (notwithstanding the cash collateralization thereof), such Departing Bank shall, except as it may otherwise agree, receive a portion of the L/C Fee corresponding to its portion of such Syndicated Letter of Credit, and the L/C Fee owing to each other Bank shall be adjusted accordingly. (b) WGRC shall cause the Financial Advisor on the Effective Date to pay to each Bank, for such Bank's own account, an up-front fee of .15% times the dollar amount of such Bank's Commitment. All such up-front fees shall be paid on the Effective Date. (c) WGRC shall pay to Shawmut, for its own account in its capacities as the Facility Agent and the Collateral Agent, such other fees not described above as are specified in that certain letter from Shawmut to WGRC dated May 20, 1994. Such fees shall include the annual agents' fees described therein (the "Agent Fee"), shall be due and payable at the times specified in such letter, and shall not exceed the greater of (i) $100,000 per year and (ii) .15% per annum times the Facility Amount. (d) WGRC shall pay to each Issuer administrative fees in connection with the issuance, amendment, draw or transfer of any Letter of Credit, which fees shall, for each Issuer, not exceed $50 for each amendment or issuance of a Letter of Credit and $150 for each draw or transfer. Each such fee shall be due and payable concurrently with such issuance, amendment, draw or transfer, as the case may be, of such Letter of Credit. (e) WGRC shall pay to the Issuing Bank, for its own account, a letter of credit issuance fee (the "L/C Fronting Fee") of one-quarter of one percent (0.25%) times the face amount of each Participated Letter of Credit. Such fee shall be due and payable with respect to a Participated Letter of Credit upon the issuance, and upon each renewal, of such Letter of Credit. SECTION 4.03. Payments and Computations. (a) All payments and prepayments on the Revolving Notes and all other amounts to be paid or deposited by WGRC hereunder shall be paid to the Facility Agent (or, where applicable, to the Issuing Bank) no later than 2:00 p.m. (Boston time) on the day when due in lawful money of the United States of America in same day funds, and any payments received after such time shall be deemed to have been made on the next Business Day. Whenever any payments to be made hereunder shall be stated to be due on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day (and such extension of time shall in such case be included in the computation of interest or fees as applicable). The Facility Agent shall disburse amounts so received to the Banks in same day funds (i) on the date received if such funds are received at or prior to 2:00 p.m. (Boston time) and (ii) on the next Business Day if such funds are received after 2:00 p.m. -25- 31 (Boston time). If the Facility Agent fails to so disburse funds on such Business Day, the Facility Agent shall pay to each Bank interest on the funds owing to such Bank until the date such amount is paid at (1) the Federal Funds Rate for such Business Day and the next succeeding Business Day, and (2) the Federal Funds Rate plus two percent (2%) for each day thereafter. (b) WGRC will, to the extent permitted by law (and without duplication to any interest payable pursuant to the provisions of Section 4.01(d)) pay to the Facility Agent interest on all amounts not paid or deposited when due hereunder, from and after the Business Day immediately following the Business Day WGRC receives notice thereof from the Facility Agent until such amounts are paid in full, at 2% per annum above the Alternate Base Rate. Such interest shall, subject to Sections 9.07(c) and 9.08, be payable on demand and shall be for the account of, and distributed by the Facility Agent to, the Banks and the Agents ratably in accordance with their respective interests in such overdue amounts. (c) All payments owing by WGRC under this Agreement shall be made without deduction for any setoffs, counterclaims or other amounts owed or allegedly owed to WGRC by any Bank, either Agent or the Issuing Bank. SECTION 4.04. Yield Protection. (a) Notwithstanding any other provision herein, if, after the date hereof, either (i) the adoption of any law, rule or regulation (including any imposition or increase of reserve requirements) or any change after the date hereof in the interpretation or administration of any such law, rule or regulation by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or (ii) the compliance by any Bank with any guideline or request from any central bank or other governmental authority or quasi-governmental authority exercising control over banks or financial institutions generally (whether or not having the force of law), shall subject any Bank to any reserve (including any imposed by the Board), special deposit, assessment or similar requirement (including a reserve, special deposit, assessment or similar requirement that takes the form of a tax) against assets of, deposits with or for the account of, or credit extended by, such Bank's Eurodollar Lending Office or impose any other condition on any Bank affecting its Eurodollar Loans or Letters of Credit or its obligation to make Eurodollar Loans or to issue or participate in Letters of Credit hereunder, and as a result of either of the foregoing there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining Eurodollar Loans or issuing or maintaining any funding obligations in respect of Letters of Credit, or there shall be a reduction in the amount received or receivable by that Bank or its Eurodollar Lending Office, then WGRC shall from time to time in accordance with the provisions of Section 4.04(c), upon written notice from and demand by such Bank (with a copy of such notice and demand to the Facility Agent), pay to the Facility Agent for the account of such Bank additional amounts sufficient to indemnify that Bank against such increased cost or reduction in amount received or receivable; provided, however, that this Section 4.04 shall not apply to any -26- 32 additional cost or reduction in amounts received or receivable that is attributable to taxes except as specified above in this Section 4.04. (b) If any Bank (including the Facility Agent and the Issuing Bank) shall reasonably determine that the adoption after the date hereof of any law, rule or regulation regarding capital adequacy or capital maintenance, or any change after the date hereof in any of the foregoing or in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or any lending office of such Bank) or any Bank's holding company with any request or directive regarding capital adequacy or capital maintenance (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Bank's or such Bank's holding company's capital as a consequence of this Agreement, the Revolving Loans made by such Bank pursuant hereto or the Letters of Credit issued (or participated in) by such Bank to a level below that which such Bank or such Bank's holding company could have achieved but for such adoption, change or compliance (taking into consideration such Bank's policies with respect to capital adequacy), then from time to time in accordance with the provisions of Section 4.04(c), WGRC shall pay to such Bank such additional amount or amounts as will compensate such Bank or such Bank's holding company for such reduction. (c) Each Bank (or, as applicable, any Agent or the Issuing Bank) shall promptly notify WGRC and the Facility Agent of any event of which it has knowledge occurring after the date hereof which will entitle such Bank to compensation pursuant to this Section 4.04. A certificate of each Bank setting forth such amount or amounts as shall be necessary to compensate such Bank as specified in subsection (a) or (b) above, as the case may be (including calculations thereof in reasonable detail) and the adoption, change or compliance giving rise to such compensation shall be delivered to WGRC and shall be conclusive absent demonstrable error. WGRC shall pay each Bank the amount shown as due on any such certificate delivered by it within 15 days after its receipt of the same. Any Bank receiving any such payment shall promptly make a refund thereof to WGRC if the law, regulation, guideline or change in circumstances giving rise to such payment is subsequently deemed or held to be invalid or inapplicable by a final nonappealable order or decision and as a result thereof such Bank shall not have incurred any increased costs or suffered any reduction in the amounts received or receivable or the rate of return on capital under this Agreement. (d) Any Bank (or, as applicable, any Agent or the Issuing Bank) claiming any additional amounts payable pursuant to this Section 4.04 shall use reasonable efforts (consistent with legal and regulatory restrictions) to take any action to avoid or minimize any amounts that otherwise may be payable by WGRC pursuant to this Section 4.04, provided that such action would not, in the good faith determination of the applicable affected party, be otherwise disadvantageous to it. -27- 33 (e) Notwithstanding the foregoing, WGRC shall not be required to make any payments nor indemnify any Bank, the Issuing Bank or any Agent under this Section 4.04 with respect to any increased costs or reduced returns incurred by such Bank, the Issuing Bank or such Agent more than ninety (90) days before the date a request for payment or indemnification is delivered to WGRC. For the purposes of this Section 4.04(e), increased costs and reduced returns incurred on account of new laws, rules, regulations or interpretations which are given retroactive effect shall be deemed incurred on the date following the adoption of such law, rule, regulation or interpretation upon which the Bank is first notified of its increased costs or reduced returns by any governmental authority; provided that in no event shall WGRC be obligated to pay any increased costs or reduced returns relating to periods more than eighteen months (18) months prior to the date of such notification. (f) All payments owing by WGRC under this Section 4.04 shall be made subject to the terms of Sections 9.07(c) and 9.08 hereof. SECTION 4.05. Illegality; Unavailability. (a) In the event that on any date any Bank shall have reasonably determined (which determination shall be final and conclusive and binding upon all parties) that the making or continuation of its Eurodollar Loans has become unlawful by compliance by that Bank in good faith with any law, governmental rule, regulation or order, then, and in any such event, that Bank (an "Affected Bank") shall promptly give notice (by telephone confirmed in writing) to WGRC and the Facility Agent (a copy of which notice the Facility Agent shall promptly transmit to each Bank) of that determination. The obligation of the Affected Bank to make or maintain its Eurodollar Loans during any such period shall be terminated at the earlier of the termination of the Interest Period then in effect for each Eurodollar Loan or when required by law and WGRC shall, no later than the termination of the Interest Period in effect at the time any such determination pursuant to this Section 4.05 is made or earlier, when required by law, convert the Eurodollar Loans of the Affected Bank into Base Rate Loans. (b) If, prior to the beginning of any Interest Period, either (1) the Majority Banks shall have given notice to WGRC and the Facility Agent as set forth in subsection (a) above, or (2) the Facility Agent shall have reasonably determined (which determination shall be final and conclusive and binding upon all parties) that: (i) Dollar deposits in the relevant amount and for such Interest Period are not available in the interbank eurodollar market or (ii) by reason of circumstances affecting the interbank eurodollar market for the Facility Agent's Eurodollar Lending Office, that adequate and fair means do not exist for ascertaining the applicable Eurodollar Rate applicable to a Eurodollar Borrowing, then, and in any such event, the Facility Agent shall promptly give notice of such determination to WGRC and to each Bank indicating the facts and circumstances giving rise to such determination. Thereafter and continuing until the Facility Agent shall notify WGRC that the circumstances giving rise to such determination no longer exist, each Eurodollar Borrowing, will, on -28- 34 the last day of the applicable Interest Period, automatically convert into a Base Rate Borrowing, the obligation of the Banks to make Eurodollar Loans shall be suspended and any Eurodollar Borrowings requested to be made at such time shall be made as Base Rate Borrowings. (c) For purposes of this Section 4.05, a notice to WGRC by any Bank shall be effective as to each of such Bank's outstanding Eurodollar Loans, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Loans; in all other cases, such notice shall be effective on the date of receipt by WGRC. SECTION 4.06. Indemnity. WGRC shall compensate each Bank, upon written request by that Bank (which request shall set forth in reasonable detail the basis for requesting such amounts) for all reasonable losses, expenses and liabilities (including any interest paid by the Bank to lenders of funds borrowed by it to make its Eurodollar Loans and any loss sustained by that Bank in connection with the re-employment of such funds but excluding taxes, which are not covered by this Section 4.06), which that Bank may sustain with respect to Eurodollar Loans: (a) if for any reason (other than a default or error by that Bank) a Eurodollar Loan does not occur on a date specified therefor in the related Notice of Borrowing or (b) if any payment or conversion, including, without limitation, under Section 2.05, Section 2.07 or Section 2.09 hereof, of any such Bank's Eurodollar Loans occurs on a date which is not the last day of the Interest Period applicable to such Eurodollar Loan or on any date specified in a notice of payment given by WGRC. All payments owing by WGRC under this Section 4.06 shall be made subject to the terms of Sections 9.07(c) and 9.08 hereof. SECTION 4.07. Pro Rata Treatment. Each repayment of principal and interest on the Revolving Loans, each payment of the Non-Usage Fee, the L/C Fee, each reduction of the Commitments and each conversion of any Borrowing to a Borrowing of another Type or with a different Interest Period shall be allocated pro rata among the Banks in accordance with their respective Pro Rata Shares (except with respect to L/C Fees in connection with Departing Banks, as provided in Section 4.02(a) hereof, and as set forth in Sections 2.04(b) and 3.06(b)(ii) hereof). Each Bank agrees that in computing such Bank's portion of any Borrowing to be made hereunder, the Facility Agent may, in its discretion, round each Bank's percentage of such Borrowing, computed in accordance with Section 2.02, to the next higher or lower whole dollar amount. If any Bank shall, through the exercise of a right of banker's lien, set-off, counterclaim or otherwise, obtain payment with respect to its Revolving Loans which results in its receiving more than its Pro Rata Share of any payments described above or more than its priority share of any payments to be made to it under Section 9.07 or 9.08 as applicable, then (A) such Bank shall be deemed to have simultaneously purchased from each of the other Banks a share in such other Banks' Revolving Loans so that the amount of the Revolving Loans of all Banks shall be pro rata as otherwise set forth above, (B) such Bank shall immediately pay to the other Banks their Pro Rata Share of the payments otherwise received as -29- 35 consideration for such purchase and (C) such other adjustments shall be made from time to time as shall be equitable to insure that all Banks share such payments ratably or according to the priority set forth in such Section 9.07 or 9.08. If all or any portion of any such excess payment is thereafter recovered from the Bank which received the same, the purchase provided in this Section 4.07 shall be deemed to have been rescinded to the extent of such recovery, without interest. WGRC expressly consents to the foregoing arrangements and agrees that each Bank so purchasing a portion of another Bank's loan may exercise all rights of payment (including, without limitation, all rights of set-off, banker's lien or counterclaim) with respect to such portion as fully as if such Bank were the direct holder of such portion. SECTION 4.08. Taxes. WGRC agrees that: (i) Any and all payments by WGRC under this Agreement shall be made free and clear of and without deduction for any and all current or future taxes, stamp or other taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on the net income of, franchise taxes imposed on, and taxes (other than withholding taxes) imposed on the gross receipts or gross income of the Facility Agent, the Collateral Agent, the Issuing Bank or any Bank by the United States or by any jurisdiction under whose laws the Facility Agent, the Collateral Agent, the Issuing Bank or any such Bank is organized or in which the office through which it makes its Revolving Loans or issues Letters of Credit is located or any political subdivision of any such jurisdiction (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If WGRC shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Bank, the Issuing Bank, the Collateral Agent or the Facility Agent, then the sum payable shall be increased by the amount necessary to yield to the Facility Agent, the Collateral Agent, the Issuing Bank or such Bank (after payment of all Taxes) an amount equal to the sum it would have received had no such deductions been made. (ii) Whenever any Taxes are payable by WGRC, or whenever any Agent, Issuing Bank or Bank has notified WGRC that such Person has paid or owes any Taxes payable by WGRC under this Section 4.08, as promptly as possible thereafter, WGRC shall send to the Facility Agent for its own account or for the account of any Bank, the Issuing Bank or the Collateral Agent, as the case may be, a certified copy of an original official receipt showing payment thereof or such other evidence of such payment as may be available to WGRC and acceptable to the taxing authorities having jurisdiction over such Agent, the Issuing Bank or such Bank, as applicable. If WGRC fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Facility Agent the required receipts or other required documentary evidence, (a) the applicable Agent, Issuer or Bank may pay such Taxes on behalf of WGRC, and (b) WGRC shall indemnify the Agents, the Issuers and the Banks, as applicable, for such Taxes, for any incremental taxes, interest or penalties that may become payable by such party as a result of any such failure, and for reasonable -30- 36 counsel fees and out-of-pocket expenses arising from any such failure. (iii) On or before the date it becomes a party to this Agreement and on any extension of its Commitment, each Bank (and, to the extent applicable, the Issuing Bank and any Agent) that is organized under the laws of a jurisdiction outside the United States shall deliver to WGRC such certificates, documents or other evidence, as required by the Internal Revenue Code or Treasury Regulations issued pursuant thereto, including (i) two original copies of Internal Revenue Service Form 1001 or Form 4224 or successor applicable form, properly completed and duly executed by such Bank, the Issuing Bank or such Agent certifying in each case that such party is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, and (ii) an original copy of Internal Revenue Service Form W-8 or W-9 (or applicable successor form) properly completed and duly executed by such party. (iv) Any obligation of WGRC to pay any additional amounts to any Bank, the Issuing Bank or any Agent in respect of United States Federal withholding tax pursuant to this Section 4.08 shall be net of any credits in respect of other tax liabilities of such Person which credits relate to or result from such withholding tax (as determined by such Person in its reasonable discretion, it being understood that nothing in this Agreement shall impose any duty on any Bank to disclose its internal tax records as a condition to reimbursement under this Section). (v) Any Bank (or as applicable, the Issuing Bank or any Agent) claiming any additional amounts payable pursuant to this Section 4.08 shall use reasonable efforts (consistent with legal and regulatory restrictions) to take any action to avoid or minimize any amounts that otherwise may be payable by WGRC pursuant to this Section 4.08, including filing any certificate or document or changing the jurisdiction of its applicable office from which it funds any Revolving Loans or issues Letters of Credit, provided that such action would not, in the good faith determination of the applicable affected party, be otherwise disadvantageous to it. (vi) Notwithstanding the foregoing, WGRC shall not be required to make any payments nor indemnify any Bank, the Issuing Bank or any Agent under this Section 4.08 with respect to any Taxes paid by such Bank, the Issuing Bank or such Agent more than ninety (90) days before the date a request for payment or indemnification is delivered to WGRC (it being understood that the date of payment of such Taxes, and not the time period to which such Taxes may relate, shall begin the running of the ninety (90) day period described above). (vii) All payments owing by WGRC under this Section 4.08 shall be made subject to the terms of Sections 9.07(c) and 9.08 hereof. -31- 37 ARTICLE V CONDITIONS OF REVOLVING LOANS AND LETTERS OF CREDIT SECTION 5.01. Conditions Precedent to Initial Borrowing or Letter of Credit. The obligation of the Banks to make their initial Revolving Loans hereunder and the obligation of the Issuers to issue any Letters of Credit hereunder are each subject to satis- faction of the conditions precedent that the Facility Agent shall have received, on or before the Effective Date, all of the following, each fully executed by all signatories thereto (where applicable) and in form and substance satisfactory to the Facility Agent; (i) this Agreement; (ii) the Revolving Notes; (iii) the Receivables Sale Agreement; (iv) certificates of the Secretaries or Assistant Secretaries of WGRC and each Initial Seller, certifying in each case (A) the names and true signatures of the officers authorized to sign the Facility Documents to be delivered by such party pursuant hereto or thereto (on which certificate the Agents and the Banks may conclusively rely until such time as the Facility Agent shall receive a revised certificate meeting the requirements of this clause (iv)(A)), (B) that attached thereto is a true and complete copy of the certificate or articles of incorporation and by-laws of such corporation as in effect on the date of such certification and (C) that attached thereto are true and complete copies of resolutions by such corporation's Board of Directors approving the execution, delivery and performance of the Receivables Sale Agreement and all other Facility Documents to which such corporation is a party; (v) a certificate executed by an officer of WGRC certifying that as of the Effective Date, all of the represen- tations and warranties contained in Article VI hereof are true and accurate in all respects with the same force and effect as though such representations and warranties had been made as of such time; (vi) a certificate executed by an officer of each Initial Seller certifying that as of the Effective Date, all of the representations and warranties contained in Article III of the Receivables Sale Agreement are true and accurate in all respects with the same force and effect as though such representations and warranties had been made as of such time; (vii) a copy of WGRC's Certificate of Incorporation, certified by the Secretary of State of Delaware; (viii) a copy of the Certificate of Incorporation or other corporate charter documents for each Initial Seller, certified by the appropriate Secretary of State or Commonwealth; -32- 38 (ix) certificates relating to the good standing of WGRC, Wyman and the other Initial Sellers from the Secretaries of State of the States in which each such Person has its chief executive office or inventory; (x) copies of UCC lien search reports, dated a date reasonably close to the Effective Date, disclosing no effective financing statements or other instruments on file with respect to the Collateral except for (i) those in favor of the Collateral Agent and (ii) financing statements which will be terminated as of the Effective Date; (xi) copies of UCC financing statements, in form and substance satisfactory to the Facility Agent, as filed with the appropriate offices deemed necessary by the Facility Agent to perfect (A) the transfers of interests in Purchased Assets under the Receivables Sale Agreement and (B) the grant of security in the Collateral under this Agreement; (xii) evidence that any financing statements described in clause (x) above filed in favor of any Person other than the Collateral Agent have been (or will be, concurrently with the initial Funding Date or issuance of L/Cs hereunder) terminated; (xiii) favorable opinions of Goodwin, Procter & Hoar, and Sidley & Austin, counsel for Wyman and WGRC, in form and substance satisfactory to the Agents, the Banks and to the Rating Agency, including, without limitation, opinions as to enforceability and the perfection under the UCC of the Liens in the Receivables created in favor of WGRC and Liens in the Collateral created in favor of the Banks as described in clause (xi) above, together with a favorable memorandum from Sidley & Austin, counsel for Wyman and WGRC, in form and substance satisfactory to the Agents, the Banks and to the Rating Agency, relating to the priority of the Liens described above; (xiv) a favorable opinion of Goodwin, Procter & Hoar, counsel for Wyman and WGRC, in form and substance satisfactory to the Agents, the Banks and to the Rating Agency, including, without limitation, opinions as to true sale and substantive consolidation issues relating to the treatment of the Receivables purchased by WGRC as property of WGRC in the event of a bankruptcy of any Seller; (xv) a favorable opinion of Wallace F. Whitney, Jr., Vice President, General Counsel and Clerk of Wyman, in form and substance satisfactory to the Agents, the Banks and to the Rating Agency, including, without limitation, opinions as to corporate organization, authority, execution and the absence of conflict; (xvi) a rating letter from the Rating Agency indicating a rating of not less than AAA with respect to the payment of principal and non-default interest under the Facility; -33- 39 (xvii) a letter from Ernst & Young, satisfactory in form and substance to the Facility Agent, with respect to the information contained in the Information Memorandum relating to the Receivables; (xviii) Lock-Box Agreements executed by the Sellers, WGRC and each Lock-Box Bank; (xix) such sublicenses and assignments as the Facility Agent shall require with regard to all computer and data recovery programs licensed to any Seller and/or WGRC and used in the collection of the Receivables; (xx) evidence of the capitalization of WGRC in accordance with the terms of the Receivables Sale Agreement and this Agreement; (xxi) evidence of the payment in full of all fees owing to the Banks as of the Effective Date; and (xxii) such other documents and instruments as the Facility Agent may reasonably request relating to the Facility Documents and the transactions contemplated hereby. SECTION 5.02. Conditions Precedent to Each Revolving Loan and Letter of Credit. The obligation of the Banks to make any Revolving Loans on any day (including those comprising the initial Borrowing) and the obligation of the Issuers to issue, extend or renew any Letters of Credit on any day shall be subject to the Facility Agent's receipt of the Daily Report for such day and to the conditions precedent that on the Funding Date of such Borrowing or the issuance date or applicable date with respect to the extension or renewal of such Letter of Credit, before and after giving effect thereto and to the application of any proceeds there- from, the following statements shall be true: (i) the representations and warranties contained in Article VI hereof and all representations and warranties of the Sellers in the Receivables Sale Agreement (except for representations and warranties which speak as of a specific date only), are true and accurate as of such date in all material respects with the same force and effect as though such representations and warranties had been made as of such time; (ii) no event has occurred and is continuing, or would result from such Borrowing, issuance, extension or renewal, which constitutes a Liquidation Event or an Unmatured Liquidation Event; (iii) the Aggregate Net Outstandings, after giving effect to any such Revolving Loan or the issuance, extension or renewal of any such Letter of Credit, shall not be greater than the Base Amount; -34- 40 (iv) the Aggregate L/C Amount, after giving effect to the issuance, extension or renewal of any such Letter of Credit, shall not be greater than the L/C Facility Sub-Amount; and (v) the sum of the Aggregate Loan Amount and the Aggregate L/C Amount, after giving effect to any such Revolving Loan or the issuance, extension or renewal of any such Letter of Credit, shall not be greater than the Facility Amount. Each of (i) the giving of the applicable Notice of Borrowing and the acceptance by WGRC of the proceeds of any such Borrowing and (ii) the request by WGRC for issuance, extension or renewal of a Letter of Credit and delivery of such Letter of Credit to WGRC or to the beneficiary designated by WGRC, shall each constitute a representation and warranty by WGRC that, as of the Funding Date or issuance date, as applicable, before and after giving effect to any such Borrowing or issuance, extension or renewal and to the application of any proceeds therefrom, the foregoing statements are true. ARTICLE VI REPRESENTATIONS AND WARRANTIES SECTION 6.01. Representations and Warranties of WGRC. WGRC represents and warrants that: (a) Organization; Qualification. WGRC is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. WGRC has all governmental licenses, authorizations, consents and approvals required to carry on its business, to do business as a foreign corporation and is in good standing in each jurisdiction in which its business is now conducted, except where the absence of such licenses, authorizations, consents, approvals or good standing would not have a Material Adverse Effect. (b) Corporate Authority. WGRC has corporate power and authority to execute and deliver this Agreement, to borrow money and to grant a security interest hereunder, to execute and deliver the Facility Documents to which it is a party and to perform its obligations hereunder and thereunder and all such action has been duly and validly authorized by all necessary corporate proceedings on its part. (c) Execution; Binding Effect. This Agreement and each of the other Facility Documents to which WGRC is a party have been duly and validly executed and delivered by WGRC and constitute the legal, valid and binding obligations of WGRC enforceable against WGRC in accordance with their respective terms. (d) Authorizations. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body, agency, official or other Person is required for the due execution, delivery and performance by WGRC of this Agreement, any other Facility Document or any other agreement, -35- 41 document or instrument delivered hereunder or thereunder except for the filing of financing statements pursuant to the UCC required to perfect the security and/or ownership interests granted hereunder, under the Receivables Sale Agreement (all of which filings have been duly made and are, and on or prior to each Purchase, will be, in full force and effect), and for other consents which have been duly obtained. No transaction contemplated hereby requires compliance with any bulk sales act or similar law. (e) Absence of Conflicts. Neither the execution and delivery of this Agreement or any other Facility Document to which WGRC is a party, nor consummation of the transactions herein or therein contemplated nor performance of or compliance with the terms and conditions hereof or thereof will (a) violate or conflict with any law, rule or regulation applicable to WGRC or any of its properties, (b) violate, conflict with or result in a breach of or a default under (i) the Certificate of Incorporation or By-laws of WGRC, (ii) any agreement or instrument to which WGRC is a party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound or (iii) any order, writ, judgment, award, injunction or decree binding on or affecting WGRC or its property (now owned or hereafter acquired) or (c) except for Liens created pursuant to the Facility Documents, result in the creation or imposition of any Lien in favor of any other party upon any property (now owned or hereafter acquired) of WGRC. (f) Perfected Security Interest. Upon the making of the initial Revolving Loan and/or the issuance of the initial Letter of Credit hereunder, and at all times from the Effective Date through the Collection Date, the Banks will have a legal, valid, perfected and enforceable Lien upon and security interest in the Collateral which Lien and security interest is prior in right to all other Liens thereon (except Permitted Liens) and such Collateral shall not be subject to any other Liens (except for Permitted Liens). (g) Consideration for Purchases by WGRC. WGRC shall have given reasonably equivalent value to the Sellers in consideration for the transfer to WGRC of the Receivables and Related Security under the Receivables Sale Agreement and no such transfer shall have been made for or on account of an antecedent debt owed by any Seller to WGRC. (h) Accuracy of Information. All written information, exhibits, documents, records, Daily Reports, Settlement Statements, certificates, reports, financial statements and similar writings (including, without limitation, the Information Memorandum) (collectively, the "Written Information") furnished by WGRC to the Facility Agent or the Banks at any time pursuant to any requirement of, or in response to any request of any such party under, this Agreement or any other Facility Document or any transaction contemplated hereby or thereby, have been, and all such Written Information hereafter furnished by WGRC to such parties will be, true and accurate in all material respects on the date as of which any such Written Information was or will be delivered, and shall not omit to state any material facts or any facts necessary to make the statements contained therein not materially misleading in light of the circumstances under which they were made. -36- 42 (i) Litigation. There are no actions, suits or proceedings at law or in equity or by or before any governmental authority now pending or, to the knowledge of WGRC, threatened against or affecting WGRC or any property or rights of WGRC which purport to challenge the legality, validity or enforceability of this Agreement or any other Facility Document or which may materially impair the ability of WGRC to carry on business substan- tially as now being conducted or which may materially adversely affect the condition (financial or otherwise), operations or properties of WGRC. (j) Governmental Regulations. WGRC is not a "holding company", nor a "subsidiary company" or "affiliate" thereof, within the meaning of the Public Utility Holding Company Act of 1935, as amended, and WGRC is not an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, or otherwise subject to any other similar federal or state statute or regulation limiting its ability to incur indebtedness. (k) Margin Regulations. WGRC is not engaged, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each of the quoted terms is defined or used in Regulation G, T, U or X). No part of the proceeds of any of the Revolving Loans has been used for so purchasing or carrying margin stock or for any purpose which violates, or which would be inconsistent with, the provisions of Regulation G, T, U or X. (l) Separate Corporate Existence. WGRC is operated as an entity with assets and liabilities distinct from those of the Sellers and any other Affiliates of WGRC, and WGRC hereby acknowledges that the Agents and the Banks are entering into the transactions contemplated by this Agreement in reliance upon WGRC's identity as a separate legal entity from each Seller and each such Affiliate. Since its incorporation, WGRC has been (and will be) operated in such a manner as to comply with the covenants set forth in Section 7.09. (m) Investments. WGRC has no Investments other than Permitted Investments and does not own or hold, directly or indirectly, any capital stock or equity security of, or any equity interest in, any Person. (n) Facility Documents. The Receivables Sale Agreement is the only agreement pursuant to which WGRC purchases Receivables or any other accounts receivable, and the Facility Documents delivered to the Facility Agent represent all material agreements between any Seller, on the one hand, and WGRC on the other. WGRC has furnished to the Facility Agent true, correct and complete copies of each Facility Document to which WGRC is a party, each of which is in full force and effect. Neither WGRC nor any Affiliate party thereto is in default of any of its obligations thereunder in any material respect. Upon the Purchase of each Receivable pursuant to the Receivables Sale Agreement, WGRC shall be the lawful owner of, and have good title to, such Receivable and all Purchased Assets relating thereto, free and clear of any Liens -37- 43 (except for Liens created hereunder and Permitted Liens). All such Purchased Assets are purchased without recourse to the Sellers except as described in the Receivables Sale Agreement. The Purchases of the Purchased Assets by WGRC constitute valid and true sales and transfers for consideration (and not merely a pledge of such Purchased Assets for security purposes), enforceable against creditors of the Sellers, and no Purchased Assets shall constitute property of any Seller. (o) Business. Since its incorporation, WGRC has conducted no business other than the purchase of Receivables and related assets from the Sellers under the Receivables Sale Agreement, the incurrence of Indebtedness under this Agreement to finance such Purchases, and such other activities as are incidental to the foregoing. (p) Lock-Box Accounts. The names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock- Box Accounts, are set forth on Exhibit 6.01(p) hereto (or as hereafter notified to the Facility Agent in accordance with Section 8.11), and each Lock-Box Bank has executed a Lock-Box Agreement. All Obligors have been instructed to remit payment on the Receivables to a Lock-Box Account or, via wire transfer, directly to the Collection Account. (q) Ownership of WGRC. One hundred percent (100%) of the outstanding capital stock of WGRC is directly owned (both beneficially and of record) by the Sellers. Such stock is validly issued, fully paid and nonassessable and there are no options, warrants or other rights to acquire capital stock from WGRC. (r) Taxes. WGRC has filed or caused to be filed all Federal, state and local tax returns which are required to be filed by it, and has paid or caused to be paid all taxes shown to be due and payable on such returns or on any assessments received by it, other than any taxes or assessments, the validity of which are being contested in good faith by appropriate proceedings and with respect to which WGRC has set aside adequate reserves on its books in accordance with GAAP and which proceedings would not have a Material Adverse Effect. (s) Locations. The principal place of business and chief executive office of WGRC are located at its address set forth in Exhibit 7.08 hereto and the locations of the offices where the Records and computer software are kept are listed on such exhibit (or at such other locations, notified to the Facility Agent in accordance with Section 7.08, with respect to which all action required by such Section 7.08 has been taken and completed). (t) Other Names. During the past five years WGRC has had no trade names, fictitious names, assumed names, "doing business as" names or other names under which it has done or is doing business. (u) Solvency. On the Effective Date, on each Funding Date and on the date of each issuance of a Letter of Credit hereunder, WGRC: (i) is not "insolvent" (as such term is defined -38- 44 in Secion 101(32)(A) of the Bankruptcy Code, (ii) is able to pay its debts as they mature; and (iii) does not have unreasonably small capital for the business in which it is engaged or for any business or transaction in which it is about to engage. (v) Software. Except as set forth in the Receivables Sale Agreement, WGRC and the Collateral Agent, as assignee of WGRC, each has (or will have, concurrently with the effectiveness hereof) an enforceable right (whether by license, sublicense or assignment) to use all of the computer software used to account for the Receivables to the extent necessary to administer the Receivables. ARTICLE VII AFFIRMATIVE COVENANTS WGRC covenants and agrees that, until the expiration or termination of the Commitments and thereafter until the Collection Date, unless the requisite Banks required under Section 12.01 shall otherwise consent in writing, it will: SECTION 7.01. Reports; Certificates; Other Information. Furnish or cause to be furnished to the Facility Agent, in sufficient copies to be forwarded to each Bank (or when stated, to the Facility Agent only) (and, with respect to the reports described in Section 7.01(c) and 7.01(g)(i), with a copy thereof to the Rating Agency): (a) Annual Reports. As soon as available and in any event within one-hundred five (105) days after the end of each fiscal year of WGRC, a copy of the annual statements of income and cash flows of WGRC for such fiscal year and the related balance sheet as at the end of such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year and prepared in accordance with GAAP consistently applied (except for such changes in application which are approved by WGRC's independent public accountants and disclosed therein), accompanied by an unqualified opinion from Ernst & Young or other independent certified public accountants of recognized national standing selected by WGRC or otherwise reasonably acceptable to the Facility Agent (which accountants may also provide services to Wyman and Wyman's other Subsidiaries), together with a certificate from WGRC's independent public accountants confirming that, in conducting such audit, nothing came to their attention which caused them to believe that WGRC was not in compliance with this Agreement insofar as it relates to accounting matters, with the understanding that such audit was not directed primarily toward obtaining knowledge of such noncompliance; (b) Quarterly Reports. As soon as available and in any event within sixty (60) days after the end of the first three fiscal quarters of each fiscal year of WGRC, a copy of (A) the unaudited statement of income and cash flows of WGRC for such fiscal quarter and for the period from the beginning of the respective fiscal year to the end of such fiscal quarter; and (B) an unaudited balance sheet of WGRC as at the end of such fiscal quarter; setting forth in each case in comparative form -39- 45 the corresponding figures for the preceding fiscal year and all of the foregoing to be prepared in accordance with GAAP consistently applied (except for such changes in application which are approved by WGRC's financial officer preparing such statements and disclosed therein); (c) Annual Accountants' Report. Within one-hundred five (105) days after the end of each fiscal year of WGRC, a report with respect to the Facility Documents by Ernst & Young or any other firm of nationally recognized independent accountants reasonably acceptable to the Facility Agent (who may also render other services to WGRC, Wyman on their Affiliates); provided, however, that if the Liquidation Period shall have occurred by reason of an event described in clause (ii), (iii), (iv) or (v) of the definition thereof, then the Majority Banks may direct WGRC to replace such accountants with another firm of nationally recognized independent accountants selected by the Majority Banks and reasonably acceptable to WGRC. Each such report shall set forth the procedures performed, which procedures shall be substantially in compliance with the agreed upon procedures described in the letter delivered pursuant to Section 5.01(xvii); (d) Certificates. Contemporaneously with the furnishing of a copy of each annual and quarterly report provided for in subsections 7.01(a) and (b), respectively, a certificate dated the date of delivery and signed by a Responsible Officer of WGRC, which certificate shall state that said financial statements fairly present the financial position and results of operations of WGRC in accordance with GAAP consistently applied (except for such changes in application which are approved by WGRC's independent public accountants or, in the case of the quarterly reports, by such officer and further subject to normal year-end adjustments) and that such Responsible Officer has reviewed the relevant terms of this Revolving Credit Agreement and has made, or caused to be made under such Responsible Officer's supervision, a review of WGRC's activities during the period covered by the statements then being furnished, and that the review has not disclosed the existence of a Liquidation Event or Unmatured Liquidation Event, or if there is such an event, describing it and the steps, if any, taken or being taken to cure it; (e) Notice of Liquidation Event and Litigation. As soon as possible and in any event within two Business Days upon learning of the occurrence of any of the following, written notice thereof (with a copy concurrently sent to the Rating Agency), describing the same and the steps being taken by WGRC with respect thereto: (a) a Liquidation Event or Unmatured Liquidation Event, or (b) the institution against WGRC of, or any adverse determination in, any litigation, arbitration proceeding or governmental proceeding; (f) ERISA Events. Promptly after the filing or receiving thereof, copies of all reports and notices with respect to any Reportable Event defined in Article IV of ERISA (other than any such Reportable Event for which the Pension -40- 46 Benefit Guaranty Corporation has waived the 30-day notice requirement) which WGRC or any ERISA Affiliate files under ERISA with the Internal Revenue Service or the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or which WGRC or any ERISA Affiliate receives from the Pension Benefit Guaranty Corporation; (g) Reports under Receivables Sale Agreement. Promptly upon receipt thereof, copies of (i) all annual and quarterly financial statements and monthly Settlement Statements delivered to WGRC by the Sellers or by the Servicer pursuant to the Receivables Sale Agreement (each such Settlement Statement to be delivered no later than the Business Day of WGRC's receipt but in no event later than the applicable Reporting Date) and (ii) (to the Facility Agent only) all Daily Reports (to be delivered no later than the Business Day of WGRC's receipt) and all other reports and other written information not specified above which are required to be delivered by the Sellers or the Servicer to WGRC pursuant to the terms of the Receivables Sale Agreement; and (h) Bi-Annual Legal Opinions. On or within thirty (30) days prior to the second anniversary of the Effective Date, and on each successive second anniversary of such date, a legal opinion, in form and substance reasonably satisfactory to the Facility Agent, that the ownership interests of WGRC in the Receivables and the security interests of the Collateral Agent in the Collateral, to the extent they may be perfected by financing statements, remain perfected. (i) Other Information. Promptly, from time to time, such other information, documents, records or reports respecting the Purchased Assets, including, without limitation, the Receivables, or the condition or operations, financial or otherwise, of WGRC, any Agent or any Bank or their respective agents or representatives may from time to time reasonably request. SECTION 7.02. Inspection. At any time and from time to time during WGRC's normal business hours, with reasonable notice, permit the Facility Agent, its permitted assigns, or their respective agents or representatives, (i) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and discs) in the possession or under the control of WGRC relating to the Receivables or the other Purchased Assets, and (ii) to visit the offices and properties of WGRC for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to the Receivables or the other Purchased Assets, or WGRC's perform- ance hereunder with any of the officers or employees of WGRC having knowledge of such matters. WGRC agrees that representatives from the other Banks shall be permitted to accompany the Facility Agent on any such inspection or visit and to participate in any such discussion. WGRC agrees to instruct its independent accountants to cooperate with any reasonable request of the Facility Agent, its permitted assigns, or their respective agents or representatives, in connection with the performance of such accountants' routine -41- 47 verification procedures with respect to the Receivables or the other Collateral. The Facility Agent, its assigns, agents or representatives, shall also be permitted to verify the validity, amount or any other matter relating to any Receivable; provided, however, that none of the Facility Agent, the Banks nor their respective assigns shall, unless a Liquidation Event has occurred and is continuing, notify any or all of the Obligors of the security interests granted hereunder or direct such Obligors to make payments under any Receivables directly to the Banks or their designees. Without limiting the foregoing, WGRC shall, from time to time during WGRC's normal business hours, upon request of the Facility Agent (or its permitted assigns, or their respective agents, or representatives), permit certified public accountants or other auditors selected by the Person making such request to conduct, a review of WGRC's books and records relating to the Purchased Assets and the Facility Documents; provided that unless a Liquidation Event has occurred and is continuing such review shall not be conducted more than twice during any calendar year, provided, however, that an additional review of each new Seller added to the Facility pursuant to Section 2.06 of the Receivables Sale Agreement may be conducted during such calendar year and shall not be counted towards such limit. The costs and expenses of the first such review of WGRC's books and records in any calendar year and the initial review of any new Seller during such calendar year shall not exceed $20,000 for each such review (subject to an annual increase at the Facility Agent's election for any subsequent review not to exceed 5% in any year and provided that the costs and expenses for the initial review of Cameron shall not exceed $12,500) and shall be borne by the Servicer as part of its duties which are compensated by the Servicer Fee, and the costs and expenses of any further reviews in any calendar year shall be borne by the Banks ratably in accordance with their Pro Rata Shares; provided that after the occurrence and during the continuation of a Liquidation Event, all such reviews shall be borne by the Servicer as part of its duties which are compensated by the Servicer Fee. Upon the request of the Facility Agent, WGRC shall exercise inspection, audit and other rights provided for in the Receivables Sales Agreement, with respect to review and access to the Records of any Seller and the furnishing of information by such Seller relating to such Receivables. SECTION 7.03. Books and Records of WGRC. Maintain and implement administrative and operating procedures reasonably necessary in the performance of its obligations hereunder (includ- ing, without limitation, an ability to recreate records evidencing the Receivables in the event of the destruction of the originals thereof), and keep and maintain at all times, or cause to be kept and maintained at all times, all documents, books, records, accounts and other information relating to the Receivables and the Purchased Assets reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the daily identification of each Receivable and all collections of and reductions or adjustments to each Receivable). -42- 48 SECTION 7.04. Corporate Existence. Observe all corporate procedures required by its Certificate of Incorporation and By-Laws and do or cause to be done all things necessary to preserve and maintain its corporate existence, good standing (except where the failure to be in good standing would not have a Material Adverse Effect), material rights, licenses, permits and franchises. SECTION 7.05. Compliance with Laws. Comply in all material respects with all applicable laws, rules, regulations, writs, judgments, injunctions, decrees, awards and orders with respect to it, its business and properties. SECTION 7.06. Obligations and Taxes. Pay all its indebtedness and obligations promptly and in accordance with their terms and pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it or in respect of its property, before the same shall become in default, as well as all lawful claims for labor, materials and supplies or otherwise which, if unpaid, might become a Lien or charge upon such properties or any part thereof (except such indebtedness, obligations, taxes, assessments, governmental charges and levies and claims being contested in good faith by appropriate proceedings and for which WGRC has set aside adequate reserves therefor). SECTION 7.07. Facility Documents. Comply in all material respects with the terms of and employ the procedures outlined in and enforce the obligations of the Sellers and the Servicer under the Receivables Sale Agreement, and all of the other Facility Documents to which it is a party. SECTION 7.08. Location of Records. Keep its principal place of business and chief executive office, and the offices where it keeps its books, records and documents concerning the Receivables (including all original documents relating thereto) at the addresses specified in Exhibit 7.08 hereto, or, upon thirty days' prior written notice to the Facility Agent, at such other locations in the United States where all action required to maintain the perfection of WGRC's ownership interest in the Purchased Assets and the Banks' security interests in the Collateral shall have been taken and completed. WGRC shall, in the case of any change in its principal place of business and chief executive office, WGRC shall also provide, prior to such change, an opinion of counsel as to continued perfection of such security interests. SECTION 7.09. Separate Corporate Existence. WGRC shall take all reasonable steps (including, without limitation, all steps that the Facility Agent may from time to time reasonably request) to maintain WGRC's identity as a separate legal entity from each Seller and to make it manifest to third parties that WGRC is an entity with assets and liabilities distinct from those of each Seller and each other Affiliate thereof. Without limiting the generality of the foregoing and in addition to and consistent with the covenants set forth in Sections 7.04 and 7.07, WGRC shall: -43- 49 (i) conduct all of its business, and make all communications to third parties (including all invoices (if any) letters, checks and other instruments) solely in its own name (and not as a division of any other Person), and require that all employees of WGRC identify themselves as such and not as employees of any other Affiliate of WGRC (including, without limitation, by means of providing appropriate employees with business or identification cards identifying such employees as WGRC's employees); (ii) compensate all employees, consultants and agents directly, from WGRC's bank accounts, for services provided to WGRC by such employees, consultants and agents and, to the extent any employee, consultant or agent of WGRC is also an employee, consultant or agent of any Affiliate of WGRC, allocate the compensation of such employee, consultant or agent between WGRC and such Affiliate on a basis which reflects the services rendered to WGRC and such Affiliate; (iii) pay its own operating expenses and liabilities from its own funds, allocate all overhead expenses (including, without limitation, telephone and other utility charges) for items shared between WGRC and any Affiliate on the basis of actual use to the extent practicable and, to the extent such allocation is not practicable, on a basis reasonably related to actual use and allocate taxes on the basis set forth in the Tax Sharing Agreement; (iv) at all times have at least one "Independent Director" as defined in and as required under WGRC's Certificate of Incorporation, have at least one officer responsible for managing its day-to-day business and manage such business by or under the direction of its board of directors; (v) maintain WGRC's books and records separate from those of any Affiliate; (vi) prepare its financial statements separately from those of its other Affiliates and insure that any consolidated financial statements of Wyman that include WGRC have detailed notes to the effect that WGRC is a separate corporate entity and that WGRC's creditors have a claim on its assets prior to those assets becoming available to any creditors of any Seller; (vii) use its best efforts not to commingle funds or other assets of WGRC with those of any other Affiliate, and not to hold its assets in any manner that would create an appearance that such assets belong to any other Affiliate, and will not maintain bank accounts or other depository accounts to which any Affiliate is an account party, into which any Affiliate makes deposits or from which any Affiliate has the power to make withdrawals; -44- 50 (viii) not permit any Affiliate to pay any of WGRC's operating expenses (except pursuant to allocation arrangements that comply with the requirements of subsection (iii) of this Section 7.09 or pursuant to the terms of the Receivables Sale Agreement); (ix) not guarantee any obligation of any Affiliate nor (to the extent that WGRC has the legal power to prevent such) have any of its obligations guaranteed by any such Affiliate, (either directly or by seeking credit based on the assets of such Affiliate) or otherwise hold itself out as responsible for the debts of any Affiliate; (x) maintain at all times a separate telephone number and separate stationery from that of any Affiliate which will be answered in its own name, and have all its officers and employees conduct all of its business solely in its own name; (xi) not permit WGRC to be named as a direct or contingent beneficiary or loss payee on any insurance policy covering the property of any Affiliate and not name other Affiliates as a direct or contingent beneficiary or loss payee on its own insurance policies such that (A) in the event of a loss in connection with such property, payments on account thereof would be made to WGRC or would be jointly made to WGRC and such Affiliate, or (B) payments on account of losses to WGRC's property would be made to any Affiliates or would be jointly made to WGRC and any Affiliates; (xii) hold regular meetings of its board of directors in accordance with the provisions of WGRC's Certificate of Incorporation; (xiii) maintain a separate office from the offices of any of its Affiliates and identify such office by a sign in its own name; and (xiv) take such other actions as are necessary on its part to ensure that the facts and assumptions set forth in the opinion described in Section 5.01(xiv) remain true and correct at all times. ARTICLE VIII NEGATIVE COVENANTS WGRC covenants and agrees that, until the expiration or termination of the Commitments and thereafter until the Collection Date, unless the requisite Banks required under Section 12.01 shall otherwise consent in writing, it will not, directly or indirectly: SECTION 8.01. Liens; Sales of Collateral. Incur, create, assume or permit to exist any Lien upon or with respect to any property or assets now owned or hereafter acquired by WGRC other than Permitted Liens and the Liens created under the Facility Documents, or (except as expressly contemplated pursuant to the Facility Documents) sell, convey, assign (by operation of law or otherwise), transfer or otherwise dispose of any of the Collateral or WGRC's right to receive income in respect thereof. -45- 51 SECTION 8.02. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness except for (i) Indebtedness to the Agents, the Banks and the Issuing Banks expressly contemplated hereunder, (ii) Ordinary Course Expenses (to the extent, if any, that such items constitute Indebtedness) and (iii) Indebtedness to the Sellers pursuant to the Receivables Sale Agreement and the Intercompany Notes; provided that (x) WGRC shall not increase the principal amount outstanding under the Short-Term Notes if, immediately after giving effect thereto, the aggregate outstanding balances of the Short-Term Notes would exceed the limits set forth in the Receivables Sale Agreement and (y) WGRC shall not increase the principal amount outstanding under either the Short-Term Notes or the Long-Term Notes if, immediately after giving effect thereto, the aggregate outstanding balances of the Short-Term Notes and the Long-Term Notes would exceed (i) Net Eligible Receivables minus (ii) the Aggregate Net Outstandings minus (iii) the product of (a) Net Eligible Receivables times (b) sixty percent (60%) of the Loss Reserve Ratio, unless, in either such case, (A) the Majority Banks have previously consented thereto in writing and (B) the Rating Agency shall have confirmed its rating with respect to the Facility notwithstanding such increase. SECTION 8.03. Minimum Net Worth. WGRC shall at all times maintain a minimum net worth (defined as the sum of (i) the amount of its capital stock plus (ii) the amount of surplus and retained earnings (or, in the case of a surplus or retained earnings deficit, minus the amount of such deficit), in each case determined in accordance with GAAP) of not less than the greater of (1) $3,000,000 prior to the date Cameron becomes a Seller under the Receivables Sale Agreement or $5,000,000 on any date thereafter or (2) ten percent (10%) of the aggregate Outstanding Balance of all Receivables. SECTION 8.04. Guarantees. Guarantee, endorse or otherwise be or become contingently liable (including by agreement to maintain balance sheet tests) in connection with the obligations of any other Person, except endorsements of negotiable instruments for collection in the ordinary course of business and reimbursement or indemnification obligations in favor of the Facility Agent or the Banks as provided for under this Agreement. SECTION 8.05. Limitation on Investments. Make any Investment in any Person except for Permitted Investments. SECTION 8.06. Limitation on Transactions with Affil- iates. Enter into, or be a party to any transaction with any Affiliate of WGRC, except for: (i) the transactions contemplated by the Receivables Sale Agreement; and (ii) the transactions contemplated by the Company Documents; and (iii) to the extent not otherwise prohibited under this Agreement, other transactions in the nature of employment con- tracts and directors' fees, upon fair and reasonable terms -46- 52 materially no less favorable to WGRC than would be obtained in a comparable arm's-length transaction with a Person not an Affiliate. SECTION 8.07. Facility Documents. Except as otherwise permitted under Section 12.01, (a) amend or otherwise modify any Facility Document to which it is a party, or grant any waiver or consent thereunder or (b) designate a Termination Date if, at the time of such designation, the Aggregate Net Outstandings exceed the Base Amount, or (c) consent to any amendment or modification of the Credit and Collection Policy; except that WGRC may, with prior written notice to the Facility Agent, but without any prior written consent, amend any Company Document, provided that any such amendment shall be on fair and reasonable terms materially no less favorable to WGRC than would be obtained in a comparable arm's- length transaction with a Person not an Affiliate and such amendment shall not be prohibited by, or otherwise adversely affect WGRC's ability to comply with, Section 7.09. SECTION 8.08. Charter and By-Laws. Amend or otherwise modify its Certificate of Incorporation or Bylaws in any manner which requires the consent of the "Independent Director" (as defined in WGRC's Certificate of Incorporation) without the prior written consent of the Facility Agent and reconfirmation by the Rating Agency of its rating with respect to the Facility and delivery of an opinion of counsel that such amendment shall not alter the conclusions set forth in the legal opinion described in Section 5.01(xiv). In addition, WGRC shall not make any change to its corporate name unless (i) the Facility Agent and the Rating Agency shall have received twenty (20) Business Days' prior written notice of such name change and (ii) at least ten (10) Business Days prior to the effective date of any such name change, WGRC shall have executed and delivered to the Facility Agent (x) such Financing Statements (Form UCC-1 and UCC-3) which the Facility Agent may request to reflect such name change, together with such other documents and instruments that the Facility Agent may request in connection therewith and (y) an opinion of counsel as to continued perfection of the security interests in the Collateral following such change. SECTION 8.09. Lines of Business. Conduct any business other than that described in Section 6.01(o), enter into any transaction with any Person which is not contemplated by or incidental to the performance of its obligations under the Facility Documents, or consolidate with or merge into any other Person, or otherwise acquire or create any Subsidiaries. SECTION 8.10. Bank Accounts. Maintain any bank accounts other than the Collection Account, the Lock-Box Accounts and checking accounts for payments of Ordinary Course Expenses. SECTION 8.11. Lock-Box Banks; Change in Payment Instructions to Obligors. (a) Make any changes in instructions to Obligors directing payments other than to a Lock-Box Bank or, via wire transfer, to the Collection Account, or (b) voluntarily add or terminate any bank as a Lock-Box Bank from those listed in Exhibit 6.01(p) unless, with respect to the addition of any Lock-Box Bank, -47- 53 the Facility Agent shall have first received and approved, which approval shall not be unreasonably withheld, (x) copies of Lock-Box Agreements executed by each new Lock-Box Bank and WGRC and (y) copies of all agreements and documents signed by WGRC (and, if applicable, by a Seller) and the respective Lock-Box Bank with respect to any new Lock-Box Account. SECTION 8.12. Accounting Treatment. Prepare any financial statements or other statements (including any tax filings which are not consolidated with those of Wyman) which shall account for the transactions contemplated by the Receivables Sale Agreement in any manner other than as the sale of the Purchased Assets by the Sellers to WGRC. SECTION 8.13. ERISA Matters. WGRC will not (i) engage or (to the extent it has the legal power to prevent such) permit any ERISA Affiliate to engage in any prohibited transaction for which an exemption is not available or has not previously been obtained from the United States Department of Labor; (ii) permit to exist any accumulated funding deficiency, as defined in Section 302(a) of ERISA and Section 412(a) of the IRC with respect to any Benefit Plan other than a Multiemployer Plan; (iii) fail to make any payments to any Multiemployer Plan that WGRC or any ERISA Affiliate may be required to make under the agreement relating to such Multiemployer Plan or any law pertaining thereto; (iv) termi- nate or (to the extent it has the legal power to prevent such) permit any ERISA Affiliate to terminate any Benefit Plan which could result in any liability of WGRC or any ERISA Affiliate under Title IV of ERISA; or (v) permit to exist any occurrence of any reportable event described in Title IV of ERISA which represents a material risk of a liability of WGRC or (to the extent it has the legal power to prevent such) any ERISA Affiliate under ERISA or the Internal Revenue Code of 1986, as amended, if such prohibited transactions, accumulated funding deficiencies, payments, terminations and reportable events occurring within any fiscal year of WGRC, in the aggregate, would be reasonably likely to result in a Lien (other than a Permitted Lien) attaching to the Purchased Assets and/or the other Collateral under Title IV of ERISA. SECTION 8.14. Merger, Consolidation, Etc. Consolidate with or merge into or with any other corporation, or purchase or otherwise acquire all or substantially all of the assets of any Person or sell, transfer, lease or otherwise dispose of all or substantially all of its assets to any Person, except as expressly permitted under the terms of this Agreement. ARTICLE IX SECURITY INTEREST; ADMINISTRATION AND COLLECTION OF RECEIVABLES SECTION 9.01. Grant of Security Interest. To secure the prompt and complete payment when due of all Revolving Loans, interest, fees, indemnities, Letter of Credit reimbursement obligations, expenses and all other amounts owed hereunder or in connection herewith (collectively, the "Obligations"), WGRC hereby assigns and pledges to the Collateral Agent, for the benefit of the Banks, a security interest in and Lien on all of WGRC's right, title and interest in and to the following property, whether now -48- 54 owned or existing or hereafter arising or acquired and wheresoever located (collectively, the "Collateral"): (a) all Receivables, together with all Related Security, Collections, Records and other Purchased Assets related thereto; (b) all right, title and interest of WGRC in, to and under the Receivables Sale Agreement, including, without limitation, all monies due and to become due to WGRC from the Sellers or the Servicer under or in connection therewith, whether as Receivables or fees, expenses, costs, indemnities, insurance recoveries, damages for breach or otherwise, and all rights, remedies, powers, privileges and claims of WGRC against the Sellers and the Servicer under or with respect to the Receivables Sale Agreement (whether arising pursuant to the terms of the Receivables Sale Agreement or otherwise available at law or in equity), including, without limitation, (i) the right at any time to appoint a successor to the Servicer as set forth therein, provided, however, that the Collateral Agent's right to appoint a successor to the Servicer shall arise only upon the occurrence of a Servicer Termination Event and (ii) all licenses granted to WGRC by the Sellers in connection with the administration and collection of the Receivables; (c) all right, title and interest of WGRC in, to and under each of the other Facility Documents (excluding this Agreement) (whether as an original party thereto, as assignee or otherwise), including, without limitation, all monies due and to become due to WGRC under or in connection with such other Facility Documents, and all rights, remedies, powers, privileges, benefits and claims of WGRC under or with respect to such other Facility Documents (whether arising pursuant to the terms of such Facility Documents or otherwise available at law or in equity); (d) the Collection Account, and all other bank and similar accounts established for the benefit of the Collateral Agent and/or the Banks, and all funds held therein or in such other accounts, and all income from the investment of funds in the Collection Account and such other accounts; and all certificates and instruments, if any, from time to time representing or evidencing the Collection Account or such other accounts; (e) all lock boxes, Lock-Box Accounts, and all other bank and similar accounts relating to the collection of Receivables and all funds held therein or in such other accounts, and all income from the investment of funds in the Lock-Box Accounts and such other accounts and all certificates and instruments if any, from time to time in such lock boxes or representing or evidencing the Lock-Box Accounts or such other accounts; -49- 55 (f) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any and all of the foregoing; (g) all substitutions for and proceeds of any of the foregoing and, to the extent not otherwise included, all payments under insurance (whether or not the Collateral Agent is the loss payee thereof) or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing. Notwithstanding the foregoing, it is expressly understood and agreed that any assignment and transfer to the Sellers of WGRC's interest in returned or repossessed goods, which transfer is made pursuant to the terms of Section 2.02(f) of the Receivables Sale Agreement and subject to the payment requirements contemplated thereunder, shall be made free and clear of any security interest of the Collateral Agent in such goods. SECTION 9.02. Continuing Liability of WGRC. The security interests described above are granted as security only and shall not subject the Facility Agent, the Collateral Agent, the Issuing Bank or the Banks or their respective assigns to, or transfer or in any way affect or modify, any obligation or lia- bility of WGRC with respect to, any of the Collateral or any transaction in connection therewith. None of the Facility Agent, the Collateral Agent, the Issuing Bank nor the Banks nor their respective assigns shall be required or obligated in any manner to make any inquiry as to the nature or sufficiency of any payment received by it or the sufficiency of any performance by any party under any such obligation, or to make any payment or present or file any claim, or to take any action to collect or enforce any performance or the payment of any amount thereunder to which it may be entitled at any time. SECTION 9.03. Collection of Receivables. As of the Effective Date, WGRC hereby transfers to the Collateral Agent for the benefit of the Banks and the Agents the exclusive ownership and control of the Lock-Box Accounts and all related lock-boxes owned by WGRC, and WGRC hereby agrees to take any further action necessary or that the Collateral Agent may reasonably request to effect such transfer. Each Lock-Box Bank shall be instructed to remit, on a daily basis, via overnight or same day transfer, all amounts deposited in its Lock-Box Accounts to a segregated trust account maintained with and under the exclusive control of the Collateral Agent (on the corporate trust side thereof) for the benefit of the Banks (the "Collection Account") in accordance with the terms of a Lock-Box Agreement substantially in the form of Exhibit 9.03 hereto. WGRC shall have no legal ownership of or control over the Collection Account and no rights of withdrawals therefrom except for the right to receive Available Cash to the extent provided under this Agreement and the other rights to receive withdrawals expressly provided for in Section 9.07 or Section 9.08. WGRC shall, by delivery of the Daily Report, cause the Servicer to advise WGRC and the Agents of the amount of Collections to be received into the Lock-Box Accounts and the -50- 56 Collection Account on each Business Day with respect to the Receivables and the Facility Agent shall, based solely on such Daily Report, advise WGRC and the Agents as to the amounts of such Collections which constitute Available Cash. If WGRC or its agents or representatives shall at any time receive any cash, checks or other instruments constituting Collections, such recipient shall promptly segregate such payment and hold such payment in trust for and in a manner acceptable to the Agents, and shall, promptly upon receipt of any such payment (and in any event within one Business Day following such receipt), remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to a Lock-Box Account or the Collection Account. (b) At any time upon the occurrence and during the continuance of a Liquidation Event: (i) with contemporaneous notice to WGRC, the Facility Agent may notify any or all of the Obligors of the security interest granted hereunder and may direct any or all of the Obligors of Receivables included in the Collateral to pay all amounts payable under any such Receivables directly to the Collateral Agent or its designee; (ii) at the Facility Agent's request and at WGRC's expense, WGRC shall give notice of the Banks' interest in the Collateral to each Obligor whose Receivables are included in the Purchased Assets and direct that payments be made directly to the Collateral Agent or its designee; (iii) WGRC shall promptly assemble all Records included in the Collateral, and make the same available to the Collateral Agent at a place selected by the Collateral Agent or its designee; and (iv) the Collateral Agent may enforce the Receivables Sale Agreement against the Sellers and the Servicer and shall have the right to give or withhold any or all consents, requests, notices, directions, approvals, demands, extensions or waivers under or with respect thereto, to the same extent as WGRC would otherwise be entitled to do. In addition to the foregoing, upon the occurrence and during the continuance of a Servicer Termination Event, WGRC shall, at the request of the Facility Agent, exercise its rights under the Receivables Sale Agreement to notify any or all of the Obligors of WGRC's interests in the Purchased Assets. WGRC hereby authorizes the Banks, and gives to the Banks its irrevocable power of attorney, which shall be coupled with an interest, and the Banks hereby designate the Collateral Agent to exercise such authorization and power of attorney, to take any and all steps in the name of WGRC, which steps are necessary or desirable, in the reasonable determination of the Collateral Agent, to collect all amounts due under the Collateral, including, without limitation, endorsing WGRC's name on checks and other instruments representing Collections and, upon the occurrence and during the continuance of a Liquidation Event, enforcing such Receivables and the related Invoices. (c) WGRC shall, or shall cause the Servicer to, following notification that collections of any receivable or other intangible owed to any Seller or an Affiliate thereof, which is not a Purchased Asset, have been deposited into the Lock-Box Accounts, segregate all such collections or, if such collections have been deposited into the Collection Account, request the Collateral Agent to segregate such collections. Promptly after such misapplied collections have been reasonably identified to the Collateral -51- 57 Agent, the Collateral Agent shall turn over to the applicable Seller or such Affiliate, as applicable, all such collections less all reasonable and appropriate out-of-pocket costs and expenses, if any, incurred by the Collateral Agent in identifying and collecting such receivables. (d) WGRC shall cause to be delivered to the Agents, on each Business Day, the Daily Report for such day prepared by the Servicer pursuant to Section 5.03(b) of the Receivables Sale Agreement, and shall cause to be delivered to the Agents and the Banks, no later than each Reporting Date with respect to the Collection Period most recently ended, the Settlement Statement prepared by the Servicer pursuant to such Section 5.03(b). (e) In the event that the Servicer resigns or is removed under the terms of the Receivables Sale Agreement and this Agreement, and a successor Servicer is not promptly named by WGRC (or, following a Servicer Termination Event, the Collateral Agent), WGRC hereby agrees to appoint the Collateral Agent, and the Collateral Agent hereby agrees to accept such appointment (or, following a Servicer Termination Event, agrees to appoint itself) as Servicer, and to assume all of the duties and obligations thereof. SECTION 9.04. Responsibilities of WGRC. Anything herein to the contrary notwithstanding: (a) WGRC shall (i) diligently perform (either directly or indirectly by causing the Sellers to perform) all of its obliga- tions under the Invoices related to the Receivables and the exercise by the Facility Agent or the Collateral Agent of their respective rights hereunder shall not relieve WGRC from such obligations and (ii) pay when due (either directly or, to the extent provided for in the Receivables Sale Agreement, indirectly by causing the Sellers to pay when due) any taxes relating to the origination and sale of the Receivables and the other Purchased Assets and/or the grant of any security interest hereunder. (b) Neither any Agent nor any Bank shall have any obligation or liability with respect to any Receivable or related contract nor be obligated to perform any of the obligations of WGRC or any Seller thereunder and WGRC agrees to indemnify and hold harmless each of the Agents and the Banks against and from any and all liabilities arising from or related to any such obligation or liability (the payment of such indemnity to be subject to the terms of Sections 9.07(c) and 9.08 hereof). SECTION 9.05. Further Action Evidencing Security Interest. (a) WGRC agrees that at any time and from time to time, at its expense, it will promptly execute and deliver all further instruments and documents, and take all further action that may be necessary to perfect, protect or more fully evidence the security interests granted hereunder, or to enable the Facility Agent, the Collateral Agent or the Banks to exercise or enforce any of their respective rights hereunder. Without limiting the generality of the foregoing, WGRC will (i) cause its computer files and other physical records relating to the Receivables (by means of a general legend that will automatically appear at or near the beginning of -52- 58 any list or print-out of the Receivables) to indicate that, unless otherwise specifically identified on such list or print-out as a Receivable not so sold, all Receivables included in such list or print-out and Related Security are part of the Collateral in accordance with this Agreement and (ii) execute and file such financing or continuation statements or amendments thereto or assignments thereof, and such other instruments and notices, as may be necessary or appropriate or as the Facility Agent or any of its agents, representatives or permitted assignees may reasonably request. (b) In the event that WGRC, within one (1) Business Day after notice from the Facility Agent, fails to deliver one or more financing or continuation statements, and amendments thereto and assignments thereof, that the Facility Agent or any of its agents, representatives or permitted assignees may reasonably determine to be necessary to evidence or perfect the Collateral Agent's security interest in the Collateral or WGRC's ownership of all or any of the Purchased Assets now existing or hereafter arising, then WGRC hereby authorizes either of the Agents to file any such statements without the signature of WGRC where permitted by law. A carbon, photographic or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof, shall be sufficient as a financing statement. If WGRC fails to perform any of its agreements or obligations under this Agreement, following expiration of any applicable cure period, either Agent may (but shall not be required to) perform, or cause performance of, such agreement or obligation, and the reasonable expenses of the Agents and the Banks incurred in connection therewith shall be payable by WGRC upon the Facility Agent's written demand therefor (which demand shall itemize such expenses in reasonable detail). (c) All amounts payable by WGRC under this Section 9.05 shall be payable subject to the terms of Sections 9.07(c) and 9.08 hereof. SECTION 9.06. Application of Collections. Any payment by an Obligor in respect of any indebtedness or other obligations owed by such Obligor to WGRC shall, except as otherwise specified by such Obligor or otherwise required by law, be applied as a Collection of any Receivable included in the Purchased Assets (in the order of the age by invoice date of such Receivables, starting with the oldest such Receivable, as determined under the Credit and Collection Policy) to the extent of any amounts then due and payable thereunder before being applied to (i) any Receivable arising subsequent to the Termination Date which is not included in the Purchased Assets or (ii) any other indebtedness of such Obligor to any Seller or to WGRC. SECTION 9.07. Administration of Collection Account Prior to the Liquidation Period. On each Business Day prior to the commencement of the Liquidation Period, the Collateral Agent shall administer all Collections received into the Collection Account in accordance with the following provisions of this Section 9.07: -53- 59 (a) On each such Business Day, the Collateral Agent shall retain in the Collection Account an amount equal to the Carrying Costs Reserve. Whenever any Reserved Carrying Costs have become due and payable (or, in the case of Ordinary Course Expenses which constitute Reserved Carrying Costs), when WGRC has made a request certifying that such Ordinary Course Expenses need to be paid on or within the next five (5) Business Days), the Collateral Agent shall withdraw funds from the Collection Account to pay such Reserved Carrying Costs (or, in the case of Ordinary Course Expenses which constitute Reserved Carrying Costs, to deposit the amount of such requested funds in WGRC's checking account maintained for such purposes). (b) If, on any such Business Day, the Aggregate Net Outstandings exceed the Base Amount, then, in such event, all Available Cash shall be remitted to the Banks for prepayment of the Revolving Loans and/or retention in the Collection Account in the following order of priority: first, to prepay the Revolving Loans to the extent required under Section 2.07(a), second, to retain in the Collection Account the amount of any Available Cash which must be retained in the Collection Account pursuant to Section 2.07(b) and third, to cash collateralize the Letters of Credit in accordance with Section 2.07(a). (c) After giving effect to the retention and or remittance of funds under clauses (a) and (b) of this Section 9.07, all Available Cash (including any cash income received by reason of investments of any retained cash) shall, except as otherwise required in clause (d) below of this Section 9.07, be remitted to WGRC or, if any payment described below in this clause (c) is owing to either Agent, the Issuing Bank or any Bank, to such Person directly. All such Available Cash shall be applied to pay (i) first, any amounts owing to the Issuing Bank under Sections 3.06(a) or (b) in connection with any Bank's failure to fund its Pro Rata Share of a draw under a Participated Letter of Credit and then any amounts owing to the Facility Agent under Section 2.04(a) or 2.04(b) in connection with any Bank's failure to fund its Pro Rata Share of a Revolving Loan , (ii) second, any amounts owing to Dissenting Banks or required to cash collateralize the applicable Pro Rata Share of Syndicated Letters of Credit issued by Dissenting Banks pursuant to Section 2.06(d) hereof, (iii) third, any Unreserved Carrying Costs owing to the Banks or the Agents, (iv) fourth, any other Unreserved Carrying Costs, (v) fifth, to the extent requested by WGRC, any voluntary prepayments of the Revolving Loans pursuant to Section 2.07(c) above, (vi) sixth, the purchase price for newly generated Purchased Assets under the Receivables Sale Agreement, and (vii) seventh, the following amounts in the following order of priority: (1) to Wyman to pay principal and interest then due and owing on the L/C Notes, (2) to the Sellers pro rata to pay any principal and interest outstanding on the Short-Term Notes, (3) to the Sellers pro rata to pay any interest and principal outstanding on the Long-Term Notes, and (4) only if WGRC has so elected and subject to proper authorization of WGRC's board of directors, to pay dividends on or redeem in whole or in part the common stock of WGRC. -54- 60 (d) If, on any such Business Day, either (i) an Insolvency Event with respect to any Seller or (ii) to Wyman's knowledge, a Liquidation Event described in clause (m) of the definition thereof with respect to such Seller's Receivables, has occurred and is continuing, then, unless WGRC has been authorized to continue purchases of Receivables from such Seller under the Receivables Sale Agreement in accordance with Section 8.07 hereof during either such event, the Collateral Agent shall, after giving effect to the retention and/or remittance of funds under clauses (a) and (b) of this Section 9.07, separately identify the Bank Percentage and the WGRC Percentage of the Collections attributable to such Seller's Receivables. The Bank Percentage of such Collections shall be set aside in trust for the Banks until the earliest of (i) commencement of the Liquidation Period (at which time such funds shall be remitted and applied as provided in Section 9.08), (ii) dismissal of the proceedings giving rise to such Insolvency Event or resumption of purchases pursuant to appropriate court order as contemplated under the Receivables Sale Agreement (in which event such funds shall be remitted and applied as provided above in this Section 9.07) and (iii) waiver or cure of the Liquidation Event described in clause (m) thereof (in which event such funds shall be remitted and applied as provided above in this Section 9.07); the Bank Percentage of such Collections shall also be used to make any mandatory prepayments of the Revolving Loans which may subsequently be required under clause (b) of this Section 9.07. The WGRC Percentage of such Collections shall be remitted and applied as follows: (x) fifty percent (50%) of the WGRC Percentage of such Collections shall be retained in the Collection Account as cash collateral for the payment of any not-yet accrued Carrying Costs (including, without limitation, indemnification amounts) or for the payment of any indemnities described in Section 9.08(c) until the amount of such cash collateral so retained equals (x) fifteen percent (15%) times (y) the Dilution Reserve Ratio then in effect times (z) the Net Eligible Receivables as of the date such Insolvency Event or Liquidation Event first occurred; and (y) the remaining fifty percent (50%) of the WGRC Percentage of such Collections shall be remitted to WGRC on account of the WGRC Percentage and may be used by WGRC to make any payments which it is authorized to make under clause (c) of this Section 9.07. SECTION 9.08. Administration of Collection Account During the Liquidation Period. (a) On each Business Day during the Liquidation Period, the Collateral Agent shall remit all Collections on deposit in the Collection Account to the appropriate parties in the following order of priority: (i) to pay the following accrued and unpaid Reserved Carrying Costs in the following order of priority: first, to the payment of all accrued and unpaid interest on the Revolving Loans (other than interest owed pursuant to Sections 4.01(d) and 4.03(b)); second, to the payment of any Servicer Fees owed to any Servicer, if other than WGRC or any Affiliate -55- 61 thereof; third, to the payment of all Agent Fees then due and payable to the Facility Agent; fourth, to the payment of all L/C Fees then due and payable; fifth, to the payment of all L/C Fronting Fees and other fees then due and payable to the Issuing Bank under Sections 4.02(d) and (e); sixth, to the payment of all Non-Usage Fees owed with respect to periods prior to the Termination Date; and seventh, to be remitted to WGRC for the payment of Ordinary Course Expenses which constitute Reserved Carrying Costs; (ii) to prepay the Revolving Loans until the Aggregate Loan Amount equals zero; provided, that any such reductions shall, subject to Section 2.04(b) and 3.06(b), be applied first, against all Base Rate Loans then outstanding, second, to all Eurodollar Loans then outstanding with Interest Periods ending on such date, and third, to any other Eurodollar Loans then outstanding; (iii) to cash collateralize the outstanding Letters of Credit until the amount of cash collateral held by the Collateral Agent equals the Aggregate L/C Amount; (iv) to pay any Unreserved Carrying Costs owing to the Banks and the Agents; (v) to pay any other Unreserved Carrying Costs; (vi) to pay any Servicer Fees owed to WGRC or any Affiliate thereof; and (viii) to pay interest and principal amounts owed under the Intercompany Notes. All Unreserved Carrying Costs shall only be paid from Collections and other cash of WGRC, and there shall be no recourse to or claim against WGRC at any time for the payment thereof to the extent that such Collections and cash are insufficient to satisfy such Unreserved Carrying Costs. After the Revolving Loans have been paid in full and the Aggregate L/C Amount has been cash collateralized in full, any remaining Collections and proceeds of the Collateral (including any income from the investment of the cash collateral in the Collection Account), less any continued Carrying Costs, shall be remitted to WGRC. In the event that any Letter of Credit expires undrawn or is otherwise terminated, then any cash collateral previously held on account of such Letter of Credit shall be remitted to WGRC. (b) During the Liquidation Period, the Collateral Agent may, at its discretion, require that all Collections and other proceeds which would otherwise be received into the Collection Account be held in a special segregated trust account maintained on the corporate trust side thereof pending the determination of whether or not such Collections and other proceeds are included in the Purchased Assets. In such event, the Servicer shall, as soon as possible after receipt of any Collections and other proceeds by the Collateral Agent, (i) determine whether such Collections and proceeds are included in the Purchased Assets or otherwise (such -56- 62 determination to be satisfactory to the Collateral Agent) and (ii) notify WGRC, the Sellers and the Agents of such determination. The Collateral Agent shall as soon as possible thereafter transfer any Collections or proceeds included in the Purchased Assets to the Collection Account for application pursuant to the other terms of this Section 9.08 and pay any Collections that are not included in the Purchased Assets to the applicable Person. Notwithstanding the foregoing, during any Liquidation Period, all Collections received from an Obligor in respect of any Receivables or other indebtedness owed to any Seller and/or WGRC shall continue to be applied in accordance with the provisions of Section 9.06 hereof and Section 5.06 of the Receivables Sale Agreement. SECTION 9.09. Remittances and Investment of Funds. All remittances from the Collection Account to the Banks, to WGRC or to the Agents as required under Section 9.07 or under Section 9.08 shall be by wire transfer of immediately available funds. All funds which are retained in the Collection Account pursuant to Section 9.07 or Section 9.08 (including funds maintained as part of the Carrying Costs Reserve) shall be invested in Permitted Investments selected by the Collateral Agent at the direction of WGRC (such direction to be set forth in the applicable Daily Report), or, absent such direction or at any time during the Liquidation Period or following notice to WGRC from the Collateral Agent following the occurrence and during the continuance of a Liquidation Event, in overnight Permitted Investments selected by the Collateral Agent, provided, however, that (i) each such investment shall be in the name of the Collateral Agent or otherwise in a form which permits the Collateral Agent to maintain a perfected security interest in such investment and (ii) the maturities of Permitted Investments maintained as part of the Carrying Costs Reserve shall be limited to ensure that all such Permitted Investments mature in time for WGRC to make timely payments of all Carrying Costs as the same become due. The Collateral Agent may liquidate any Permitted Investments prior to maturity in order to transfer funds or make any distributions which transfers or distributions are required under the Facility Documents, provided that no such Permitted Investments may be liquidated at a price less than the purchase price therefor without the prior consent of all of the Banks. It is understood that the Collateral Agent shall have no liability to WGRC, to any other party hereto or to any other Person for (i) the rate of return on any such Permitted Investments or (ii) any failure to pay, remit, distribute or transfer funds to such party or to make any required payment, remittance, distribution or transfer on account of the Collateral Agent's inability to liquidate any Permitted Investments as a result of the foregoing sentence. ARTICLE X TERMINATION; REMEDIES; INDEMNIFICATION SECTION 10.01. Termination; Remedies. The obligation of the Banks to make Revolving Loans and to issue and/or participate in Letters of Credit shall terminate on the Commitment Termination Date unless the Termination Date shall have earlier occurred pursuant to the definition thereof. Upon any such termination, (i) the Commitments of the Banks shall be terminated; (ii) the -57- 63 Liquidation Period shall immediately commence; (iii) the Agents and the Banks shall be entitled to pursue any other right or remedy under this Agreement; and (iv) the Agents and the Banks shall be entitled to exercise all the rights and remedies provided to a secured creditor upon default under the UCC of otherwise, all of which rights and remedies shall be cumulative to those provided in this Agreement and the other Facility Documents (provided, that the Agents and the Banks may not sell all or substantially all of the Receivables unless such sale is commercially reasonable and all of the Banks consent thereto). In addition to the foregoing, if WGRC becomes the subject of an Insolvency Event, then, in addition to the foregoing, the principal and interest on the Revolving Notes and the other Obligations shall become immediately due and payable, without presentment, demand, protest or other notice of any kind whatsoever. Absent the occurrence of an Insolvency Event with respect to WGRC, the principal and interest on the Revolving Notes shall become immediately due and payable upon the Final Collection Date. SECTION 10.02. Binding Effect. Notwithstanding any Termination Date, the obligations of WGRC under this Agreement shall be absolute and unconditional and shall remain in full force and effect until the Obligations have been fully paid and satisfied. Upon the Collection Date, the security interests granted hereby shall terminate and the Collateral Agent will, at WGRC's expense, execute and deliver to WGRC such UCC termination statements and other documents as WGRC may reasonably request to evidence such termination. SECTION 10.03. Indemnities by WGRC. Without limiting any other rights which the Facility Agent, the Collateral Agent, the Banks, the Issuers and the Issuing Bank may have hereunder or under applicable law, but without duplication, WGRC hereby agrees to indemnify each of the Facility Agent, the Collateral Agent, the Banks, the Issuers and the Issuing Bank, their successors and permitted assignees, and their and such assignees' respective officers, directors, agents and employees (all of the foregoing collectively referred to herein as "Indemnitees") from and against any and all damages, losses, claims, liabilities, costs and expenses, including reasonable attorneys' fees, and disbursements (all of the foregoing collectively referred to herein as the "Indemnified Amounts") awarded against or incurred by any Indemnitee relating to or resulting from this Agreement or the acquisitions or ownership by WGRC of any Purchased Assets (excluding, however, any such amounts to the extent the same comprise recourse for Receivables which are not collected, not paid or uncollectible on account of the insolvency, bankruptcy, inability or failure to pay or lack of creditworthiness of the applicable Obligor). Without limiting the foregoing (but subject to the exclusion in the immediately preceding sentence), WGRC shall indemnify the Indemnitees for Indemnified Amounts relating to or resulting from: (i) any representation or warranty made by WGRC or any Seller (or any of its officers) (individually or as Servicer or as subservicer) under or in connection with this Agreement or in connection with the preparation or delivery of any Daily -58- 64 Report, any Settlement Statement, or any other information or report delivered pursuant hereto, which shall have been false, incomplete or incorrect in any respect when made; (ii) the failure by WGRC or any Seller (individually or as Servicer or as subservicer) to comply with any term, provision or covenant contained in this Agreement, any other Facility Document or any agreement executed in connection with this Agreement or any other Facility Document (in each case, where WGRC or such Seller is a party thereto), or with any applicable law, rule or regulation with respect to any Receivable, the related Invoice or the Related Security, or the nonconformity of any Receivable, the related Invoice or the Related Security with any such applicable law, rule or regulation; (iii) the failure of any Seller to vest and maintain vested in WGRC or to transfer to WGRC, or the failure of WGRC to maintain vested in it, legal and equitable title to and ownership of the Receivables and other Purchased Assets which are, or are purported to be, sold by such Seller under the Receivables Sales Agreement, free and clear of any Lien (other than Liens created in favor of WGRC thereunder and Liens created in favor of the Collateral Agent hereunder and under the other Facility Documents), including all amounts expended by the Collateral Agent pursuant to Section 9.05(b); (iv) the failure by WGRC or any Seller to file, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables and other Purchased Assets which are, or are purported to be, sold by a Seller under the Receivables Sales Agreement, or which are the subject of a security interest granted under this Agreement, whether at the time of any Purchase or at any subsequent time; (v) the failure by WGRC or any Seller to be duly qualified to do business, to be in good standing or to have filed appropriate fictitious or assumed name registration documents in any jurisdiction; (vi) any dispute, claim, offset or defense to the payment of any Receivable (other than discharge in bankruptcy or under similar insolvency law) which is, or is purported to be, sold by any Seller under the Receivables Sales Agreement which dispute, claim, offset or defense is based on the Receivable or related invoice not being a legal, valid and binding obligation of the related Obligor, enforceable in accordance with its terms, or which relates to Dilution Factors or to such Receivables being Noncomplying Receivables on the date of Purchase or on any similar ground not related to the creditworthiness of the applicable Obligor or any other claim asserted against any Indemnitee resulting from the sale of the merchandise or services related to such Receivable or the furnishing or failure to furnish such merchandise or services; -59- 65 (vii) any products liability claim or personal injury or property damage suit or other similar or related claim or action of whatever sort arising out of or in connection with the goods and/or merchandise or services that are the subject of any Receivable generated by a Seller or related Invoice or contract; (viii) the failure of WGRC or any Seller to pay when due (A) any taxes or charges imposed on such Seller or (B) any sales taxes or other charges imposed in connection with such Seller's transfer of Purchased Assets under the Receivables Sales Agreement (other than taxes on or measured by the net income of WGRC or any of its permitted assignees); (ix) the failure of WGRC or any Seller (individually or as Servicer or subservicer) or any of its agents or representatives to perform its duties and obligations in accordance with the provisions of this Agreement, or to remit to WGRC, Collections of Purchased Assets received by such Seller or any such agent or representative; and (x) the commingling of Collections of Purchased Assets with any other funds of WGRC or any of the Sellers. It is expressly agreed and understood by the parties (i) that such indemnification is not intended to constitute a guarantee of the collectibility or payment of the Receivables sold hereunder and the other Purchased Assets and (ii) that nothing in this Section 10.03 shall require WGRC to indemnify any Indemnitee (A) for damages, losses, claims or liabilities or related costs or expenses resulting from such Indemnitee's gross negligence or willful misconduct or (B) for lost profits, consequential, special or punitive damages. Notwithstanding anything in this Agreement to the contrary, the gross negligence or willful misconduct of any one Indemnitee shall not be a defense to, or in any other way adversely affect, mitigate or diminish any other Indemnitee's right or claim to indemnification under this Section 10.03. Any amounts subject to the indemnification provisions of this Section 10.03 shall, subject to Sections 9.07(c) and 9.08 hereof, be paid by WGRC from the Collection Account for distribution to the applicable Indemnitees within five (5) Business Days following such Indemnitees' written demand therefor, setting forth in reasonable detail the basis for such demand, in each case out of Available Cash (including any proceeds received by WGRC pursuant to the indemnifications made in its favor under the Receivables Sales Agreement). Notwithstanding anything to the contrary in this Agreement, for purposes of this Section 10.03, any representations, warranties and covenants contained in Sections 6.01(a), 6.01(r), 7.04 or 7.09 of this Agreement shall not be deemed to be limited to failures to perform or comply or to events, circumstances, conditions or changes that did give rise to a Material Adverse Effect. The indemnity obligations set forth in this Section 10.03 shall be continuing and shall survive any termination of this Agreement. -60- 66 ARTICLE XI THE AGENTS SECTION 11.01. Authorization and Action. Each Bank hereby accepts the appointment of and irrevocably authorizes each of the Agents to take such action as agent on its behalf and to exercise such powers as are expressly delegated to such Agent by the terms hereof, together with such powers as are reasonably incidental thereto. Neither Agent shall be required to take any action which exposes such Agent to personal liability or which is contrary to this Agreement or applicable law. Except where this Agreement expressly provides otherwise, each Agent agrees to give to the other Agent and to each Bank prompt notice of each notice given to it by WGRC or any Seller pursuant to the terms of this Agreement. The appointment and authority of the Agents hereunder shall terminate upon the indefeasible payment in full of the Obligations and the termination of all Letters of Credit. SECTION 11.02. Nature of Agents' Duties. The Agents shall have no duties or responsibilities except those expressly set forth in this Agreement or in the other Facility Documents. The duties of the Agents shall be mechanical and administrative in nature. Neither Agent shall have by reason of this Agreement a fiduciary relationship in respect of the other Agent or any Bank. Nothing in this Agreement or any of the Facility Documents, express or implied, is intended to or shall be construed to impose upon either Agent any obligations in respect of this Agreement or any of the Facility Documents except as expressly set forth herein or therein. Neither Agent shall have any duty or responsibility, either initially or on a continuing basis, to provide any Bank or the other Agent with any credit or other information with respect to WGRC or the Sellers, whether coming into its possession before the date hereof or at any time or times thereafter (except as expressly set forth in this Agreement). If either Agent seeks the consent or approval of the Banks to the taking or refraining from taking any action hereunder, such Agent shall send notice thereof to each Bank. The Agents shall promptly notify each Bank any time that the Banks have instructed the Agents to act or refrain from acting pursuant hereto. SECTION 11.03. UCC Filings. Each of WGRC and the Banks expressly recognizes and agrees that the Collateral Agent may be listed as the assignee or secured party of record on the various UCC filings required to be made hereunder in order to perfect the grant of a security interest herein for the benefit of the Banks, that such listing shall be for administrative convenience only in creating a single secured party to take certain actions hereunder on behalf of the Banks and that such listing will not affect in any way the status of the Banks as the beneficial holders of such security interest. In addition, such listing shall impose no duties on the Collateral Agent other than those expressly and specifically undertaken in accordance with this Article XI. SECTION 11.04. Agent's Reliance, Etc. Neither of the Agents nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them as Agent under or in connection with this Agreement -61- 67 (including, without limitation, such Agent's servicing, administering or collecting Receivables) except for its or their own gross negligence or willful misconduct. Without limiting the foregoing, each Agent: (i) may consult with legal counsel (including counsel for WGRC), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation to the other Agent or to any Bank and shall not be responsible to the other Agent or any Bank for any statements, warranties or representations made in or in connection with this Agreement; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of WGRC or to inspect the property (including the books and records) of WGRC (except as otherwise expressly set forth in this Agreement); (iv) shall not be responsible to the other Agent or to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency, or value of this Agreement, or any other instrument or document furnished pursuant hereto, or any certificate, report, statement or other document referred to or provided for in, or received by the Agents under or in connection with, the Facility Documents, or for any failure of WGRC or any of its Affiliates to perform its obligations under the Facility Documents; and (v) shall incur no liability under or in respect of this Agreement by acting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by telex) believed by it to be genuine and to be or to have been signed or sent by the proper party or parties. Each Agent may at any time request instructions from the Banks with respect to any actions or approvals which by the terms of this Agreement or of any of the other Facility Documents such Agent is permitted or required to take or to grant, and such Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any of the Facility Documents until it shall have received such instructions from the Majority Banks (or, where required, from the Required Banks or all of the Banks). Without limiting the foregoing, no Bank shall have any right of action whatsoever against either Agent as a result of such Agent acting or refraining from acting under this Agreement or any of the other Facility Documents in accordance with the instructions of the Majority Banks (or, where required, the Required Banks or all of the Banks). The Agents shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation reasonably believed by it or them to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to WGRC), independent accountants and other experts selected by the Agents. SECTION 11.05. Agent and Affiliates. To the extent that the Agents or any of their Affiliates are or shall become Banks hereunder, such Agent or such Affiliate, in such capacity, shall -62- 68 have each and every right and power under this Agreement as would any other Bank hereunder (including, without limitation, the right to vote upon any matter upon which any of the Banks are entitled to vote) and, without exception, may exercise the same as though it were not an Agent. Each Agent and its Affiliates may engage in any kind of business with WGRC or any Seller, any of their respective Affiliates and any Person who may do business with or own securities of WGRC or any Seller or any of their respective Affiliates, all as if it were not an Agent hereunder and without any duty to account therefor to the other Agent or the Banks. SECTION 11.06. Credit Decision. Each Bank and the Issuing Bank acknowledges that it has, independently and without reliance upon either Agent or any other Bank and based on such documents and information as it has deemed appropriate, made its own evaluation and decision to enter into this Agreement and, to the extent it so determines, to issue and participate in Letters of Credit and/or to make Revolving Loans hereunder. Each Bank and the Issuing Bank also acknowledges that it will, independently and without reliance upon either Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under this Agreement. SECTION 11.07. Indemnification. Each Bank agrees to indemnify the Agents (to the extent not reimbursed by WGRC or, to the extent applicable, by any Seller), ratably according to its Pro Rata Share, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agents in any way relating to or arising out of this Agreement or any action taken or omitted by the Agents under this Agreement; provided, however, that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements resulting from such Agent's gross negligence or willful misconduct. Without limiting the generality of the foregoing, each Bank agrees to reimburse the Agents, (to the extent not reimbursed by WGRC or, to the extent applicable, by any Seller) ratably according to their Pro Rata Shares, promptly upon demand, for any out-of-pocket expenses (including reasonable counsel fees) incurred by the Agents in connection with the administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of their rights or responsibilities under, this Agreement. The rights of the Agents under this Section 11.07 shall survive the termination of this Agreement. SECTION 11.08. Successor Agent. Either Agent may resign at any time by giving thirty days' notice thereof to the other Agent, the Banks, WGRC and the Servicer. All of the Banks other than the applicable Agent shall have the right to remove such Agent, with or without cause. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Agent approved by WGRC (which approval will not be unreasonably withheld or delayed), and such resignation or removal -63- 69 shall not be effective until such successor Agent is appointed and has accepted such appointment; provided, that WGRC shall not have the right to approve any successor Agent following the occurrence and during the continuance of a Liquidation Event or during the Liquidation Period. The Banks shall provide the Rating Agency with prompt notice of the resignation or removal of either Agent. If no successor Agent shall have been so appointed and accepted such appointment within 45 days after the retiring Agent's giving of notice of resignation, then the retiring or removed Agent may, on behalf of the Banks appoint a successor Agent approved by WGRC (which approval will not be unreasonably withheld or delayed), which successor Agent shall be (a) either (i) a commercial bank having a combined capital and surplus of at least $500,000,000 or (ii) an Affiliate of such an institution and (b) experienced in the types of transactions contemplated by this Agreement. In addition, any successor Collateral Agent must be authorized under United States law to maintain and operate the Collection Account. Upon the acceptance of any appointment as an Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from all further duties and obligations under this Agreement. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article XI shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement. SECTION 11.09. Direction by the Banks. The Agents shall be fully justified in failing or refusing to take any action under the Facility Documents unless it or they shall first receive such advice or concurrence of the Majority Banks (or, if applicable, the Required Banks or all of the Banks) as it or they deem appropriate or it or they shall first be indemnified to its or their satisfaction by the Banks against any and all liability and expense which may be incurred by it or them by reason of taking or continuing to take any such action. The Agents shall in all cases be fully protected in acting, or in refraining from acting, under the Facility Documents in accordance with a request of the Majority Banks (or, if applicable, the Required Banks or all of the Banks) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks and all future holders of the Revolving Notes. SECTION 11.10. Notice of Liquidation Events. The Agents shall not be deemed to have knowledge or notice of the occurrence of any Liquidation Event hereunder unless either Agent shall have received notice from a Bank or WGRC describing such Liquidation Event or stating that such notice is a "notice of Liquidation Event." In the event that an Agent receives such a notice, such Agent shall given prompt notice thereof to the Banks. The Agents shall take such action or refrain from taking such action with respect to such Liquidation Event as shall be reasonably directed by the Majority Banks (or, if applicable, the Required Banks or all of the Banks); provided, the Agents may (but shall not be obligated to) take such action, or refrain from taking such action, as is permitted hereunder, with respect to such Liquidation Event as it or they shall deem advisable in the best interests of the Banks. -64- 70 SECTION 11.11. Duty of Care. The Agents shall endeavor to exercise the same care in its administration of the Facility Documents as they exercise with respect to similar transactions in which they are involved and where no other co-lenders or participants are involved; provided that the liability of the Agents for failing to do so shall be limited as provided in the preceding paragraphs of this Article XI. SECTION 11.12. Delegation of Agency. (i) If at any time or times it shall be necessary or prudent in connection with the exercise or protection of the Agents' rights hereunder in order to conform to any law of any jurisdiction in which any of the Collateral shall be located, or the Agents shall be advised by counsel that it is so necessary or prudent in the interest of the Banks, or the Agents shall deem it necessary for its or their own protection in the performance of its or their duties hereunder, the Agents and (to the extent required by the Agents) WGRC shall execute and deliver all instruments and agreements reasonably necessary or proper to constitute another bank or trust company, or one or more individuals approved by the Collateral Agent (to the extent necessary or required by the Collateral Agent) (each an "Approved Delegate"), either to act as co-agent or co-agents or trustee of all or any of the Collateral, jointly with the Collateral Agent originally named herein or any successor, or to act as separate agent or agents or trustee of any such Collateral. In the event that WGRC shall not have joined in the execution of such instruments or agreements with any Approved Delegate within thirty (30) Business Days after the receipt of a written request from the Collateral Agent to do so, or in case a Liquidation Event shall have occurred and be continuing, WGRC hereby irrevocably appoints the Agent as its agent and attorney to act for it under the foregoing provisions of this Section 11.10 in such contingency. Every separate agent and every co-agent and every trustee, other than any agent which may be appointed as successor to the Facility Agent, shall, to the extent permitted by applicable law, be appointed to act and be such, subject to the following provisions and conditions, namely: (a) except as otherwise provided herein, all rights, remedies, powers, duties and obligations conferred upon, reserved or imposed upon the Facility Agent in respect of the custody, control and management of moneys, paper or securities shall be exercised solely by the Facility Agent hereunder; (b) all rights, remedies, powers, duties and obligations conferred upon, reserved to or imposed upon the Facility Agent hereunder shall be conferred, reserved or imposed and exercised or performed by the Facility Agent except to the extent that the instrument appointing such separate agent or separate agents or co-agent or co-agents or trustee shall otherwise provide, and except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Facility Agent shall be incompetent or unqualified to perform such act or acts, in which event such rights, remedies, powers, duties and obligations shall be exercised and performed by such separate agents or co-agent or co-agents to the extent specifically directed in writing by the Facility Agent; -65- 71 (c) no power given hereby to, or which it is provided hereby may be exercised by, any such separate agent or separate agents or co-agent or co-agents or trustee shall be exercised hereunder by such separate agent or separate agents or co-agent or co-agents or trustee except jointly with, or with the consent in writing of, the Facility Agent, anything herein contained to the contrary notwithstanding; (d) no separate agent or co-agent or trustee constituted under this Section 11.12 shall be personally liable by reason of any act or omission of any other agent, separate agent, co- agent or trustee hereunder; and (e) the Facility Agent, at any time by an instrument in writing, executed by it, may accept the resignation of or remove any such separate agent or co-agent or trustee, and in that case, by an instrument in writing executed by the Facility Agent and WGRC (to the extent necessary or requested by the Facility Agent) jointly may appoint a successor to such separate agent or co-agent or trustee, as the case may be, anything therein contained to the contrary notwithstanding. In the event that WGRC shall not have joined in the execution of any such instrument with a Person or entity within ten (10) days after the receipt of a written request from the Facility Agent to do so, or in the case a Liquidation Event shall have occurred and be continuing, the Facility Agent, acting alone, may appoint a successor and may execute any instrument in connection therewith, and WGRC hereby irrevocably appoints the Facility Agent its agent and attorney to act for it in such connection in either of such contingencies. (ii) The Agents may execute any of their duties under the Facility Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel, and other specialists and advisors (including affiliates of Shawmut) selected by it, concerning all matters pertaining to such duties. The Agents shall not be responsible for the negligence or misconduct of any such agents, attorneys-in-fact, counsel and other specialists and advisors selected by it with reasonable care. ARTICLE XII MISCELLANEOUS SECTION 12.01. Amendments, Etc. No amendment to or waiver of any provision of this Agreement or the other Facility Documents, nor consent to any departure by WGRC therefrom, shall in any event be effective unless the same shall be in writing and signed by WGRC, the Facility Agent and the Required Banks (with concurrent notice thereof to the Rating Agency) provided, however, that no such agreement shall (i) decrease the outstanding amount of, or extend the repayment of or any scheduled payment date for the payment of, any interest in respect of any Revolving Loan or any fees owed to a Bank without the prior written consent of such Bank; (ii) forgive or waive or otherwise excuse any repayment of the Aggregate Loan Amount without the prior written consent of each Bank affected thereby; (iii) increase the Commitment of any Bank without its prior written consent (it being understood that -66- 72 increases in the L/C Facility Sub-Amount shall not constitute an increase in the Commitment of any Bank); (iv) except as otherwise expressly contemplated under Section 2.06(d) or Section 2.09, amend or modify the Pro Rata Share of any Bank without its prior written consent; (v) amend or modify the provisions of this Section 12.01 or the definition of "Majority Banks" or "Required Banks" without the prior written consent of each Bank; (vi) without the prior written consent of all Banks, waive any Liquidation Event arising from an Insolvency Event with respect to WGRC or any Seller; (vii) without the prior written consent of all Banks, waive, amend or otherwise modify the definition of the Termination Date; (viii) amend, modify or otherwise affect the rights or duties of the Facility Agent, the Collateral Agent, the Issuing Bank or any other Issuer hereunder without the prior written consent of such Person; (ix) amend, waive or modify any definition or provision expressly requiring the consent of all Banks, the Required Banks or Banks with specified Pro Rata Shares without the prior written consent of all Banks, Required Banks or Banks with specified Pro Rata Shares, as applicable; and (x) without the prior written consent of all Banks, amend, waive or modify any definition or provision which would result in a decrease in the Applicable Reserve Ratio unless the Rating Agency has confirmed in writing that such amendment, waiver or modification would not cause its rating of the Facility to be reduced or withdrawn (in which event such amendment, waiver or modification shall still require the consent of the Required Banks as set forth above). Any such waiver, consent or approval shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on WGRC in any case shall entitle WGRC to any other or further notice or demand in the same, similar or other circumstances. SECTION 12.02. No Waiver; Remedies. No waiver by the Facility Agent, the Collateral Agent or the Banks of any breach or default of or by WGRC under this Agreement shall be deemed a waiver of any other previous breach or default or any thereafter occurring. No failure on the part of the Facility Agent, the Collateral Agent or the Banks to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder, or any abandonment or discontinuation of steps to enforce such right, power or privilege, preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 12.03. Successors and Assigns; Assignment; Participations. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party; all covenants, promises and agreements by or on behalf of any parties hereto that are contained in this Agreement shall bind and inure to the benefit of their respective successors and permitted assigns. WGRC may not assign or transfer any of its rights or obligations hereunder or under any of the other Facility Documents without the written consent of the Facility Agent and all of the Banks. Each of the Banks, with the prior written consent of the Facility Agent and of WGRC (each such consent not to be unreasonably withheld), may assign any of its interests, rights and obligations hereunder to an -67- 73 Eligible Assignee; provided, that (i) the Commitment amount to be assigned hereunder shall not be less than $10,000,000 (unless the amount assigned either (x) constitutes all of the Commitment of the assigning Bank or (y) is being assigned from one Bank to another Bank already party to this Agreement and equals an amount not less than $5,000,000), (ii) prior to the effective date of any such assignment, the assignee and assignor shall have (1) executed and delivered to the Facility Agent and to WGRC an Assignment and Acceptance substantially in the form of Exhibit 12.03 hereto and (2) paid a processing fee of $2500 to the Facility Agent, and (iii) WGRC's consent shall not be necessary with respect to any assignment by a Bank to an Affiliate of such Bank which is also an Eligible Assignee. Upon the effectiveness of any such permitted assignment, (i) the assignee thereunder shall, to the extent of the interests assigned to it, be entitled to the interests, rights and obligations of a Bank under this Agreement and (ii) the assigning Bank shall, to the extent of the interest assigned, be released from its obligations under this Agreement. (b) Notwithstanding anything contained in paragraph (a) of this Section 12.03, (i) each Bank may at any time pledge or assign all or any portions of its interests and rights under this Agreement to a Federal Reserve Bank, and (ii) each Bank may sell participations in all or any part of any Revolving Loan or Revolving Loans made or in all or any part of any Letter of Credit issued by such Bank to another Bank or other financial institution meeting the criteria of an Eligible Assignee; provided, that: (A) no such grant of a participation shall, without the consent of WGRC, require WGRC to file a registration statement with the Securities and Exchange Commission or otherwise comply with the blue sky laws of any state; (B) such Bank's obligations under this Agreement shall remain unchanged and such Bank shall remain solely responsible to WGRC for performance of such obligations; (C) WGRC shall continue to deal solely and directly with the Bank in connection with such Bank's rights and obligations under this Agreement; (D) such participant shall agree to be bound by the confidentiality provisions of Section 12.08 hereof and (E) no holder of any such participation shall be entitled to require such Bank to take or omit to take any action hereunder except that such Bank may agree with such participant that, without such participant's consent, such Bank will not consent to an amendment, modification or waiver referred to in clauses (i) through (vii) of Section 12.01. Any such participant shall not have any rights hereunder or under the Facility Documents except that such participant shall have rights under Sections 4.04, 4.06 and 4.08 hereunder as if it were a Bank; provided, that no such participant shall be entitled to receive any payment pursuant to such sections which is greater in amount than the payment which the transferor Bank would have otherwise been entitled to receive in respect of the participation interest so sold. SECTION 12.04. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF PERSONAL SERVICE AND VENUE; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTERESTS OF THE COLLATERAL AGENT, THE -68- 74 FACILITY AGENT AND THE BANKS IN THE COLLATERAL OR REMEDIES HEREUNDER OR THEREUNDER IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY AGREES TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE CITY OF NEW YORK, NEW YORK (AND ANY COURTS HEARING APPEALS FROM SUCH STATE OR FEDERAL COURT) OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO SUCH PARTY AT ITS ADDRESS SPECIFIED IN SECTION 12.05 OR PROVIDED THEREIN. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER WITHIN THE STATE OF NEW YORK AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY ANY COURT IN SUCH STATE. NOTHING IN THIS SECTION 12.04 SHALL AFFECT THE RIGHT OF ANY PARTY HEREUNDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE COLLATERAL AGENT, THE FACILITY AGENT OR THE BANKS TO BRING ANY ACTION OR PROCEEDING AGAINST WGRC OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION OR JURISDICTIONS TO THE EXTENT NECESSARY FOR REALIZING ON THEIR INTERESTS IN ANY COLLATERAL GRANTED HEREUNDER. EACH OF THE PARTIES HERETO HEREBY EXPRESSLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT, POWER OR REMEDY UNDER OR IN CONNECTION WITH THIS AGREEMENT OR UNDER OR IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE TERMS AND PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT. SECTION 12.05. Notices. Except as otherwise expressly provided in this Agreement, any notice shall be conclusively deemed to have been received by a party hereto and to be effective (i) if sent by regular mail or commercial delivery service, on the day on which delivered to such party at its address set forth below its name on the signature pages hereto (or at such other address as such party shall specify to the other parties hereto in writing), (ii) if sent by telex, graphic scanning or other telecopy communications of the sending party, when delivered by such equipment to the number set forth below its name on the signature pages hereto and confirmed by telephone or (iii) if sent by registered or certified mail, on the day on which delivered to such party (or delivery is refused), addressed to such party at such address. Any notices required to be delivered to the Rating Agency under this Agreement or any of the other Facility Documents shall be addressed to the Rating Agency at the following address (or to such other address as the Rating Agency may hereafter specify to the other parties hereto in writing): Standard & Poor's Corporation, 25 Broadway, Attn: Asset-Backed Surveillance Group, New York, NY 10004, Telephone: (212) 208-8000; Telecopy: (212) 412-0225. SECTION 12.06. Survival of Agreement. All covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making of -69- 75 the Revolving Loans and the issuance of any Letters of Credit and the execution and delivery of this Agreement and shall continue in full force and effect until the Collection Date has occurred and all Letters of Credit issued hereunder have expired; provided, however, that the indemnities contained in Sections 3.07, 4.06, 4.08, 10.03, 11.07 and 12.07 of this Agreement and the obligations of the parties hereto under Section 12.08, shall be continuing and shall survive any termination of this Agreement. SECTION 12.07. Expenses; Indemnification. In addition to the indemnification provisions set forth in Article X, WGRC shall pay on demand (i) all reasonable out-of-pocket fees and expenses (including reasonable attorneys fees and expenses) of the Agents incurred in connection with the negotiation, preparation, execution, delivery, administration, amendment, modification and waiver of this Agreement and the other Facility Documents and the making and repayment of the Revolving Loans and (ii) all out-of- pocket fees and expenses of the Agents and the Banks (including reasonable attorneys' fees and expenses of a single set of counsel for the Banks which counsel shall be selected by the Facility Agent, shall be reasonably acceptable to the Majority Banks and shall be a major New York City law firm of international reputation) incurred from and after a Liquidation Event in connection with the enforcement of this Agreement and the other Facility Documents against WGRC and the Sellers, including, without limitation, any Servicer Fees paid to any third party other than WGRC or the Sellers for services rendered to the Banks and the Agents in collecting the Receivables and the other Purchased Assets. In addition, WGRC will pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing, recording or enforcement of this Agreement or the other Facility Documents, and hereby indemnifies and saves the Agents and the Banks harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. All payments owing by WGRC under this Section 12.07 shall be made subject to the terms of Sections 9.07(c) and 9.08 hereof. SECTION 12.08. Confidentiality. Each of the Agents, the Issuing Bank and the Banks hereby acknowledges that the Records and other information which it or WGRC receives from the Sellers may contain information in which WGRC or the Sellers have a proprietary interest and which may not, at the time of assignment and/or delivery, be generally available to and known by the public (including, without limitation, information relating to WGRC or the Sellers contained in the Information Memorandum). Each of the Agents, the Issuing Bank and the Banks hereby agrees, for the benefit of WGRC and the Sellers, to maintain as confidential all such information obtained from the Sellers or WGRC and not to disclose such information to any other Person, provided, however, that nothing in this Section 12.08 shall (x) impose any liability on any Agent, Bank or Issuing Bank which has acted in accordance with its customary standards for maintaining the confidentiality of information relating to its corporate customers and (y) prevent any Person from disclosing such information (i) to any permitted assignee of WGRC, the Agents, the Issuing Bank or any Bank (or their permitted prospective participants and assignees), provided -70- 76 that each such party agrees in writing, for the benefit of WGRC and the Sellers, (x) to use such information and keep such information confidential in accordance with the same terms set forth herein and (y) that it will not disclose such information to any of its Affiliates which is not a financial institution or a parent company of a financial institution, (ii) to its employees, agents, attorneys, auditors and accountants, (iii) subject to the further requirements set forth in this Section 12.08, upon the order of any court or administrative agency or upon the request or demand of any regulatory agency, authority or official having jurisdiction over the Agents, the Issuing Bank or Bank, as the case may be, (iv) which has (other than through a breach of this Section 12.08) been obtained from any Person other than WGRC, any Seller or any other party hereto, or (v) to the extent that such information (other than through a breach of this Section 12.08, has become generally available to and known by the public subsequent to the time of delivery hereunder. Any Bank, Agent or Issuing Bank (a) will provide WGRC with prompt written notice of any subpoena or any request or requirement by any governmental authority (other than any such request or requirement in connection with an audit or other regulatory review of a financial institution) for disclosure of any confidential information so that WGRC and/or the Sellers may seek a protective order or other appropriate remedy prior to such disclosure and (b) shall consult with WGRC to a reasonable extent on the advisability of taking legally available steps to resist or narrow such request or requirement (it being understood that, after such notice and consultation, such party shall be under no further obligations to WGRC under this Section 12.08 to refrain from disclosure in connection with such proceeding during the pendency thereof as provided under clause (iii) of the immediately preceding sentence). In the event that such protective order or other remedy is not obtained, the affected Bank, Agent or Issuing Bank will exercise reasonable efforts (x) to limit the information disclosed to such information which it is legally required to disclose and (y) to obtain assurance that confidential treatment will be accorded any such information so disclosed, in each case only to the extent that such efforts would not cause the affected Bank, Agent or Issuing Bank to incur costs which it deems to be material. SECTION 12.09. No Recourse. The obligations of WGRC hereunder shall be solely its obligations and shall in all respects be non-recourse to all of its officers, directors, controlling persons or stockholders (including, without limitation, the Sellers), and each of the Agents and the Banks acknowledges the same with respect to WGRC and, to the fullest extent permitted by law, waives any such recourse and any claim against any of such parties arising hereunder; provided, however, that (a) the foregoing shall be without prejudice to the rights that the Agents and the Banks may have against the Sellers under the Receivables Sale Agreement or for a breach of Wyman's duties as Servicer and (b) nothing herein shall constitute a waiver of any rights the Agents or any Bank may have against any Person on account of any claim for intentional fraud, intentional deceit or intentional material misrepresentation or omission. -71- 77 SECTION 12.10. No Proceedings. Each of the Agents and the Banks hereby agrees that it will not institute against WGRC any involuntary proceeding of the type referred to in the definition of "Insolvency Event" so long as this Agreement remains in full force and effect and for at least one year and one day following termination of this Agreement. SECTION 12.11. Execution in Counterparts; Severability. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. SECTION 12.12. Entire Agreement. This Agreement, together with the other Facility Documents, including the exhibits and schedules hereto and thereto, contains a final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all previous oral statements and other writings with respect thereto. SECTION 12.13. Exhibits and Schedules. Upon the execution and effectiveness of any Assumption Agreement pursuant to Section 2.06 of the Receivables Sale Agreement, each of the applicable schedules and exhibits hereto shall be automatically deemed amended in accordance with such Assumption Agreement, without any further action on the part of any of the parties hereto. -72- 78 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers and delivered as of the day and year first above written. WYMAN-GORDON RECEIVABLES CORPORATION By: /s/ Luis E. Leon Title: President Notice Address: P.O. Box 181 244 Worcester Street North Grafton, Massachusetts 01536 Telephone: 508-839-8350 Telecopy: 508-839-7529 SHAWMUT BANK, N.A., individually, as Facility Agent, as Collateral Agent and as Issuing Bank By: /s/ Matt O'Keefe Title: Vice President Notice Address: 446 Main Street - WO-10608 Worcester, Massachusetts 0160 Attention: Asset-Based Lending Telephone: 508-893-4259 Telecopy: 508-793-4110 With copies to: 777 Main Street MSN-987 Hartford, Connecticut 06115 Attn: Suzanne Fischetti Telephone: (203) 986-2226 Telecopy: (203) 986-4191 ABBEY NATIONAL TREASURY SERVICES PLC By: /s/ Jonathan C. Nicholls Title: Director Notice Address: Abbey House/Baker Street London, NW1 6XL UNITED KINGDOM Attn: Head of Corporate Finance Telephone: 011-44-71-612-4722 Telecopy: 011-44-71-612-4146 -73- 79 BANCO DI NAPOLI By: /s/ Francesco Di Mario Title: Vice President By: /s/ Claude P. Mapes Title: First Vice President Notice Address: 277 Park Avenue New York, New York 10172-0002 Telephone: 212-872-2415 Telecopy: 212-872-2426 BANQUE ET CAISSE D'EPARGNE DE L'ETAT, LUXEMBOURG By: /s/ Paul Guillaume/ /s/ John Dhur Title: Conseiller De Direction/ Conseiller De Direction Notice Address: 1+2 Place de Metz L1930 Luxembourg GRAND DUCHY DE LUXEMBOURG Attn: John Dhur Telephone: 011-352-4015-4296 Telecopy: 011-352-4015-4284 With Copies to: 1211 Avenue of the Americas, 24th Floor New York, NY 10036-8701 Patrick Wallerand Attn: Patrick Wallerand Telephone: 212-921-1136 Telecopy: 212-921-1950 RAIFFEISEN ZENTRALBANK OSTERREICH AG By: /s/ Martin Gruell/ /s/ Michael Meyer Title: Vice President/Manager Notice Address: Am Stadtpark 9 A-1030 Vienna AUSTRIA Attn: Kurt Bruckner Telephone: 43-1-71707-1040 Telecopy: 43-1-71707-1473 With Copies to: 609 Fifth Avenue New York, NY 10017 Attn: John Valiska Telephone: 212-593-7593 Telecopy: 212-593-9870 -74- 80 ANNEX I DEFINED TERMS When used in (i) that certain Receivables Purchase and Sale Agreement by and among Wyman-Gordon Receivables Corporation as purchaser and Wyman-Gordon Company, Wyman-Gordon Investment Castings, Inc. and Precision Founders Inc. as sellers and (ii) that certain Revolving Credit Agreement by and among Wyman-Gordon Receivables Corporation, the "Banks", the "Collateral Agent" and the "Facility Agent" (as each such term is defined below), capitalized terms used in either such agreement and not otherwise defined therein shall have the meanings set forth below: "Accrued Carrying Costs" shall mean, as of any date, the sum of (i) accrued and unpaid Reserved Carrying Costs as of such date plus (ii) without duplication, the amount of Reserved Carrying Costs that will, or are estimated to, have accrued by the next Settlement Date as set forth in the then-effective Settlement Statement. "Actual Dilution" shall mean, for any Collection period, the aggregate amount of Dilution during such Collection Period less, if WGRC shall so elect with respect to any one and only one Receivable, the Dilution for such Receivable to the extent arising from any credits or series of related credits to the same Obligor, where such credit or credits (i) exceed in the aggregate $100,000; (ii) are granted for a billing error or related billing errors; and (iii) are posted no later than five (5) Business Days after the original invoice date for such Receivable. "Adjusted Loss to Liquidation Ratio" shall mean the Loss to Liquidation Ratio for all of the Receivables, recalculated to exclude, from the numerator thereof, those Write-Offs recognized and (without duplication) Receivable Notes issued during the applicable three Collection Periods on account of Receivables owed by a particular Obligor and its Consolidated Affiliates whenever the aggregate amount of such Write-Offs recognized and Receivable Notes taken during the applicable three Collection Periods on account of such Obligor and its Consolidated Affiliates exceeds $500,000. The underlying calculations for each of the six Collection Periods preceding the first Settlement Date to be used in future calculations of the Adjusted Loss to Liquidation Ratio shall be as set forth in such Schedule 1. "Affected Bank" shall have the meaning ascribed to such term in Section 4.05 of the Revolving Credit Agreement. "Affiliate" shall mean, with respect to any Person, a Person: (i) that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Person; (ii) that beneficially owns or holds 5% or more of any class of the voting stock (or, in the case of a Person that is not a corporation, 5% or more of the equity interest) of such Person; or (iii) 5% or more of the voting stock (or, in the case of a Person that is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held, directly or indirectly, by such Person. The term "control" shall mean the -1- 81 possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting stock or any equity interest, by contract, or otherwise. Notwithstanding the foregoing, (i) neither the Banks, the Facility Agent nor the Collateral Agent shall be deemed an "Affiliate" of WGRC or Wyman and (ii) so long as Cooper Industries, Inc. beneficially owns less than 50% of the aggregate voting stock of Wyman, Cooper Industries, Inc. shall not be deemed an "Affiliate" of Wyman. "Aged Receivables Ratio" shall mean the aged receivables ratio calculated in the most recent Settlement Statement, which ratio (expressed as a percentage) shall equal a fraction, (1) the numerator of which equals the sum of (i) the aggregate Outstanding Balances of Receivables (other than Termination Receivables, Progress Billing Receivables and excluding Receivables owed by Tier-1 Obligors) which were from 210 to 240 days past invoice date as of the most recent Cut-Off Date plus (ii) the aggregate Outstanding Balances of Receivables (other than Termination Receivables and Progress Billing Receivables) which were (A) written off as uncollectible during the most recently ended Collection Period, (B) not more than 240 days past invoice date at the time of such write-off and (C) not Receivables of Obligors of the type described in clause (a) of the definition of "Eligible Obligor"; and (2) the denominator of which equals the aggregate Original Balances of all new Receivables (other than Termination Receivables and Progress Billing Receivables) generated during the Collection Period that occurred seven (7) Collection Periods prior to the most recently ended Collection Period, as determined as of the Cut-Off Date for such seventh prior Collection Period. The Aged Receivables Ratio calculated in any Settlement Statement shall be the Aged Receivables Ratio from the Settlement Date relating thereto until the next Settlement Date. The Aged Receivables Ratio from the Effective Date until the first Settlement Statement shall be as set forth on Schedule 1 hereto and the underlying calculations for each of the seven Collection Periods preceding the first Settlement Date to be used in future calculations of the Aged Receivables Ratio shall be as set forth in such Schedule 1. "Agent" shall mean either the Facility Agent or the Collateral Agent, as the context requires, and "Agents" shall mean each of the Facility Agent and the Collateral Agent. "Agent Fees" shall mean the agent fees owed by WGRC to Shawmut Bank, N.A., as the Facility Agent and as the Collateral Agent (or any successor Agents), as described in Section 4.02(c) of the Revolving Credit Agreement. "Aggregate L/C Amount" shall mean, at any time, the then aggregate outstanding face amount of the Letters of Credit. -2- 82 "Aggregate Loan Amount" shall mean, at any time, the then aggregate outstanding principal amount of the Revolving Loans. "Aggregate Net Outstandings" shall mean, on any date, the sum of the Aggregate Loan Amount and the Aggregate L/C Amount then outstanding minus the amount of Available Cash, if any, which is then being retained in the Collection Account as required under Section 2.07 of the Revolving Credit Agreement. "Alternate Base Rate" shall mean a fluctuating rate per annum on any date equal to the higher of (i) the rate of interest most recently publicly announced by the Facility Agent as its "prime," "reference" or "base" rate and (ii) a rate of interest equal to the sum of (A) the Federal Funds Rate, plus (B) 0.50%. The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by the Facility Agent in connection with extensions of credit. Changes in the Alternate Base Rate shall take effect immediately upon their occurrence. "Applicable Reserve Ratio" shall mean, at any time, the greater of (A) the Minimum Required Reserve Ratio and (B) the sum of the Required Reserve Ratios then in effect; provided, however, that from and after any Reporting Date until the next Settlement Date, the Applicable Reserve Ratio shall mean the greater of the above percentage or the sum of the Required Reserve Ratios as calculated in the most recently delivered Settlement Statement. "Assignment and Acceptance" shall mean an assignment and acceptance in substantially the form of Exhibit 12.03 to the Revolving Credit Agreement. "Assumption Agreement" shall mean an Assumption Agreement in substantially the form of Exhibit F to the Receivables Sale Agreement whereby a Subsidiary of Wyman becomes a new Seller under said agreement. "Available Cash" shall mean, at any time, all funds on deposit in the Collection Account which are in excess of the then required amount of the Carrying Costs Reserve. "Average Dilution Ratio" shall mean, at any time, the average of the Dilution Ratios for the Collection Periods occurring during the twelve Collection Periods ending on the most recent Cut-Off Date as calculated in the most recent Settlement Statement. "Bankruptcy Code" shall mean Title 11 of the United States Code, as amended from time to time, or any successor statute. "Bank Percentage" shall mean a percentage calculated in accordance with the following formula: BP = ALA + ALCA BA where: BP = the Bank Percentage; -3- 83 ALA = the Aggregate Loan Amount; ALCA = the Aggregate L/C Amount; and BA = the Base Amount. "Banks" shall mean those financial institutions which have agreed to make Revolving Loans and to issue or participate in Letters of Credit pursuant to the Revolving Credit Agreement. "Base Amount", as of any date, will equal (i) the result obtained by multiplying (x) Net Eligible Receivables as of such date times (y) 100% minus the Applicable Reserve Ratio minus (ii) the Discount Rate Reserve. "Base Rate Borrowing" shall mean a Borrowing consisting Base Rate Loans. "Base Rate Loan" shall mean a Revolving Loan interest on which is calculated at a per annum rate based on the Alternate Base Rate. "Benefit Plan" means any defined benefit plan as defined in Section 3(35) of ERISA in respect of which any Seller or any ERISA Affiliate of a Seller is an "employer" as defined in Section 3(5) of ERISA. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States of America. "Borrowing" shall mean a group of Revolving Loans with a single Funding Date or Conversion/Continuation Date and as to which a single Interest Period is in effect. "Business Day" shall mean any day except a Saturday, Sunday or other day on which commercial banks in Boston, Massachusetts are required or authorized by law to close and, when the term "Business Day" is used (i) with respect to any Borrowing or funding under a Letter of Credit, it shall mean any such day on which commercial banks are open for business in New York City, New York and, so long as any Bank's sole lending office is in a jurisdiction outside the United States, also in such jurisdiction and (ii) with respect to any Eurodollar Borrowing, it shall mean any such day on which commercial banks are open for international business (including dealings in Dollar deposits) in New York City, New York and London, England; provided that (i) the term "Business Day" shall also not include any day on which Wyman, with not less than ten days' prior written notice to the Facility Agent, closes its corporate headquarters so long as Wyman does not so close its headquarters for more than five days in any one calendar year in addition to those already described above and no more than two of such additional days are consecutive and (ii) all Banks whose sole lending offices are outside the United States shall, upon the request of WGRC and/or the Facility Agent, give WGRC and the Facility Agent reasonable advance notice of any holidays on which they are not open for business during the forthcoming calendar year. -4- 84 "Cameron" shall mean Cameron Forged Products Company, a Delaware corporation and, following the acquisition thereof by Wyman, a wholly-owned subsidiary of Wyman. "Carrying Costs" shall mean, collectively, any Reserved Carrying Costs and any Unreserved Carrying Costs. "Carrying Costs Percentage" shall mean, on any date, the carrying costs percentage appearing on the most recent Settlement Statement, which percentage shall be computed, as of the most recent Cut-Off Date by dividing (i) the sum of any Carrying Costs (other than interest on the Revolving Loans, the L/C reimbursement obligations or the Intercompany Notes) billed or, if not previously billed, paid during the Collection Period then ended by (ii) the aggregate Outstanding Balance of all Receivables as of such Cut-Off Date. The Carrying Costs Percentage shall be determined monthly in each Settlement Statement and such Carrying Costs Percentage shall be the Carrying Costs Percentage for all purposes under the Facility Documents from the Settlement Date relating thereto until the next Settlement Date. The Carrying Costs Percentage from the Effective Date until the first Settlement Date shall be as set forth on Schedule 1 hereto. All fees and expenses which are paid or payable on the Effective Date shall be excluded from the computation of the Carrying Costs Percentage in the first Settlement Statement. "Carrying Costs Reserve" shall mean, on any date, the sum of (i) Accrued Carrying Costs as of such date plus (ii) the product of (a) the Aggregate Loan Amount times (b) the Cost of Funds Rate divided by (c) twelve plus (iii) an accrual calculated to reasonably approximate WGRC's estimated income tax liabilities as owed to Wyman under the Company Documents; provided, however, that WGRC may direct the Collateral Agent to increase the Carrying Costs Reserve in order to simplify the daily allocations of funds required under Section 9.07 of the Revolving Credit Agreement. "Collateral" shall have the meaning assigned to such term in Section 9.01 of the Revolving Credit Agreement. "Collateral Agent" shall mean Shawmut Bank, N.A., in its capacity as collateral agent for the Banks under the Revolving Credit Agreement, and any successor thereto. "Collection Account" shall have the meaning assigned to such term in Section 9.03 of the Revolving Credit Agreement. "Collection Agent" shall mean, at any time, the Person then authorized pursuant to Article IX of the Revolving Credit Agreement to service, administer and collect the Receivables on behalf of the Banks. "Collection Date" shall mean the date following the Termination Date on which the aggregate Outstanding Balance of the Receivables included in the Purchased Assets shall have been reduced to zero, the Aggregate Loan Amount has been reduced to zero, the Aggregate L/C Amount has been reduced to zero and/or cash collateralized in full and WGRC has paid to the Banks and the Agents in full all principal, interest, fees and other amounts owed under the Facility. -5- 85 "Collection Period" shall mean each fiscal month of WGRC. "Collections" shall mean, with respect to any Receivable or all of the Receivables, as the case may be, all cash collections and other cash proceeds of such Receivable or Receivables, including, without limitation, all cash proceeds of Related Security with respect to such Receivable or Receivables. "Commitment" shall mean, as to any Bank, its commitment to make Revolving Loans and to issue and/or participate in Letters of Credit up to that dollar amount set forth opposite its name on the signature pages to the Revolving Credit Agreement, (or, as applicable, set forth in any amendment thereto entered into pursuant to Section 2.10 thereof or set forth in any Assignment and Acceptance entered into pursuant to Section 12.03 thereof) as such dollar amount may be reduced pursuant to Section 2.06 of the Revolving Credit Agreement or increased pursuant to Section 2.09 thereof, and "Commitments" shall mean the aggregate commitments of the Banks to make Revolving Loans and to issue and/or participate in Letters of Credit up to the Facility Amount (or, if less, up to the Base Amount). "Commitment Termination Date" shall mean the earlier of (i) the Settlement Date which occurs not more than three calendar months nor less than two calendar months before the fifth anniversary of the Effective Date, as such date may be extended pursuant to Section 2.06 of the Revolving Credit Agreement, and (ii) the date the Commitments are reduced to zero in accordance with Section 2.06(b) of the Revolving Credit Agreement. "Company Documents" shall mean the following documents between Wyman and WGRC dated as of even date with the Receivables Sale Agreement: (i) that certain Ancillary Services and Lease Agreement and (ii) that certain Tax Sharing Agreement. "Consolidated Affiliate" shall mean, with respect to any Person, any other Person whose financial statements are, or should be under GAAP, consolidated with the financial statements of such Person. "Conversion/Continuation Date" shall mean, as to any Borrowing, the date on which such Borrowing is converted into a different Type of Borrowing or continued as the same Type of Borrowing pursuant to Section 2.05 of the Revolving Credit Agreement. "Cost of Funds Rate" shall mean, on any date, the weighted average of the per annum rates at which interest is then accruing on the Revolving Loans (computed on the basis of a year of 365 or 366 days), as calculated in the most recent Settlement Statement using the rates in effect and the Revolving Loans outstanding as of the close of business on the most recent Cut-Off Date, provided that, if no Revolving Loans are then outstanding, the Cost of Funds Rate shall mean the lesser of (a) the Eurodollar Rate for an Interest Period of one month plus five-eighths of one percent (0.625%) and (b) the Alternate Base Rate, in each case as calculated for such Cut-Off Date. The Cost of Funds Rate -6- 86 calculated in any Settlement Statement shall be the Cost of Funds Rate from the Settlement Date relating thereto until the next Settlement Date. The Cost of Funds Rate from the Effective Date until the first Settlement Date shall be as set forth on Schedule 1. "Credit and Collection Policy" shall mean, the credit policies and procedures relating to the Receivables and Invoices as described on Exhibit C to the Receivables Sale Agreement, as the same may be amended from time to time in accordance with Section 4.03(c) of the Receivables Sale Agreement and Section 8.07 of the Revolving Credit Agreement. "Cut-Off Date" shall mean the last day of a Collection Period. "Daily Report" shall mean the Daily Report substantially in the form of Exhibit D-1 or Exhibit D-2 to the Receivables Sale Agreement (as applicable) delivered by the Servicer on each Business Day as required by Section 5.03(b) of the Receivables Sale Agreement. "Departing Bank" shall have the meaning ascribe to such term in Section 2.10 of the Revolving Credit Agreement. "Dilution" shall mean, with respect to any Receivable, the actual reduction in the Original Balance of that Receivable as a result of any claim or setoff of the Obligor or any other adjustment made by the Servicer which reduction or adjustment arose as a result of a Dilution Factor. "Dilution Adjustment" shall mean, on any date, payments owed by a Seller to WGRC pursuant to Section 2.02(f) of the Receivables Sale Agreement on account of Dilution reported for such date with respect to the Receivables, which payments shall equal the amount of such Dilution. "Dilution Factors" shall mean any adjustments to the Outstanding Balances of the Receivables other than adjustments which arise as a result of Collections, Write-Offs or the taking of any Receivable Notes. Dilution Factors shall include, without limitation, any credits, rebates, sales or other similar taxes, cash discounts, volume discounts, cooperative advertising expenses, allowances, disputes, billing errors, chargebacks, returned or repossessed goods, inventory transfers, allowances for early payments and other allowances and discounts that are made or coordinated with Wyman's usual practices but shall not include adjustments made on account of the applicable Obligor's inability to pay the Outstanding Balance thereof. "Dilution Horizon Variable" shall mean, at any time, an amount calculated in the most recent Settlement Statement to equal a fraction, the numerator of which equals the aggregate Original Balances of new Receivables (other than Termination Receivables and Progress Billing Receivables) generated during the two most recent Collection Periods and the denominator of which equals the aggregate Outstanding Balances of all Eligible Receivables as determined on the most recent Cut-Off Date. -7- 87 "Dilution Ratio" shall mean the dilution ratio calculated in the most recent Settlement Statement to equal a fraction (expressed as a percentage) the numerator of which shall be Actual Dilution during the most recent Collection Period on Receivables (other than Termination Receivables and Progress Billing Receivables) and the denominator of which shall be the aggregate Original Balances of new Receivables (other than Termination Receivables and Progress Billing Receivables) generated during the Collection Period which ended two Collection Periods prior to the last Cut-Off Date; provided, however, that if, for any three consecutive Collection Periods, the aggregate amount of Actual Dilution during each such Collection Period differs from the aggregate amount of Dilution during such Collection Period, then the Dilution Ratio shall be thereafter calculated using the aggregate amount of Dilution during the most recent Collection Period (instead of Actual Dilution) on Receivables (other than Termination Receivables and Progress Billing Receivables) in the numerator thereof. "Dilution Reserve Ratio" shall mean, commencing on any Settlement Date and continuing until (but not including) the next Settlement Date, an amount (expressed as a percentage) calculated in accordance with the following formula: DRR = [(2.5 x ADR) + [(HDR-ADR) x HDR)]] x DHV ADR where: DRR = the Dilution Reserve Ratio; ADR = the Average Dilution Ratio calculated in the most recent Settlement Statement; HDR = the highest average of the Dilution Ratios for any two consecutive Collection Periods within the twelve Collection Periods ending on the most recent Cut-Off Date; and DHV = the Dilution Horizon Variable calculated in the most recent Settlement Statement. The Dilution Reserve Ratio calculated in any Settlement Statement shall be the applicable Dilution Reserve Ratio from the Settlement Date relating thereto until the next Settlement Date. The Dilution Reserve Ratio from the Effective Date until the first Settlement Date shall be as set forth on Schedule 1 hereto and the Dilution Ratios for the twelve Collection Periods preceding the first Settlement Date to be used in future calculations of the Dilution Reserve Ratio shall be as set forth in such Schedule 1. "Discount Rate" shall mean, on any date, (i) the Cost of Funds Rate plus (ii) the Carrying Costs Percentage, each as determined in the most recent Settlement Statement with respect to which a Settlement Date has occurred. The Discount Rate shall be determined by the Servicer monthly in each Settlement Statement and such Discount Rate shall be the Discount Rate for all purposes under the Facility Documents from the Settlement Date relating -8- 88 thereto until the next Settlement Date. The Discount Rate from the Effective Date until the first Settlement Date shall be as set forth in Schedule 1 hereto. "Discount Rate Reserve" shall mean the discount rate reserve calculated on each day which amount shall be calculated in accordance with the following formula: DRR = ACC + ANO X (FR + SFR) X (3 X T TD) - CCR 360 where: DRR = the Discount Rate Reserve; ACC = Acccrued Carrying Costs as of the date of determination; ANO = the Aggregate Net Outstandings as of the most recent Reporting Date; FR = the higher of the Cost of Funds Rate then in effect and the Alternate Base Rate then in effect; SFR = the per annum rate applicable to the Servicer Fee (if the Servicer is a party other than Wyman, any other Seller or WGRC); CCR = the aggregate balance of funds in the Collection Account on the date of determination which are retained on account of the Carrying Costs Reserve; and TD = Turnover Days for all of the Receivables as calculated in the most recent Settlement Statement. "Dissenting Bank" shall have the meaning ascribed to such term in Section 2.06(c) of the Revolving Credit Agreement. "Dollar" and the symbol "$" shall mean lawful money of the United States of America. "Effective Date" shall mean the date on which the conditions precedent to the effectiveness of the Revolving Credit Agreement have been satisfied (and/or waived) and the Facility Agent has confirmed the effectiveness of the Revolving Credit Agreement. "Eligible Assignee" shall mean any commercial bank with (i) a combined capital and surplus of at least $500,000,000 and (ii) a rating on such bank's long-term deposits of not less than A-3 (or the equivalent thereof) from any such rating agency. "Eligible Obligor" shall mean each Obligor that satisfies the following criteria: (a) it is not the United States of America, any foreign government, any state, province or other local govern- mental agency, or any department, agency or instru- mentality thereof; -9- 89 (b) it is not an Affiliate of Wyman; (c) as of the most recent Cut-Off Date, it was not the subject of an Insolvency Event; (e) as of the most recent Cut-Off Date, no more than 50% of the aggregate Receivables owed by such Obligor and its Consolidated Affiliates were (for reasons other than disputes) aged more than 120 days past their respective invoice dates; and (f) as of the most recent Cut-Off Date, none of the past due Receivables owed by such Obligor had been evidenced by Receivable Notes. "Eligible Receivable" shall mean, at any time, a Receivable which satisfies the following criteria: (1) Such Receivable is (i) denominated in U.S. Dollars; (ii) non-interest bearing, and (iii) owed by an Eligible Obligor; (2) Such Receivable is in compliance with all applicable laws, rules and regulations; (3) Such Receivable represents a bona fide obligation resulting from a sale of goods which have been shipped or services which have been performed, and constitutes the legally valid, binding and enforceable obligation of the applicable Obligor in accordance with its terms; (4) Such Receivable does not constitute a "bill and hold" Receivable or other pre-billed obligation (including, without limitation, any Progress Billing Receivables); (5) Such Receivable arose from the sale of merchandise or services in the ordinary course of the Seller's business; (6) Such Receivable is not subject to any asserted reduction, cancellation, refund or rebate or to any dispute, offset, counterclaim, Lien (other than created under the Facility Documents) or other defense, provided that (i) the Outstanding Balance of any such Receivable which is otherwise Eligible and is subject only in part to any of the foregoing shall be Eligible to the extent not subject to any such reduction, cancellation, refund, rebate, dispute, offset, counterclaim, Lien or other defense; (provided, that if any Lien is not in the nature of a dispute, offset or counterclaim and attaches to any individual Receivable (and not Receivables generally), such entire Receivable shall not be an Eligible Receivable) and (ii) if any such Lien attaches to all of the Receivables, such Lien shall not affect the eligibility of any Receivables but shall instead operate as a reduction in the Net Eligible Receivables as described in clause (iii) of the definition thereof); -10- 90 (7) As of the most recent Cut-Off Date, such Receivable was not aged more than 120 days past its invoice date; (8) The sale of such Receivable and the Related Security to WGRC and the grant of a security interest therein by WGRC to the Collateral Agent does not conflict with any law, rule or regulation or any contractual or other restriction, limitation or encumbrance; (9) The sale or assignment of such Receivable does not require the consent of the Obligor or any other Person other than any such consent which has been previously obtained; (10) Such Receivable was created in accordance with and otherwise complies with all applicable requirements of the Credit and Collection Policy; (11) Such Receivable is an "account" (and not chattel paper, a general intangible or an instrument) within the meaning of the UCC; (12) WGRC's ownership interest and the Banks' security interests in such Receivable shall have been perfected; and (13) Such Receivable is not a Termination Receivable. Without limiting the foregoing, Write-Offs and Receivables evidenced by Receivable Notes shall not constitute Eligible Receivables. In addition, for purposes of computing Net Eligible Receivables on any date, no Receivable evidenced by an invoice for an amount greater than $500,000 shall qualify as an Eligible Receivable until the sixth Business Day after the date of such invoice. "ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means (i) any corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as WGRC or Wyman; (ii) a trade or business (whether or not incorporated) under common control (within the meaning of Section 414(c) of the Code) with WGRC or Wyman or (iii) a member of the same affiliated service group (within the meaning of Section 414(m) of the Code) as WGRC or Wyman, any corporation described in clause (i) above or any trade or business described in clause (ii) above. "Eurodollar Borrowing" shall mean a Borrowing consisting of Eurodollar Loans. "Eurodollar Lending Office" shall mean, as to any Bank, the office designated on the signature pages of the Revolving Credit Agreement as the office through which such Bank makes Eurodollar Loans whether or not such office is outside the United States of America. -11- 91 "Eurodollar Loan" shall mean a Revolving Loan interest on which is calculated at a per annum rate based on the Eurodollar Rate. "Eurodollar Rate" shall mean, with respect to any Eurodollar Borrowing, for any Interest Period, an interest rate determined by the Facility Agent to be the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates per annum at which Dollar deposits in immediately available funds are offered to the Facility Agent's Eurodollar Lending Office two Business Days prior to the beginning of such Interest Period by prime banks in the interbank eurodollar market as at or about 10:00 a.m., Boston time, for delivery on the first day of such Interest Period, for the number of days comprised therein and in an amount equal to the amount of such Eurodollar Borrowing. "Excess Concentration Balances" shall mean for any Obligor and its Consolidated Affiliates, the aggregate Outstanding Balances of otherwise Eligible Receivables due from such Obligor and, without duplication, its Consolidated Affiliates which, expressed as a percentage of the aggregate Outstanding Balances of all Eligible Receivables, exceeds the following percentages for the following Obligors: (a) 20% for any Tier-2 Obligor; (b) 10% for any Tier-3 Obligor; (c) 6-2/3% for any Tier-4 Obligor; and (d) 4% for any Tier-5 Obligor; provided, that WGRC may, by notice thereof in any Settlement Statement (with concurrent notice to the Rating Agency), increase or decrease the percentages set forth in the foregoing clauses for all subsequent Collection Periods (until further changed in accordance with the terms hereof) so long as (i) no Liquidation Event or Unmatured Liquidation Event shall have occurred and be continuing at the time such Settlement Statement is delivered, (ii) the percentage set forth in clause (b) above shall at all times be equal to one-half of the percentage in clause (a) above, (iii) the percentage set forth in clause (c) above shall at all times be equal to one-third of the percentage in clause (a) above, and (iv) the percentage set forth in clause (d) above shall at all times be equal to one-fifth of the percentage in clause (a) above. Any such change to the foregoing percentages shall result in a corresponding change to the Minimum Required Reserve Ratio, as set forth in the definition thereof. "Excess Foreign Obligor Balances" shall mean, as of any date, the dollar amount by which the aggregate Outstanding Balances of otherwise Eligible Receivables owing from Obligors which are not residents of the United States or Canada and do not have a dollar- denominated rating from the Rating Agency as of such day (other than any such Receivables payment of which is supported by a letter of credit or guarantee (i) issued by a domestic banking institution rated at least "A" by the Rating Agency and (ii) assigned to the -12- 92 Collateral Agent) exceeds five percent (5%) of the aggregate Outstanding Balances of all Eligible Receivables as of such day. "Extension Request" shall have the meaning ascribed to such term in Section 2.06(c) of the Revolving Credit Agreement. "Facility" shall mean the facility under the Revolving Credit Agreement for Revolving Loans and for the issuance of Letters of Credit. "Facility Agent" shall mean Shawmut Bank, N.A., in its capacity as agent for the Banks under the Revolving Credit Agreement, and any successor thereto. "Facility Amount" shall mean $65,000,000, as the same may be increased pursuant to Section 2.09 of the Revolving Credit Agreement and/or reduced pursuant to Section 2.06 of the Revolving Credit Agreement. "Facility Documents" shall mean collectively, the Receivables Sale Agreement, the Revolving Credit Agreement, the Lock-Box Agreements, the Company Documents, and all other agreements, documents and instruments delivered pursuant thereto or in connection therewith. "Federal Funds Rate" shall mean, on any day, a fluctuating interest rate per annum equal to the rate of interest offered in the interbank market to the Facility Agent as the overnight Federal funds rate as of about 10:00 a.m., Boston time, on such day (or, if such day is not a Business Day, for the next preceding Business Day). "Final Collection Date" shall mean the thirteenth Settlement Date from and after the Termination Date. "Financial Advisor" shall mean BT Securities Corporation. "Force Majeure Event" shall mean, with respect to any Person, any riots, acts of God or the public enemy, acts of war, acts of terrorists, epidemics, fire, equipment or power failures, flood, embargoes, weather, earthquakes or similar events beyond the control of such Person. "Funding Date" shall mean, as to any Revolving Loan, the date on which such Revolving Loan is made pursuant to Section 2.02 of the Revolving Credit Agreement. "GAAP" shall mean generally accepted accounting principles as set forth from time to time in the opinions and pro nouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by significant segments of the accounting profession. "Indebtedness" shall mean on any date, for any Person, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable -13- 93 arising in the ordinary course of business which are payable according to ordinary business terms, (iii) all obligations of such Person as lessee under leases which shall have been, or should be, in accordance with GAAP, recorded as capital leases, (iv) all reimbursement obligations in respect of any letters of credit, (v) all obligations secured by any Lien on the property of such Person, (vi) all obligations of such Person under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (vi) above, and (vii) all net obligations of such Person arising under any repurchase agreements or any interest rate or currency protection or exchange agreements. "Indemnified Amounts" shall have the meaning ascribed to such term in Section 10.03 of the Revolving Credit Agreement. "Information Memorandum" shall mean that certain Preliminary Information Memorandum dated March 9, 1994 (as the same may have been supplemented or otherwise updated by memorandum from the Financial Advisor dated April 15, 1994) with respect to the transactions contemplated under the Facility Documents. "Initial Purchase Date" shall mean, (i) as to any Initial Seller, the Effective Date and (ii) as to any other Seller, the date on which WGRC makes its initial Purchase of Receivables from such Seller. "Initial Seller" shall mean Wyman, WGIC and PFI. "Insolvency Event" shall mean, with respect to any Person, the institution of any case or proceeding by or against such Person seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, dissolution, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property or the taking of any corporate action by such Person to authorize any of the foregoing actions. "Intercompany Notes" shall mean the Short-Term Notes, the Long-Term Notes and the L/C Note. "Interest Period" shall mean: (i) for each Eurodollar Loan comprising part of the same Borrowing, the period commencing on the Funding Date or the Conversion/Continuation Date of such Borrowing, as applicable, and ending on the last day of the period selected by WGRC pursuant to the terms of the Revolving Credit Agreement, which period shall be one, two, or three months; and -14- 94 (ii) for each Base Rate Loan comprising part of the same Borrowing, a period commencing on the Funding Date or the Conversion/Continuation Date of such Borrowing and ending on the immediately following Settlement Date, and thereafter commencing on each Settlement Date and ending on the immediately following Settlement Date. provided, however, that (i) if any Interest Period would otherwise end on a day that shall not be a Business Day, such Interest Period shall end on the next succeeding Business Day (unless, with respect to any Eurodollar Loan, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day) and (ii) if any Interest Period with respect to a Eurodollar Loan would otherwise end on a calendar day for which there is no corresponding calendar day in the applicable subsequent calendar month, such Interest Period shall expire on the last Business Day of such applicable subsequent calendar month, and (iii) no Interest Period with respect to any Eurodollar Loan shall end on a date later than the Commitment Termination Date. "Investment" shall mean, with respect to any Person, any direct or indirect investment by such Person in any other Person, whether by means of share purchase, capital contribution, loan or otherwise, excluding the incurrence of receivables arising from sales made or services rendered in the ordinary course of business and excluding commission, travel and similar advances to officers, directors and employees made in the ordinary course of such Person's business. "Invoice" shall mean an invoice issued by a Seller to an Obligor in substantially one of the forms attached as Exhibit B to the Receivables Sale Agreement, or such other writing approved by the Facility Agent, pursuant to which such Obligor is obligated to pay for the sale of goods, merchandise and/or services rendered by the applicable Seller. "IRC" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor statute. "IRS" shall mean the Internal Revenue Service. "Issuer" shall mean, (i) with respect to any Syndicated Letter of Credit, each Bank in its capacity as an issuer thereof and (ii) in the case of any Participated Letter of Credit, the Issuing Bank. "Issuing Bank" shall mean Shawmut Bank, N.A., in its capacity as the issuer of certain Letters of Credit pursuant to Article III of the Revolving Credit Agreement. "L/C Facility Sub-Amount" shall mean $35,000,000; provided, however, that if the Facility Amount is increased pursuant to Section 2.09 of the Revolving Credit Agreement, then the L/C Facility Sub-Amount shall be increased by fifty percent (50%) of the amount of such increase in the Facility Amount. -15- 95 "L/C Fee" shall have the meaning ascribed to such term in Section 4.02(a) of the Revolving Credit Agreement. "L/C Fronting Fee" shall have the meaning ascribed to such term in Section 4.02(e) of the Revolving Credit Agreement. "L/C Note" shall mean that certain L/C Note issued by WGRC in favor of Wyman, for the benefit of Wyman and the other Sellers, pursuant to Section 2.02(d) of the Receivables Sale Agreement. "Letter of Credit" shall mean any letter of credit issued by the Banks or by the Issuing Bank for the account of WGRC pursuant to Article III of the Revolving Credit Agreement. "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, security interest, lien (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, the interest of a lessor under a capitalized lease obligation, any financing lease having substantially the same economic effect as any of the foregoing and the filing of any financing statement, naming the owner of the asset to which such Lien relates as debtor, under the UCC or comparable law of any jurisdiction). "Liquidation Event" shall mean any one of the following events: (a) The Settlement Statement delivered on any Reporting Date shall show that, as of the preceding Cut-Off Date, the Loss to Liquidation Ratio for all of the Receivables exceeded five percent (5%); or (b) The Settlement Statement delivered on any Reporting Date shall show that, as of the preceding Cut-Off Date, the Adjusted Loss to Liquidation Ratio for each of (1) the period of three consecutive Collection Periods ending on such Cut-Off Date and (2) the period of three consecutive Collection Periods which immediately preceded the three Collection Periods in subclause (b)(1), exceeded one percent (1%); or (c) The Settlement Statements delivered on any two consecutive Reporting Dates shall show that, as of the preceding Cut-Off Date, the aggregate unpaid balance of Receivables (excluding, however, Termination Receivables and Progress Billing Receivables) which were more than 120 days past invoice date (but which, in accordance with the Credit and Collection Policy, had not yet been written off) exceeded (i) until the earlier of (a) the first Cut-Off Date after which Cameron has become a Seller and (b) December 31, 1994, fifteen percent (15%) of the aggregate unpaid balance of all Receivables or (ii) thereafter, twelve percent (12%) of the aggregate unpaid balance of all Receivables; or -16- 96 (d) Either (i) failure by WGRC to make any mandatory payment of principal or interest on the Revolving Loans when required under the Facility Documents which failure continues unremedied for three (3) Business Days; or (ii) failure by WGRC or any Seller (whether individually or in its capacity as Servicer or subservicer) to pay LIBOR breakage costs or any Reserved Carrying Costs when due under the Facility Documents, which failure continues unremedied for five (5) Business Days; or (iii) failure by WGRC or any Seller (whether individually or in its capacity as Servicer or subservicer) to pay any other amount when due under the Facility Documents, which failure continues unremedied for seven (7) Business Days; provided, however, that if WGRC, the Servicer and/or a Seller is unable to make a payment described above as a result of a Force Majeure Event, then the time periods described above shall be extended for so long as such Force Majeure Event renders the Servicer, Seller or WGRC unable to make such payment but in no event shall such extension exceed ten (10) business days; or (e) Any representation or warranty made by WGRC or by a Seller (whether individually or in its capacity as the Servicer or as subservicer) under or in connection with any Facility Document, any Daily Report, any Settlement Statement or other report, certificate, financial statement or information furnished by a Seller and/or WGRC pursuant to the Facility Documents shall prove to have been false or incorrect in any material respect when made; provided, however, that (i) the mistaken representation of a Receivable as an Eligible Receivable shall not constitute a Liquidation Event unless and until the relevant Seller has failed to make the requisite cash payments owed under the Receivables Sale Agreement within the time frame provided hereunder in respect of the Noncomplying Receivables Adjustment arising from such misrepresentation and (ii) if any such misrepresentation is capable of cure within five (5) Business Days, then such misrepresentation shall not constitute a Liquidation Event unless and until WGRC or the relevant Seller, as applicable, has failed to cure such misrepresentation within such time period; or (f) Any Seller (whether individually or in its capacity as Servicer or as subservicer) shall fail to perform or observe any term, provision, covenant, condition or agreement contained in Article IV or Article V of the Receivables Sale Agreement on its part to be performed or observed (other than those referred to in clause (d) above) and any such failure (other than failures which are not capable of cure and failures with respect to Section 4.02(a) or Section 4.03(d) of the Receivables Sale Agreement, either of which shall constitute a Liquidation Event without any further lapse of time) shall remain unremedied for five (5) Business Days or more after written notice thereof shall have been given by WGRC or the Facility Agent to such Seller; or -17- 97 (g) WGRC shall fail to perform or observe any term, provision, covenant, condition or agreement contained in Section 7.01(e) or Article VIII of the Revolving Credit Agreement on its part to be performed or observed and, solely with respect to Sections 8.03 and 8.13, any such failure shall remain unremedied for five (5) Business Days or more after written notice thereof shall have been given by the Facility Agent to WGRC; or (h) Either (i) any Seller shall fail to perform or observe any other term, provision, covenant, condition or agreement contained in the Receivables Sale Agreement or any other Facility Document on its part to be performed or observed (other than those covered by the other subsections of this definition) and any such failure shall remain unremedied for ten (10) Business Days after written notice thereof shall have been given by WGRC or the Facility Agent to such Seller or (ii) WGRC shall fail to perform or observe any term, provision, covenant, condition or agreement contained in the Revolving Credit Agreement or any other Facility Document on its part to be performed or observed (other than those covered by the other subsections of this definition) and any such failure shall remain unremedied for ten (10) Business Days after written notice thereof shall have been given to WGRC by the Facility Agent; or (i) An Insolvency Event shall have occurred with respect to any Seller or WGRC; provided, however, that if such Insolvency Event arises as a result of a involuntary bankruptcy petition being filed against all or any Sellers but not WGRC, the event described in this clause (i) shall not mature into a Liquidation Event unless and until (a) such proceeding shall continue undismissed for a period of 60 days, (b) an order of relief shall be entered in such proceeding, or (c) the applicable Seller shall acquiesce in such proceeding, whichever is earliest; or (j) Either Wyman shall cease to own (directly or indirectly) 100% of the issued and outstanding shares of WGRC or the Sellers shall cease to own 100% of the Intercompany Notes, in each case free and clear of any Liens (except Permitted Liens) or Wyman shall cease to own (directly or indirectly) at least 80% of the issued and outstanding shares of each other Seller; or (k) Either the IRS or the PBGC shall have filed one or more Liens against the assets of the Sellers or WGRC in an aggregate amount exceeding $2,000,000 unless such amounts (i) are adequately bonded to the satisfaction of the Facility Agent or (ii) relate to taxes which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained under GAAP; or (l) The Servicer shall fail to perform or observe any term, provision, covenant, condition or agreement to be performed or observed on its part under Article V of the Receivables Sale Agreement or under any other provision of any other Facility Document (other than as referred to in other -18- 98 subsections of this definition) and any such failure shall remain unremedied for five (5) Business Days after written notice thereof shall have been given by WGRC or the Facility Agent to the Servicer; provided, that any failure to deliver the Daily Report on each Business Day for reasons other than a Force Majeure Event or any failure to deliver the Settlement Statement by the applicable Reporting Date for reasons other than a Force Majeure Event, shall constitute a Liquidation Event if such failure, in either case, remains unremedied for one or more Business Days; or (m) Either (i) WGRC shall cease to have a valid first-priority ownership interest in the Receivables, all Related Security or Collections therefrom or any other Collateral; or (ii) the Collateral Agent shall cease to have a valid first-priority security interest in the Collateral (subject, however, in either case, to Permitted Liens); or (n) The Aggregate Net Outstandings shall exceed the Base Amount for a period of five or more consecutive Business Days (after giving effect to all allocations of Collections and purchases of Receivables made on each such day); provided, that if such excess has resulted solely on account of a downgrade in the rating of General Electric Company or United Technologies Corporation (but not both) and the category applicable to such Obligor in the definition of "Excess Concentration Balances" has decreased by one (but not by more than one), then a Liquidation Event shall occur under this clause (n) only if such excess continues for a period of eight or more consecutive Business Days; or (o) Any proceedings shall have commenced and shall be continuing to foreclose upon any Lien or other encumbrance on any of the Collateral; or (p) WGRC or any Seller shall become an "investment company" within the meaning of the Investment Company Act of 1940, as amended; or (q) Any non-appealable judgment or non-appealable order for the payment of money shall be rendered against WGRC and such judgment or order shall remain in effect and unpaid for a period of ten (10) or more consecutive days. "Liquidation Period" shall mean the period commencing on the date on which the Sellers' obligation to sell and WGRC's obligation to purchase Receivables under the Receivables Sale Agreement terminates and continuing until the Collection Date. The Liquidation Period shall commence on the earliest to occur of: (i) the Commitment Termination Date; (ii) the occurrence and continuance of a Liquidation Event described in clause (i) or clause (p) of the definition thereof; -19- 99 (iii) the eleventh Business Day following the occurrence and during the continuance of a Liquidation Event described in clause (d) of the definition thereof unless waived by the Majority Banks or otherwise cured prior to such eleventh Business Day; (iv) the eleventh Business Day following the occurrence of a Liquidation Event described in clause (n) of the definition thereof, unless waived by the Required Banks prior to such eleventh Business Day; (v) the first Business Day following the date designated by the Required Banks upon the occurrence and during the continuance of any Liquidation Event (including, without limitation, those described in clauses (iii), (iv) and (viii) of this definition); (vi) the date designated by Wyman to WGRC, to the Facility Agent and the Banks by not less than ten (10) days nor more than sixty (60) days prior written notice as the date on which Wyman wishes to cease the sales of Receivables to WGRC; (vii) the date designated by WGRC to the Sellers, to the Facility Agent and the Banks by not less than three days nor more than ten days prior written notice following the occurrence and during the continuance of any Liquidation Event as the date on which it wishes to cease the purchases of Receivables from Wyman; or (viii) the eleventh Business Day following Wyman's knowledge of the occurrence of a Liquidation Event described in clause (m) of the definition thereof, unless such Liquidation Event is waived by the Required Banks or otherwise cured prior to such eleventh Business Day. "Lock-Box Account" shall mean any lock-box account or other depositary account maintained for the purpose of receiving Collections on the Receivables. "Lock-Box Agreement" shall mean any agreement, in substantially the form of Exhibit 9.03 to the Revolving Credit Agreement, entered into among WGRC, the Collateral Agent and a Lock-Box Bank. "Lock-Box Bank" shall mean any of the banks holding one or more Lock-Box Accounts. "Long-Term Notes" shall mean those certain Long-Term Notes issued by WGRC in favor of the Sellers on the Effective Date to evidence WGRC's indebtedness in respect of the initial transfer of Receivables from the Sellers. "Loss Discount Ratio" shall mean, with respect to any Seller's Receivables or all of the Receivables, as the case may be, the Loss to Liquidation Ratio with respect thereto appearing on the most recent Settlement Statement, recalculated to include in the numerator thereof all Write-Offs and Receivables Notes taken during -20- 100 the applicable period, whether or not such Write-Offs and Receivables Notes exceeded the Excess Concentration Balances for the related Obligors. The underlying calculations for each of the three Collection Periods preceding the first Settlement Date to be used in future calculations of the Loss Discount Ratio shall be as set forth in Schedule 1. "Loss Reserve Ratio" shall mean, commencing on any Settlement Date and continuing until (but not including) the next Settlement Date, an amount (expressed as a percentage) calculated in accordance with the following formula: LRR = 2.5 x ARR x b where: LRR = the Loss Reserve Ratio; ARR = the highest average of the Aged Receivables Ratios for any three consecutive Collection Periods that occurred during the period of twelve consecutive Collection Periods ending on the most recent Cut-Off Date; and b = a fraction having (A) a numerator equal to the aggregate Original Balances of all new Receivables (other than Termination Receivables and Progress Billing Receivables) generated during the preceding four Collection Periods preceding such Settlement Date, and (B) a denominator equal to the aggregate unpaid balance of all Eligible Receivables as calculated on the most recent Cut-Off Date. The Loss Reserve Ratio calculated in any Settlement Statement shall be the applicable Loss Reserve Ratio from the Settlement Date relating thereto until the next Settlement Date. The Loss Reserve Ratio from the Effective Date until the first Settlement Date shall be as set forth on Schedule 1 hereto and the underlying calculations for each of the three Collection Periods preceding the first Settlement Date to be used in future calculations of the Loss Reserve Ratio shall be as set forth in such Schedule 1. "Loss to Liquidation Ratio" shall mean, with respect to any Seller's Receivables or all of the Receivables, as the case may be, the applicable loss to liquidation ratio appearing on the most recent Settlement Statement, which ratio (expressed as a percent- age) shall be computed, as of the most recent Cut-Off Date, by dividing (i) the excess, if any, of (A) the aggregate reduction in the Outstanding Balances of such Receivables as a result of Write- Offs during the three most recent Collection Periods plus without duplication, the principal amount of all Receivable Notes taken in respect of such Receivables during such three Collection Periods (excluding from this clause (A), for any Obligor, Write-Offs and Receivables Notes taken for Receivables which did not, in the aggregate, exceed the Excess Concentration Balance for such Obligor on the date such Receivables were written off or such Receivables -21- 101 Notes taken), over (B) any Collections received during such three Collection Periods in respect of such Write-Offs and, without duplication, such Receivable Notes by (ii) the aggregate amount of Collections with respect to such Receivables received during such three Collection Periods. The underlying calculations for each of the three Collection Periods preceding the first Settlement Date to be used in future calculations of the Loss to Liquidation Ratios shall be as set forth in Schedule 1. "Majority Banks" shall mean Banks whose Pro Rata Shares aggregate more than fifty percent (50%). "Material Adverse Effect" shall mean (i) any material adverse effect upon the condition (financial or otherwise), operations, properties or prospects of WGRC, (ii) any material adverse effect upon the validity or enforceability of the Facility Documents or any of the Liens created thereunder or (iii) any adverse effect which, by itself or when taken together with all other such adverse effects, would have a materially adverse effect on the validity, enforceability or collectibility of the Receivables and the other Purchased Assets taken as a whole (including, without limitation, any such adverse effect on collectibility which arises as a result of Wyman's or any other Seller's inability to perform its duties as Servicer or as Collection Agent). "Minimum Required Reserve Ratio" shall mean the sum of (i) the Average Dilution Ratio for the most recent Cut-Off Date times the Dilution Horizon Variable for the most recent Cut-Off Date plus (ii) the percentage applicable from time to time to Tier-2 Obligors with respect to the definition of Excess Concentration Balances; provided, that in no event shall the Minimum Required Reserve Ratio be less than fourteen percent (14%). The Minimum Required Reserve Ratio calculated in any Settlement Statement shall be the applicable Minimum Required Reserve Ratio from the Settlement Statement relating thereto until the next Settlement Date. The Minimum Required Reserve Ratio from the Effective Date until the first Settlement Date shall be as set forth on Schedule 1 hereto. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA which is contributed to by WGRC, Wyman or any ERISA Affiliate on behalf of its employees. "Net Eligible Receivables" shall mean the aggregate Outstanding Balances of Eligible Receivables as reported in the most recent Daily Report minus the sum of (i) the aggregate amount of the Excess Concentration Balances for each Obligor and its Consolidated Affiliates then in effect, (ii) the Excess Foreign Obligor Balances then in effect and (iii) the dollar amount of any Liens which attach to the Eligible Receivables unless such Liens (x) are for taxes, assessments or charges of any governmental authority for amounts not yet due or (y) have been bonded in full by or on behalf of the Sellers. "Non-Usage Fee" shall have the meaning ascribed to such term in Section 4.02(a) of the Revolving Credit Agreement. -22- 102 "Noncomplying Receivable" shall mean a Receivable which was not an Eligible Receivable as of the date it was purchased by WGRC from the applicable Seller. "Noncomplying Receivables Adjustment" shall mean, with respect to any Receivables which are identified on any date to a Seller by WGRC as Noncomplying Receivables, the amounts owed by such Seller to WGRC pursuant to Section 2.02(f) of the Receivables Sale Agreement, which amounts shall equal (i) the Purchase Price Percentage times the Original Balance of such identified Noncomplying Receivables minus (ii) the aggregate amount of Collections received by WGRC (and not previously the subject of an adjustment to the Purchase Price payable pursuant to said Section 2.02(f)) with respect to any such Noncomplying Receivables and minus (iii) the aggregate amount of Collections received by WGRC with respect to any Noncomplying Receivables which were previously reported to be Noncomplying Receivables and on account of which Noncomplying Receivables Adjustments were previously made. "Notice of Borrowing" shall mean a "Notice of Borrowing" described in Section 2.03 of the Revolving Credit Agreement. "Notice of Conversion/Continuation" shall mean a "Notice of Conversion/Continuation" described in Section 2.05 of the Revolving Credit Agreement. "Obligations" shall have the meaning assigned to such term in Section 9.01 of the Revolving Credit Agreement. "Obligor" shall mean any Person obligated to make payments in respect of a Receivable. "Ordinary Course Expenses" shall mean the expenses of WGRC for employee salaries, benefits, directors' fees, office lease payments, office supplies, amounts owed under the Company Documents, fees owed to the Lock-Box Banks, Federal, state and local taxes and similar expenses incurred in the ordinary course of its business other than (a) interest expense under the Intercompany Notes and (b) other Carrying Costs specifically mentioned in the definitions of Reserved Carrying Costs and Unreserved Carrying Costs. "Original Balance" shall mean, with respect to any Receivable, the face amount of such Receivable on the date it was purchased by WGRC, which face amount shall be calculated net of any credits issued on the date of Purchase (or, in the case of Purchases on the Effective Date, accrued through the date of Purchase) and reflected in the Daily Report for such date. "Outstanding Balance" shall mean, with respect to any Receivable at any time, the then outstanding face amount thereof, which is calculated by subtracting the Collections, Dilution and Write-Offs relating to such Receivable from the Original Balance of such Receivable. "Participated Letter of Credit" shall mean, a Letter of Credit issued by the Issuing Bank. -23- 103 "Permitted Investments" shall mean (i) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities on or before the first Settlement Date after the date of acquisition; (ii) time deposits and certificates of deposit having maturities on or before the first Settlement Date after the date of acquisition, maintained with or issued by any commercial bank having capital and surplus in excess of $500,000,000 and having a commercial paper rating not less than A-1+ or the equivalent thereof from the Rating Agency; (iii) money market funds which are rated AAA-m or AAA-mg by the Rating Agency; (iv) repurchase agreements having maturities on or before the first Settlement Date after the date of acquisition for underlying securities of the types described in clauses (i) and (ii) above or clause (v) below with any institution with a long term debt rating of AAA or a commercial paper rating of A-1+; and (v) commercial paper maturing on or before the first Settlement Date after the date of acquisition and having a rating of not less than A-1+ from the Rating Agency. "Permitted Liens" shall mean (i) Liens for taxes, assessments or charges of any governmental authority for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (ii) Liens of landlords, carriers, warehousemen, mechanics and materialmen imposed by law and created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (iii) any right of offset of an Obligor with respect to payment of a Receivable which has the economic effect of a priority claim; (iv) Liens of a collecting bank under Section 4-210 of the UCC; and (v) other Liens not described in clause (i) above in favor of the PBGC or the IRS which either (a) do not exceed $2,000,000 in the aggregate at any one time outstanding or (b) have been bonded in full by or on behalf of the Sellers. "Person" shall mean an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, government (or any agency or political subdivision thereof) or other entity. "PFI" shall mean Precision Founders Inc., a California corporation and a wholly-owned subsidiary of Wyman. "Pro Rata Share" shall mean, as to any Bank, a fraction, the numerator of which equals the Commitment of such Bank and the denominator of which equals the Facility Amount. "Progress Billing Receivables" shall mean any Receivables arising pursuant to invoices for progress billings with respect to work not yet completed. "Purchase" shall mean a purchase by WGRC with regard to Pur- chased Assets from the Sellers made pursuant to Article II of the Receivables Sale Agreement. -24- 104 "Purchase Discount Rate Reserve Ratio" shall mean, with respect to any Seller's Receivables a percentage calculated in the most recent Settlement Statement in accordance with the following formula: PDRR = TD x (DR + PD) 360 where: PDRR = the Purchase Discount Rate Reserve Ratio applicable to such Seller's Receivables; TD = the Turnover Days for such Seller's Receivables during the prior Collection Period; DR = the Discount Rate; and PD = a profit discount equal to three percent (3%). "Purchase Price" shall mean, with respect to any Purchase under the Receivables Sale Agreement, the aggregate price to be paid by WGRC to the applicable Seller, which price shall be computed by multiplying the aggregate Original Balances of the Seller's Receivables included in such Purchase by the then effective Purchase Price Percentage applicable to such Receivables, as such amount may be adjusted to reflect any Dilution Adjustment or Noncomplying Receivables Adjustment calculated for the applicable date of Purchase pursuant to Section 2.02(f) of the Receivables Sale Agreement. "Purchase Price Percentage" shall mean, with respect to any Seller's Receivables, a percentage calculated in the most recent Settlement Statement to equal 100% minus the sum of (i) the Loss Discount Ratio applicable thereto and (ii) the Purchase Discount Rate Reserve Ratio applicable thereto, as each such ratio has been computed in such Settlement Statement. The Purchase Price Percentage calculated in any Settlement Statement shall be the applicable Purchase Price Percentage from the Settlement Date relating thereto until the next Settlement Date. From the Effective Date to the first Settlement Date, the applicable Purchase Price Percentage shall be as set forth in Schedule 1 hereto. "Purchased Assets" shall mean, with respect to any Purchase, (a) the Receivables sold to WGRC by the applicable Seller on the date thereof, (b) all Related Security relating to such Receivables and (c) all Collections with respect to, and other proceeds of, such Receivables and Related Security (including, without limita- tion, all Receivable Notes received in respect thereof). "Rating Agency" shall mean Standard & Poor's Corporation ("Standard & Poor's") or any successor rating agency acceptable to the Facility Agent which issues a rating letter with respect to the Facility in substitution for Standard & Poor's. If Standard & Poor's is replaced as the Rating Agency, references to particular ratings shall mean the corresponding rating of such successor Rating Agency. -25- 105 "Receivable" shall mean all indebtedness of an Obligor (whether constituting an account, chattel paper, or general intangible) arising from the sale of merchandise or the furnishing of services by a Seller, including all interest or finance charges and other obligations of such Obligor with respect thereto, but excluding any such indebtedness which is not denominated in U.S. dollars. Until the Collection Date, each Write-Off and each Receivable Note shall continue to constitute a Receivable until the indebtedness of the Obligor thereunder shall have been paid in full, extinguished by agreement between the applicable Seller and such Obligor or otherwise extinguished pursuant to applicable law. "Receivable Notes" means any promissory notes issued by an Obligor to evidence a Receivable. "Receivables Sale Agreement" shall mean that certain Receivables Purchase and Sale Agreement dated as of May 20, 1994 by and between the Sellers and WGRC, as the same may be amended, restated or otherwise modified from time to time. "Records" shall mean all Invoices and other documents, books, records and other media for the storage of information (including, without limitation, tapes, disks, computer programs and databases and related property) maintained with respect to the Receivables and the related Obligors. "Regulations G, T, U and X" shall mean Regulations G, T, U and X, respectively, as promulgated by the Board, or any similar regulations substituted for any of the foregoing. "Related Security" shall mean with respect to any Receivable: (i) all of the applicable Seller's rights under the Invoices; (ii) all guarantees, indemnities, warranties, chattel paper, insurance policies and proceeds and security agreements and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Invoice related to such Receivable or otherwise; and (iii) all of the applicable Seller's residual right, title and interest in and to all goods and/or merchandise (including returned, repossessed or foreclosed goods and/or merchandise) the sale of which gave rise to such Receivable; (iv) all of the applicable Seller's rights in, to and under the (A) Records, (B) instruments, checks and other forms of payment and (C) general intangibles relating to such Receivable; (v) when used with respect to WGRC, all of WGRC's right, title and interest to and rights under the Receivables Sale Agreement; -26- 106 (vi) the assignment to WGRC or the Collateral Agent, as applicable, of all UCC financing statements covering any collateral security for the payment of any of the foregoing; and (vi) all proceeds of the foregoing. "Replacement Bank" shall have the meaning ascribed to such term in Section 2.10 of the Revolving Credit Agreement. "Reporting Date" shall mean the 15th calendar day of any calendar month or, if such day is not a Business Day, then the immediately succeeding Business Day. "Required Banks" shall mean Banks whose Pro Rata Shares aggregate more than 66 2/3%. "Required Reserve Ratios" shall mean, as of any date, the Loss Reserve Ratio and the Dilution Reserve Ratio which are then in effect. "Reserved Carrying Costs" shall mean any of the following items: (i) interest on any Revolving Loans and L/C reimbursement obligations owed under the Revolving Credit Agreement (exclusive of any default interest owed under Sections 4.01(d) and 4.03(b) thereof); (ii) interest on the Intercompany Notes (exclusive of any default interest owed with respect thereto); (iii) L/C Fees; (iv) L/C Fronting Fees; (v) Non-Usage Fees; (vi) Agent Fees; (vii) letter of credit administrative fees; (viii) Ordinary Course Expenses of WGRC not in excess of $50,000 in the aggregate during any Collection Period; and (ix) Servicer Fees. "Responsible Officer" shall mean, with respect to any Person, any president, chairman of the board of directors, vice-president (including any senior or executive vice-president) or treasurer of such Person, in each case, acting in his or her capacity as such. "Revolving Credit Agreement" shall mean that certain Revolving Credit Agreement dated as of May 20, 1994 by and among WGRC, the Facility Agent, the Issuing Bank, the Collateral Agent and the Banks, as the same may be amended, restated or otherwise modified from time to time. "Revolving Loan" shall have the meaning ascribed to such term in Section 2.01 of the Revolving Credit Agreement. "Revolving Note" shall have the meaning ascribed to such term in Section 2.02 of the Revolving Credit Agreement. "Seller" shall have the meaning ascribed to such term in the Receivables Sale Agreement. "Seller's Receivable" shall mean (i) as to WGIC and PFI, a Receivable arising from the sale of merchandise or the furnishing of services by either of them and (ii) as to any other Seller, a Receivable arising from the sale of merchandise or the furnishing of services by such Seller. -27- 107 "Servicer" shall mean, at any time, the Person then authorized pursuant to Article V of the Receivables Sale Agreement to service, administer and collect the Receivables on behalf of WGRC. "Servicer Fee" shall mean the fee paid to the Servicer by WGRC pursuant to Section 5.03(c) of the Receivables Sale Agreement. "Servicer Termination Event" shall mean (i) a Liquidation Event or (ii) an Unmatured Liquidation Event which arises from the gross negligence or willful misconduct of the Servicer in the performance of its obligations under the Receivables Sale Agreement or from a breach of the representations and warranties contained in Section 3.03 of the Receivables Sale Agreement or (iii) any Insolvency Event relating to the Servicer. "Settlement Date" shall mean, with respect to any Collection Period, the 20th calendar day of the next succeeding Collection Period, or if such day is not a Business Day, then the immediately succeeding Business Day. "Settlement Statement" shall mean a report prepared by the Servicer pursuant to Section 5.03(b) of the Receivables Sale Agreement and signed by officers of WGRC and of the Collection Agent which, among other things, certifies that no Liquidation Event or Unmatured Liquidation Event has occurred and is continuing, or, if any such Liquidation Event or Unmatured Liquidation Event has occurred and is continuing, describing such event and the steps, if any, which are being taken in respect thereof. Each Settlement Statement shall be in substantially the form of Exhibit E-1 or Exhibit E-2, as applicable, to the Receivables Sale Agreement. "Short-Term Loans" shall mean those certain loans which the Sellers may advance to WGRC from time to time in lieu of cash payment of the Purchase Price as provided in Section 2.02 of the Receivables Sale Agreement, which loans are evidenced by and subject to the terms and provisions of the Short-Term Note. "Short-Term Notes" shall mean those certain Short-Term Notes issued by WGRC in favor of the Sellers pursuant to Section 2.02(e) of the Receivables Sale Agreement. "Subsidiary" shall mean, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the Board of Directors or other Persons performing similar functions are at the time directly or indirectly owned by such Person. "Syndicated Letter of Credit" shall mean, a Letter of Credit issued severally by the Banks. "Taxes" shall have the meaning ascribed to such term in Section 4.08 of the Revolving Credit Agreement. "Termination Date" shall mean the date on which the Liquidation Period commences. -28- 108 "Termination Receivables" shall mean Receivables which are owed for expenses and penalties on account of the termination of a purchase order and/or long-term supply arrangement. "Tier-1 Obligor" shall mean any Obligor (i) that has (or whose corporate parent has) a commercial paper rating from the Rating Agency of at least A-1+ or (ii) that does not have (and does not have a corporate parent which has) a commercial paper rating of at least A-1+ but does have (or whose corporate parent has) a senior actual or implied debt rating of at least AAA. "Tier-2 Obligor" shall mean any Obligor (other than a Tier-1 Obligor) (i) that has (or whose corporate parent has) a commercial paper rating from the Rating Agency of at least A-1 or (ii) that does not have (and does not have a corporate parent which has) a commercial paper rating of at least A-1 but does have (or whose corporate parent has) a senior actual or implied debt rating of at least A. "Tier-3 Obligor" shall mean any Obligor (other than a Tier-1 Obligor or a Tier-2 Obligor) (i) that has (or whose corporate parent has) a commercial paper rating from the Rating Agency of at least A-2 or (ii) that does not have (and does not have a corporate parent which has) a commercial paper rating of at least A-2 but does have (or whose corporate parent has) a senior actual or implied debt rating of at least BBB+. "Tier-4 Obligor" shall mean any Obligor (other than a Tier-1 Obligor, a Tier-2 Obligor or a Tier-3 Obligor) (i) that has (or whose corporate parent has) a commercial paper rating from the Rating Agency of at least A-3 or (ii) that does not have (and does not have a corporate parent which has) a commercial paper rating of at least A-3 but does have (or whose corporate parent has) a senior actual or implied debt rating of at least BBB-. "Tier-5 Obligor" shall mean any Obligor which is not a Tier-1 Obligor, a Tier-2 Obligor, a Tier-3 Obligor or a Tier-4 Obligor. "Turnover Days" shall mean, with respect to any Seller's Receivables or all of the Receivables, as the case may be, as calculated in any Settlement Statement, that period (expressed in days) calculated as (a) one-half of the sum of the aggregate Outstanding Balances of such Receivables as of the last two Cut-Off Dates divided by (b) the aggregate Original Balances of such Receivables generated during the most recent Collection Period multiplied by (c) the number of days in such Collection Period. From the Effective Date until the first Settlement Statement, the Turnover Days for each Seller's Receivables and all of the Receivables shall be calculated as set forth on Schedule 1, and the underlying calculations for each of the three Collection Periods preceding the first Settlement Date to be used in future calculations of such Turnover Days shall be as set forth in such Schedule 1. "Type" of Borrowing shall mean a Base Rate Borrowing or Euro- dollar Borrowing, as the case may be. -29- 109 "UCC" shall mean the Uniform Commercial Code as from time to time in effect in the State of New York, except to the extent that the validity or perfection of any Lien created under any Facility Document or any remedy in respect thereof is governed by the laws of a jurisdiction other than the State of New York, in which case (but only to such extent) the term "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction. "Unmatured Liquidation Event" shall mean an event or condition which, with the passage of time or the giving of notice or both would constitute a Liquidation Event. "Unreserved Carrying Costs" shall mean any of the following items: (i) default interest owed under Sections 4.01(d) or 4.03(b) of the Revolving Credit Agreement, Section 2.04 of the Receivables Sale Agreement or the Intercompany Notes; (ii) Ordinary Course Expenses of WGRC in excess of $50,000 in the aggregate during any Collection Period; (iii) indemnification amounts owed under Sections 3.07(a), 4.06 and 9.04(b) of the Revolving Credit Agreement; and (iv) other amounts payable in accordance with Sections 4.04, 4.08, 9.05, 10.03 and 12.07 of the Revolving Credit Agreement. "WGIC" shall mean Wyman-Gordon Investment Castings, Inc., a Delaware corporation and a wholly-owned subsidiary of Wyman. "WGRC" shall mean Wyman-Gordon Receivables Corporation, a Delaware corporation. "WGRC Percentage" shall mean 100% minus the Bank Percentage. "Write-Off" shall mean all or a portion of a Receivable that, consistent with the applicable Credit and Collection Policy, has been or should be (i) specifically assigned to a category reserved for doubtful Receivables or otherwise recorded on the applicable Seller's or WGRC's books as a Receivable the collectibility of which is doubtful or (ii) (without duplication) written off such Seller's or WGRC's books as uncollectible. "Wyman" shall mean Wyman-Gordon Company, a Massachusetts corporation. -30- EX-99.8 9 1 EXHIBIT 99.8 RECEIVABLES PURCHASE AND SALE AGREEMENT Dated as of May 20, 1994 among WYMAN-GORDON COMPANY, WYMAN-GORDON INVESTMENT CASTINGS, INC. and PRECISION FOUNDERS INC. as the Sellers WYMAN-GORDON COMPANY, as the Servicer and WYMAN-GORDON RECEIVABLES CORPORATION as the Purchaser -18- 2 TABLE OF CONTENTS
SECTION PAGE Parties 1 Preambles 1 ARTICLE I DEFINITIONS 1 1.01 Certain Definitions 1 1.02 Accounting Terms 1 1.03 Other Terms 2 1.04 Computation of Time Periods 2 ARTICLE II AMOUNTS AND TERMS OF THE PURCHASES 2 2.01 Agreement to Purchase 2 2.02 Effective Date Transactions; Sellers' Representations 4 2.03 Calculation of Purchase Price 7 2.04 Payments and Computations, etc. 8 2.05 Transfer of Records to WGRC 8 2.06 Additional Sellers 9 ARTICLE III REPRESENTATIONS AND WARRANTIES 10 3.01 Representations and Warranties of the Sellers 10 3.02 Representations and Warranties of WGRC 14 3.03 Representations and Warranties of the Servicer 15 ARTICLE IV GENERAL COVENANTS OF THE SELLERS 16 4.01 Affirmative Covenants of the Sellers 16 4.02 General Reporting Requirements of the Sellers 20 4.03 Negative Covenants of the Sellers 22 ARTICLE V ADMINISTRATION AND COLLECTION 24 5.01 Collection of Receivables 24 5.02 Designation of Servicer 25 5.03 Duties of the Servicer; Daily Reports and Settlement Statements; Servicer Fee 26 5.04 Responsibilities of the Sellers 28 5.05 Further Action Evidencing Purchases 28 5.06 Application of Collections 29 ARTICLE VI INDEMNIFICATION 29 6.01 Indemnities by the Sellers 29
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SECTION PAGE ARTICLE VII MISCELLANEOUS 32 7.01 Amendments, etc. 32 7.02 Notices, etc. 33 7.03 No Waiver; Remedies 33 7.04 Binding Effect; Assignability 33 7.05 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF PERSONAL SERVICE AND VENUE; WAIVER OF JURY TRIAL 34 7.06 Costs, Expenses and Taxes 35 7.07 Confidentiality 35 7.08 Execution in Counterparts; Severability 36 7.09 Termination Date 36 7.10 No Recourse 37 7.11 No Proceedings 37 7.12 Entire Agreement 37 7.13 Survival of Agreement 37
-ii- 4 RECEIVABLES PURCHASE AND SALE AGREEMENT Dated as of May 20, 1994 THIS RECEIVABLES PURCHASE AND SALE AGREEMENT (the "Agreement"), dated as of May 20, 1994 is among Wyman-Gordon Company, a Massachusetts corporation ("Wyman"), Wyman-Gordon Investment Castings, Inc., a Delaware corporation ("WGIC"), Precision Founders Inc., a California corporation ("PFI") and Wyman-Gordon Receivables Corporation, a Delaware corporation ("WGRC") (Wyman, WGIC and PFI, the "Initial Sellers" and, together with each other corporation that may hereafter become a party hereto pursuant to Section 2.06, being hereinafter referred to collectively as the "Sellers.") WITNESSETH: WHEREAS, all of the issued and outstanding capital stock of WGRC is or, pursuant to the terms of Section 2.02 hereof, will be owned by the Initial Sellers; WHEREAS, WGRC was formed for the purpose of purchasing accounts receivable and certain related assets from the Sellers and engaging in other activities incidental thereto; WHEREAS, the Initial Sellers and WGRC have agreed to enter into this Agreement to evidence the terms and conditions under which such purchases shall take place; and WHEREAS, the Initial Sellers and WGRC have agreed that Cameron Forged Products Company ("Cameron"), shall become a "Seller" hereunder following the date after which (i) all of the outstanding stock of Cameron has been acquired by Wyman and (ii) the accounts receivable factoring arrangements entered into by Cameron and Cooper Industries, Inc. ("Cooper") in connection with such acquisition have been terminated and Cameron has repurchased such accounts from Cooper; NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party hereto, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Certain Definitions. For all purposes of this Agreement, except as otherwise specifically provided herein, capitalized terms used in this Agreement without definition shall have the meanings ascribed to such terms in Annex 1 hereto. SECTION 1.02. Accounting Terms. Under this Agree- ment, all accounting terms not specifically defined herein shall be interpreted, all accounting determinations made and all financial statements prepared in accordance with GAAP. -1- 5 SECTION 1.03. Other Terms. All other undefined terms contained in this Agreement shall, unless the context indicates otherwise, have the meanings provided for by the UCC to the extent the same are used or defined therein. The words "herein," "hereof," and "hereunder" and other words of similar import refer to this Agreement as a whole, including the annexes, exhibits and schedules hereto, as the same may from time to time be amended or supplemented and not to any particular section, subsection, or clause contained in this Agreement, and all references to Sections, Annexes, Exhibits and Schedules shall mean, unless the context clearly indicates otherwise, the Sections hereof and the Annexes, Exhibits and Schedules attached hereto, the terms of which Annexes, Exhibits and Schedules are hereby incorporated into this Agreement. Whenever appropriate, in the context, terms used herein in the singular also include the plural, and vice versa. SECTION 1.04. Computation of Time Periods. In this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." ARTICLE II AMOUNTS AND TERMS OF THE PURCHASES SECTION 2.01. Agreement to Purchase. (a) On the terms and conditions hereinafter set forth, on each Business Day from and after the Initial Purchase Date applicable to any Seller until the occurrence of the Termination Date, WGRC agrees (except as otherwise provided in Section 2.01(c)) to purchase from such Seller, and each such Seller agrees to sell to WGRC, all of such Seller's right, title and interest in and to all of its Receivables outstanding as of the Business Day before such date, which have not been previously purchased by WGRC, together with all of the Related Security relating to such Receivables and all Collections with respect to and other proceeds of such Receivables and Related Security (including, without limitation, all Receivables Notes received in respect thereof). For purposes of the foregoing sentence, a Receivable with respect to which an invoice has been withheld from mailing due to perceived billing errors shall not be deemed outstanding and shall not be purchased by WGRC hereunder until such invoice has been internally approved by the appropriate Seller. Until the Termination Date, each Purchase described in the preceding sentence shall occur no later than 4:00 p.m. (Boston time) on the date of such Purchase concurrently with payment of the Purchase Price required under Section 2.02 (or, in the case of the initial Purchase hereunder, concurrently with such payment, the making of the loans under the Long-Term Notes and the contribution to capital by each Initial Seller described herein). Prior to making any Purchase hereunder, WGRC may request from any Seller, and such Seller shall promptly deliver, such approvals, opinions, information, reports or documents as WGRC may reasonably request. -2- 6 (b) It is the intention of the parties hereto that each Purchase of Receivables to be made hereunder shall constitute a "sale of accounts," as such term is used in Article 9 of the UCC, and not a loan secured by such accounts and Seller shall have no rights or obligations hereunder to repurchase or otherwise reacquire any of the Receivables. Except for Noncomplying Receivables Adjustments and Dilution Adjustments, each sale of Receivables by a Seller to WGRC is made without recourse to such Seller; provided, however, that (i) each Seller shall be liable to WGRC for all representations, warranties and covenants made by such Seller pursuant to the terms of Section 6.01 of this Agreement, and (ii) such sale does not constitute and is not intended to result in an assumption by WGRC or any assignee thereof of any obligation of any Seller or any other Person arising in connection with the Receivables, the Related Security and the related Invoices, or any other obligations of the Sellers. In view of the intention of the parties hereto that the Purchases of Receivables to be made hereunder shall constitute a sale of such Receivables rather than a loan secured by such Receivables, each Seller agrees to note in its financial statements that its Receivables have been sold to WGRC. (c) Notwithstanding any other provision of this Article II, WGRC shall not purchase from any Seller nor shall any Seller sell to WGRC any Receivables on or after the earlier of (i) the Termination Date, (ii) the date of any Insolvency Event occurring with respect to such Seller or WGRC or (iii) the discovery by Wyman, WGRC or any Seller of any Liquidation Event described in clause (m) of the definition thereof with respect to the Receivables to be sold by such Seller; provided, however that if: (A) such Insolvency Event arises as a result of an involuntary bankruptcy or other proceeding filed against a Seller, and such proceeding is dismissed or otherwise terminated prior to the Termination Date; or (B) such Insolvency Event arises as a result of an involuntary bankruptcy or other proceeding filed against a Seller, and (1) WGRC, the Facility Agent and the Rating Agency shall have received an order from the court having jurisdiction of such matter, which order (x) is satisfactory to the Facility Agent and the Rating Agency, (y) approves the continuation of sales of Receivables by such Seller or Sellers to WGRC hereunder and (z) provides that WGRC and its assigns (including the Banks and the Agents) can rely on such order for the validity and nonavoidance of such sales and (2) the Rating Agency shall have issued a reconfirmation of its rating with respect to the Facility; or (C) such Liquidation Event is cured prior to the Termination Date; then, in any such case, WGRC shall automatically resume its purchase of Receivables from such Seller or the Sellers hereunder unless and until the Termination Date has otherwise occurred in accordance with the terms hereof. -3- 7 SECTION 2.02. Effective Date Transactions; Sellers' Representations; Payment for Purchases; Adjustments to Purchase Price. (a) On the Effective Date, each Initial Seller shall make a contribution to the capital of WGRC equal to the Purchase Price of all of its Receivables which are not paid for in cash or by delivery of a Long-Term Note, in exchange for which contribution the Initial Sellers shall collectively receive all of the common stock of WGRC. Each Long-Term Note shall be substantially in the form of Exhibit A-3 attached hereto. WGRC hereby agrees that it shall, subject to the terms and provisions of the Revolving Credit Agreement and upon the request of any Seller from time to time, request the Banks to make a Borrowing of Revolving Loans under the Revolving Credit Agreement. All proceeds received by WGRC from such Borrowings shall be remitted to, and shall be applied by, the Sellers in the same manner and to the same extent as if such proceeds constituted Available Cash to be distributed and applied pursuant to Section 9.07(c) of the Revolving Credit Agreement. If, after the Effective Date, any Seller elects to advance to WGRC and WGRC agrees to borrow additional loans (other than the loans evidenced by the Short-Term Notes and the L/C Note described below), then such Seller may make such additional loans under its Long-Term Note, the terms of which shall govern the repayment of such loans. The applicable Seller may evidence the making of any such additional loan or loans by recording the date and amount thereof on the grid attached to its Long-Term Note; provided that failure to make any such recordation on such grid or any error in such grid shall not adversely affect such Seller's rights to recover the outstanding amount of such loan. It is expressly acknowledged and agreed that nothing in this Section 2.02(a) shall require any Seller to advance, or require WGRC to borrow, any such additional loans (other than the loans evidenced by the Short-Term Notes and the L/C Note described below). (b) Each Purchase of Receivables hereunder shall be consummated through WGRC's payment of the applicable Purchase Price therefor in cash, except (i) as otherwise provided in Section 2.02(d) or (e) below, and (ii) that WGRC may set off against the amount of any such payment amounts then owing to WGRC as Dilution Adjustments and Noncomplying Receivables Adjustments as provided in Section 2.02(f) below and/or other uncontested amounts owing to WGRC under this Agreement. (c) It shall be a condition precedent to each Purchase hereunder from a Seller that (i) the representations and warranties of such Seller contained in Section 3.01 are correct in all material respects as to it and as to the Receivables purchased from it in such Purchase on and as of such day as though made on and as of such date (except for representations and warranties which relate to a specific date only), and (ii) no event has occurred and is continuing, or would result from such Purchase, which constitutes a Liquidation Event. Each Seller, by accepting the proceeds of the Purchase Price for a Purchase, shall be deemed to have certified to WGRC the satisfaction of the foregoing conditions precedent; provided, however, that such Seller shall not be deemed to have certified the non-existence of a Liquidation Event of which -4- 8 it does not have knowledge which Liquidation Event may have arisen solely on account of actions or omissions of WGRC. Upon the payment of the Purchase Price for any Purchase, title to the Purchased Assets included in such Purchase shall vest in WGRC, whether or not the conditions precedent to such Purchase were in fact satisfied. (d) WGRC may elect to pay all or part of the applicable Purchase Price for all Purchases of Receivables to be made on any day by paying cash or, at the request of the Sellers, by causing the Issuing Bank or the Banks severally (as applicable) to issue a Letter of Credit in favor of beneficiaries selected by the Sellers and in form and substance acceptable to WGRC. In the event that the Sellers request that any purchases be paid for by issuance of a Letter of Credit, the Sellers shall on a timely basis provide WGRC with such information as is necessary for WGRC to obtain such Letter of Credit from the Issuing Bank or the Banks. No Seller shall have any reimbursement obligations in respect of any draws under any Letter of Credit. The face amount of each Letter of Credit shall be applied in the following order of priority: (i) as a deduction from the applicable Purchase Price otherwise payable by WGRC; (ii) to the extent such face amount exceeds such Purchase Price, as a reduction in the principal amounts owed under the Short-Term Notes (allocated among the Short-Term Notes as Wyman shall direct); (iii) to the extent the aggregate principal amount outstanding under the Short Term Notes has been reduced to zero, as a reduction in the principal amounts owed under the Long-Term Notes (allocated among the Long-Term Notes as Wyman shall direct); and (iv) to the extent the aggregate principal amount outstanding under the Long-Term Notes has been reduced to zero, as a credit against the Purchase Price payable to the Sellers for future purchases of Receivables; provided, however, that if such credit is not fully utilized on the earlier of (i) the Termination Date and (ii) the date on which such particular Letter of Credit is drawn, then the Sellers shall pay to WGRC, in consideration of the applicable portion of the L/C Note, cash in an amount equal to the unutilized amount of such credit. The aggregate amount of deductions, reductions and credits described in clauses (i) through (iv) of the immediately preceding sentence shall be evidenced by an L/C Note in the form of Exhibit A-1 hereto in a notional principal amount of $35,000,000 and in an initial principal amount equal to the sum of such deductions, reductions and credits, and shall be payable to Wyman, for the benefit of the Sellers, in accordance with the terms and provisions of the L/C Note, this Agreement and Article IX of the Revolving Credit Agreement. The principal amount of the L/C Note shall be increased by the amount of each subsequent deduction, reduction and credit described above and reduced by the amount of each draw on any Letter of Credit. Any payments or credits made on or with respect to the L/C Note shall be allocated among the Sellers as the Sellers may mutually agree. In the event that a Letter of Credit (as the same may be extended, replaced or renewed and after giving effect to any partial draws) expires or is otherwise terminated undrawn, a portion of the principal amount of the L/C Note equal to the undrawn face amount of such Letter of Credit shall be payable to Wyman, for the benefit of the Sellers, within 15 Business Days thereafter. -5- 9 (e) If, on any day, WGRC has insufficient funds to pay in full the Purchase Price owed on such day, or if the Sellers otherwise consent, WGRC may pay all or part of the applicable Purchase Price to be made on such day by borrowing under its Short- Term Notes, each in the form of Exhibit A-2 attached hereto and issued in favor of each Seller, and each Seller shall have irrevocably agreed to advance, and shall be deemed to have advanced, a revolving loan in the amount so specified by WGRC; provided, however, that WGRC may not make payments of Purchase Prices through the use of such revolving loans if, as a result thereof, either (i) the aggregate unpaid principal amount of the Short-Term Notes would exceed the lesser of (A) $15,000,000 and (B) 10% of the aggregate Outstanding Balance of Receivables of all the Sellers or (ii) the aggregate unpaid principal amount of any Seller's Short-Term Note would exceed the maximum stated amount thereof, and subject (in either case) to the requirements set forth in Section 8.02 of the Revolving Credit Agreement. Each such revolving loan shall be payable in accordance with the terms and provisions of the Short-Term Notes, this Agreement and Article IX of the Revolving Credit Agreement. Each Seller may evidence the making of each revolving loan by recording the date and amount thereof on the grid attached to its Short-Term Note; provided, that failure to make any such recordation on such grid or any error in such grid shall not adversely affect such Seller's rights to recover the outstanding unpaid principal amount of the revolving loans made under its Short-Term Note. WGRC hereby agrees, to the extent reasonably practicable, to use its best efforts to allocate the amount of revolving loans made on any day under the Short-Term Notes ratably among the Sellers according to the respective Purchase Prices owed to each Seller for Receivables sold on such date. (f) On each Business Day after its Initial Purchase Date, each Seller shall (or shall cause the Servicer to) report the amount of Dilution which occurred with respect to such Seller's Receivables on the prior Business Day, and the Dilution Adjustment owing on account of such Dilution shall be deducted from the applicable Purchase Price which would, but for this Section 2.02(f), otherwise be payable to such Seller on such date. If any such Dilution relates to goods which are returned to a Seller or repossessed by a Seller, then, concurrently with payment of such Dilution Adjustment (whether through offset or otherwise), WGRC shall assign and transfer to such Seller, without any further action or consideration, all of WGRC's right, title and interest in and to such returned or repossessed goods. In addition, if, on the Business Day immediately preceding such date, WGRC has (i) notified any Seller that any Receivables previously sold to WGRC under this Agreement have been discovered to be Noncomplying Receivables and (ii) requested that such Seller pay to WGRC a Noncomplying Receivables Adjustment on account of such Noncomplying Receivables, then such Noncomplying Receivables Adjustment shall also be deducted from the applicable Purchase Price which would, but for this Section 2.02(f), otherwise be payable to such Seller on such date. If the sum of the applicable Dilution Adjustment and the -6- 10 Noncomplying Receivables Adjustment on any date exceeds the applicable Purchase Price otherwise owing to a Seller, WGRC shall be entitled to a reduction in the principal amount outstanding under the applicable Short-Term Note in an amount equal to such excess and, in the event the principal amount outstanding under such Short-Term Note has been reduced to zero, to a credit against the Purchase Price otherwise payable for future purchases of Receivables from such Seller; provided, however, that if any such credit is not fully utilized within five Business Days, such Seller shall pay to WGRC the remaining amount of any such credit on the next following Business Day in cash. If, on any date, the Servicer notifies WGRC that WGRC has received Collections on account of a Noncomplying Receivable for which a Noncomplying Receivables Adjustment was previously made, then the amount of such Collections must be added to the Purchase Price otherwise payable to the applicable Seller on such date. SECTION 2.03. Calculation of Purchase Price. (a) The Purchase Price Percentage applicable to Purchases from each Seller hereunder shall be set forth in Schedule 1 of Annex I hereto for the period from the Effective Date until the first Settlement Date. Thereafter and from and after each subsequent Settlement Date, the Purchase Price Percentage applicable to Purchases from each Seller hereunder shall be as set forth in the most recent Settlement Statement prepared by the Servicer pursuant to Section 5.03(b) (or, in the case of any Seller other than an Initial Seller, for the period from such Seller's Initial Purchase Date until the next Settlement Date, as set forth in such Seller's Assumption Agreement) and the Purchase Prices owed to each Seller for any Business Day shall be as set forth in the Daily Report prepared by the Servicer pursuant to Section 5.03(b). Each Seller agrees to provide to the Servicer on a timely basis all information necessary to calculate the applicable Purchase Price Percentage and the applicable Purchase Price. (b) Until WGRC shall notify any Seller or the Servicer of any exceptions to the calculations contained in any Daily Report or Settlement Statement (copies of which notices shall be concurrently sent to the Agents), each such Daily Report and Settlement Statement shall be deemed to be correct as originally delivered. If WGRC shall have notified any Seller or the Servicer and the Agents of any exceptions to the Daily Report or Settlement Statement, such Seller, the Servicer, WGRC and the Agents shall promptly endeavor to resolve the matters set forth in such notice. Until such resolution is agreed upon, however, the Daily Report or Settlement Statement originally delivered by the Servicer shall, absent manifest error, continue to be presumed correct for purposes of calculating the applicable Purchase Price payable hereunder until a resolution is reached to the contrary. Nothing contained in this Section 2.03(b), however, shall be deemed to limit the rights of WGRC under Section 6.01. -7- 11 SECTION 2.04. Payments and Computations, Etc. All amounts to be paid by WGRC to any Seller or by any Seller to WGRC hereunder shall be paid in accordance with the terms hereof no later than 4:00 p.m. (Boston time) on the day when due in Dollars in immediately available funds to such account as such Seller or WGRC, as applicable, may from time to time specify in writing. Payments received by any Seller or WGRC after such time shall be deemed to have been received on the next Business Day. In the event that any payment becomes due on a day which is not a Business Day, then such payment shall be made on the next succeeding Business Day. Each party hereto shall, to the extent permitted by law, pay to the other party interest on all amounts not paid when due hereunder, from and after the Business Day immediately following the Business Day such party receives notice thereof from the other party until such amounts are paid in full, at 2% per annum above the Discount Rate in effect on the date such payment was due (subject, in the case of payments owing by WGRC, to the provisions of Section 9.07 and 9.08 of the Revolving Credit Agreement); provided, however, that such interest rate shall not at any time exceed the maximum rate permitted by applicable law. All computations of interest payable hereunder shall be made on the basis of a year of 365 or, as applicable, 366 days for the actual number of days (including the first but excluding the last day) elapsed. SECTION 2.05. Transfer of Records to WGRC. (a) Each Purchase of Receivables hereunder shall include the transfer to WGRC of all of the applicable Seller's right and title to and interest in the Records relating to such Receivables, and each Seller hereby agrees that such transfer shall be effected automatically with each such Purchase, without any further documentation. In connection with such transfer, each Seller hereby grants to WGRC an irrevocable, non-exclusive license to use, without royalty or payment of any kind, all software used by such Seller to account for the Receivables, to the extent necessary to administer the Receivables, whether such software is owned by such Seller or is owned by others and used by such Seller under license agreements with respect thereto. The license granted hereby shall be irrevocable, and shall terminate on the Collection Date. (b) Each Seller shall take such action requested by WGRC, from time to time hereafter, that may be necessary or appropriate in the opinion of WGRC on the part of such Seller to ensure that WGRC has (i) an enforceable ownership interest in the Records relating to the Receivables purchased from the Sellers hereunder and (ii) an enforceable right (whether by license or sublicense or otherwise) to use all of the computer software used to account for the Receivables and/or to recreate such Records. (c) Notwithstanding the foregoing, it is expressly understood and agreed by the parties hereto that, as of the date hereof: (i) Cameron utilizes software (the "Cameron Software") owned by Computer Associates to account for its Receivables, and (ii) Computer Associates is not willing to grant to WGRC or the Servicer an enforceable right to use such Cameron Software. WGRC agrees that, upon the addition of Cameron as a Seller hereunder, Cameron -8- 12 shall not be required to grant WGRC or the Servicer an enforceable right to use the Cameron Software, provided that (y) if each of WGRC and the Servicer has not been granted such a right on or before March 31, 1995, then Cameron shall cease to use the Cameron Software to account for the Receivables and shall process all data relating to the Receivables pursuant to software programs which WGRC and the Servicer each has an enforceable right to use and (z) unless and until WGRC and the Servicer each has an enforceable right to use Cameron's accounts receivable software, Cameron shall, (1) on each Business Day, download from the Cameron Software all information relating to the Receivables generated by it and program such information into a spreadsheet which will be readable pursuant to "Excel," "Lotus," or similar software program and in a format which is consistent with the other Sellers' computer records relating to the Receivables; and (2) as frequently as the Servicer, WGRC or the Collateral Agent may request, forward to the Servicer, WGRC and/or the Collateral Agent computer disks containing such spreadsheet information. If, by March 31, 1995, Cameron has not satisfied the conditions described in clause (y) of the immediately preceding sentence, then the Receivables sold by Cameron hereunder shall thereafter not constitute Eligible Receivables unless and until such conditions are satisfied. SECTION 2.06. Additional Sellers. At any time prior to the Termination Date, Wyman may designate any U.S. Subsidiary of which it owns (directly or indirectly) at least 80% of the issued and outstanding stock as an additional "Seller" hereunder and such Subsidiary shall, subject to the conditions precedent set forth below, become a "Seller" for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement. Without limiting the foregoing, it is expressly understood and agreed by the parties hereto that Cameron shall become a "Seller" hereunder when the conditions set forth herein and in the recitals to this Agreement with respect thereto have been satisfied. The addition of any Subsidiary as a "Seller" hereunder shall be subject to the satisfaction of the conditions precedent that (i) such additional Seller shall have executed an Assumption Agreement substantially in the form of Exhibit F attached hereto (with the annexes thereto appropriately completed); (ii) except as otherwise contemplated in Section 2.05(c), the representations and warranties made by the Initial Sellers as of the Effective Date shall be made by such additional Seller as of its Initial Purchase Date and shall be true and correct as to such additional Seller in all respects as of such date; (iii) WGRC, the Facility Agent and the Rating Agency shall have received, in form and substance satisfactory to each of them, an executed copy of such Assumption Agreement and such evidence of corporate existence and good standing, secretary's certificates, UCC lien search reports, UCC financing statements, legal opinions and similar documentation required of the Initial Sellers on or prior to the Effective Date (with sufficient copies of all such documentation for delivery to the Banks) and such other documentation as may be reasonably required by WGRC, the Facility Agent or the Rating Agency; and (iv) in the case of any additional Seller other than Cameron, the Rating Agency shall have confirmed -9- 13 in writing that such addition will not cause its rating of the Facility to be reduced or withdrawn. Upon the satisfaction of all such conditions precedent with respect to any such additional Seller, each of the applicable schedules and exhibits hereto shall be automatically deemed amended in accordance with the applicable Assumption Agreement, without any further action on the part of any of the parties hereto. Prior to or within a reasonable time following the addition of any new Seller under this Section 2.06, WGRC (or the Facility Agent as its designee) shall have the right to conduct a review of any additional Seller's books and records relating to the Receivables sold or to be sold by such Seller, the costs and expenses of which review shall be borne by Wyman and/or such new Seller as Wyman and such Seller may mutually agree. ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Representations and Warranties of the Sellers. Each Seller represents and warrants that as of the Initial Purchase Date with respect to such Seller and (except for representations and warranties which relate to a specific date only) as of the date of each Purchase: (a) Such Seller is a corporation duly incorporated, validly existing and in good standing under the laws of its state of incorporation and has all governmental licenses, authorizations, consents and approvals required to carry on its business, and is in good standing in each jurisdiction in which its business is now conducted, except where the absence of such licenses, authorizations, consents, approvals or good standing would not have a Material Adverse Effect. (b) The execution, delivery and performance by such Seller of this Agreement, the other Facility Documents to which it is a party and all other agreements, instruments and documents executed and delivered by such Seller hereunder and thereunder, and the transactions contemplated hereby and thereby, are within such Seller's corporate powers, have been duly authorized by all necessary corporate action, and do not and will not (i) result in or require the creation of any Lien upon or with respect to any Purchased Assets except as created in favor of WGRC hereunder nor result in or require the creation of any material Lien with respect to its other properties; (ii) violate, conflict with or result in a breach or default under such Seller's charter or by-laws; (iii) violate, conflict with or result in a breach or default under any law, rule or regulation applicable to such Seller or its property; (iv) violate, conflict with or result in a breach or default under any contractual restriction contained in any indenture, loan, credit agreement or bond; (v) violate, conflict with or result in a breach or default under any lease, mortgage, security agreement, note, or other agreement or instrument binding on such Seller or to which its property is subject, which violation, breach or default would have a Material Adverse Effect; or (vi) violate, conflict with or result in a breach of any order, writ, judgment, award, injunction or decree binding on such Seller or to which its -10- 14 property is subject. No transaction contemplated hereby requires compliance with any bulk sales act or similar law. This Agreement has been duly executed and delivered on behalf of such Seller. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body, governmental agency or official or other Person is required for the due execution, delivery and performance by such Seller of this Agreement, any other Facility Document to which it is a party or any other agreement, document or instrument delivered hereunder or thereunder except for the filing of UCC Financing Statements to evidence WGRC's ownership interests in the Receivables and other Purchased Assets purchased hereunder and all proceeds thereof, which filings have been duly made and are, and on or prior to each Purchase will be, in full force and effect, and for other consents which have been duly obtained. (d) This Agreement and each of the other Facility Documents to which such Seller is a party each constitutes the legal, valid and binding obligation of such Seller enforceable against such Seller in accordance with its terms. (e) Immediately prior to WGRC's Purchase of each Purchased Asset sold by such Seller hereunder, such Seller is or will be the lawful owner of, and have good title to, such Purchased Asset, free and clear of all Liens except Permitted Liens. Upon the Purchase of each Receivable sold by such Seller hereunder, WGRC shall acquire all of the right and title to and interest of such Seller in such Receivable and all other Purchased Assets relating thereto, free and clear of any Liens (except Permitted Liens) and shall have a valid, perfected first priority ownership interest in such Receivables, subject only to Permitted Liens. The Purchases of the Purchased Assets by WGRC constitute true and valid sales and transfers for consideration (and not merely a pledge of such Purchased Assets for security purposes), enforceable against creditors of such Seller and no Purchased Assets shall constitute property of such Seller. No effective financing statement or other instrument similar in effect covering all or any part of such Purchased Assets naming such Seller as assignor or debtor shall at such time be on file in any filing or recording office except as may be filed in favor of WGRC or its assigns pursuant to the Facility Documents. (f) The use of all funds received by such Seller under this Agreement will not violate Regulations G, T, U and X, as in effect from time to time. (g) No information, exhibit, financial statement, document, book, record or report (including, without limitation, the Information Memorandum) furnished or to be furnished by such Seller (whether individually or in its capacity as Servicer or sub- servicer, as the case may be) to WGRC, the Agents, the Banks and/or the Issuing Bank in connection with this Agreement or any of the other Facility Documents is or shall be inaccurate in any material -11- 15 respect, or contains or shall contain any material misstatement of fact, or omits or shall omit to state a material fact or any fact necessary to make the statements contained therein not materially misleading in light of the circumstances under which they were made, in each case, as of the date it is or shall be dated or (except as otherwise disclosed to WGRC or the foregoing parties, as the case may be, at such time) as of the date so furnished. (h) The principal place of business and chief executive office of such Seller are located at the address of such Seller referred to in Section 7.02 hereof and the locations of the offices where the Records and computer software are kept, together with each other location within the states of Massachusetts and New Hampshire where the Sellers conduct business, are listed on Schedule 3.01(h) (or at such other locations, notified to WGRC and the Agents in accordance with Section 4.01(d), in jurisdictions where all action required by Section 5.05 has been taken and completed). (i) Each Obligor has been instructed to remit payment on the Receivables either to (1) one of the Lock-Box Accounts to be utilized by WGRC or (2) via wire transfer, directly to the Collection Account. From and after its Initial Purchase Date, such Seller will have no right, title and/or interest to any of the Lock-Box Accounts and will maintain no lock-box accounts in its own name for the collection of such Receivables. The account numbers of all Lock-Box Accounts, together with the names and addresses of all the Lock-Box Banks maintaining such Lock-Box Accounts, are specified in Schedule 3.01(i). (j) During the five-year period prior to the Initial Purchase Date, such Seller has had no trade names, fictitious names, assumed names or any other names under which it has done or is doing business except as set forth in Schedule 3.01(j). (k) There are no actions, suits or proceedings pending, or to the knowledge of such Seller, threatened, against it or affecting it or its property in any court, or before any arbitrator of any kind, or before or by any governmental body, which (i) challenge the validity, legality or enforceability of this Agreement or any of the other Facility Documents, or (ii) would have a Material Adverse Effect. (l) All of the computer software used by such Seller to account for the Receivables is set forth in Schedule 3.01(l) hereto. The Servicer, WGRC and their respective assigns (including any successor Servicers) have (or will have, concurrently with the effectiveness hereof) an enforceable right (whether pursuant to Section 2.05 hereunder or by separate sublicense and except as otherwise contemplated by Section 2.05(c)) to use all such computer software to the extent necessary for administering the Receivables. (m) On the date of Purchase thereof, each Receivable is, unless otherwise identified in the Daily Report, an Eligible Receivable. -12- 16 (n) Such Seller, on its Initial Purchase Date, (i) is not "insolvent" (as such term is defined in Section 101(31)(A) of the Bankruptcy Code); (ii) is able to pay its debts as they mature and (iii) does not have unreasonably small capital for the business in which it is engaged or for any business or transaction in which it is about to engage. (o) Such Seller is entering into the transactions contemplated by this Agreement in reliance on WGRC's identity as a separate legal entity from each Seller and each of its Affiliates other than WGRC, and acknowledges that WGRC and the other parties to the Facility Documents are similarly entering into the transactions contemplated by the other Facility Documents in reliance on WGRC's identity as a separate legal entity from each Seller and each such other Affiliate. (p) Such Seller is not (i) an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, or (ii) a "holding company", or a "subsidiary company" or an "affiliate" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. (q) Wyman has delivered to WGRC complete and correct copies of the audited consolidated balance sheet of Wyman as of December 31, 1993 and the unaudited consolidated balance sheet of Wyman as of March 31, 1994 and related consolidated statements of income and cash flows for the twelve-month and three-month periods then ended, respectively. Such balance sheets and statements of income and cash flows have been prepared in accordance with GAAP consistently applied (subject to changes in application which were approved by Wyman's independent public accountants and were disclosed therein and subject to normal year-end adjustments in the case of the unaudited statements), and present fairly in all material respects Wyman's financial position as of the dates indicated above and the results of its operations for the periods then ended. (r) None of the inventory the sale of which has given or may hereafter give rise to a Receivable, is subject to any Lien (other than Permitted Liens). (s) All of the Receivables are evidenced by an Invoice substantially in one of the forms collectively attached hereto as Exhibit B hereto, or such other written contract and/or form of invoice approved by WGRC (or, to the extent required under the Revolving Credit Agreement, by its assigns) in writing. (t) As of its Initial Purchase Date, such Seller is not in default under any indenture or any loan, credit or other agreement with respect to Indebtedness, the effect of which is to cause, or to permit (or would, with the giving of notice or the lapse of time or both, permit) the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity. -13- 17 (u) Such Seller currently maintains, and shall continue to maintain, such liability and casualty insurance as may be required by applicable law, as is necessary for the continued operation of its businesses and as is customarily maintained by companies engaged in similar businesses. (v) No accumulated funding deficiency (as defined in Section 302(a)(2) of ERISA or Section 412(a) of the IRC) exists with respect to any Benefit Plan, and such Seller has not failed to satisfy the minimum funding requirements under ERISA or the IRC with respect to any Benefit Plan which deficiency or failure would cause any Lien (other than a Permitted Lien) to attach to the Purchased Assets under Title IV of ERISA. As of its Initial Purchase Date, such Seller has no intent to terminate or to permit any ERISA Affiliate to terminate any Benefit Plan which would cause any Lien (other than a Permitted Lien) to attach to the Purchased Assets under Title IV of ERISA. (w) Wyman and, where applicable, each Seller, has filed or caused to be filed all federal, state and local tax returns which are required to be filed by it, and has paid or caused to be paid all taxes shown to be due and payable on such returns or in any assessments received by it, other than taxes or assessments, the validity of which are being contested in good faith by appropriate proceedings and with respect to which Wyman or each Seller, as applicable, has set aside adequate reserves on its books in accordance with GAAP and which proceedings would not have a Material Adverse Effect. (x) The transactions contemplated by this Agreement and by each of the Facility Documents are being consummated by each Seller in furtherance of such Seller's ordinary business, with no contemplation of insolvency and with no intent to hinder, delay or defraud any of its present or future creditors. As of the Effective Date, and as of each Purchase Date, the Sellers shall have received reasonably equivalent value for the Receivables sold or otherwise conveyed to WGRC under this Agreement. (y) (i) As of the Effective Date, Wyman owns 100% of the issued and outstanding stock of the other Initial Sellers, (ii) as of Cameron's Initial Purchase Date, Wyman shall own 100% of the issued and outstanding stock of Cameron and (iii) as of the date of each Purchase, Wyman shall own (directly or indirectly) at least 80% of the issued and outstanding stock of each other Seller. SECTION 3.02. Representations and Warranties of WGRC. WGRC represents and warrants that as of the Effective Date and (except for representations and warranties which relate to a specific date only) as of the date of each Purchase: (a) WGRC is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to do business, and is in good standing, in every applicable jurisdiction except where the failure to be so qualified and to be in good standing could not reasonably be expected to have a Material Adverse Effect. -14- 18 (b) The execution, delivery and performance by WGRC of this Agreement, the other Facility Documents to which it is a party and all other agreements, instruments and documents delivered by WGRC hereunder and thereunder, and the transactions contemplated hereby and thereby, are within WGRC's corporate powers, and have been duly authorized by all necessary corporate action, and do not and will not (i) result in or require the creation of any Lien upon or with respect to any of its properties except as created in favor of the Collateral Agent for the benefit of the Agents and the Banks or (ii) violate, conflict with or result in a breach or default under any of the following: WGRC's charter or by-laws; any law, rule or regulation applicable to WGRC or its property; any contractual restriction contained in any indenture, loan or credit agreement, lease, mortgage, security agreement, bond, note, or other agreement or instrument binding on WGRC or to which its property is subject; or any order, writ, judgment, award, injunction or decree binding on WGRC or to which its property is subject. This Agreement has been duly executed and delivered on behalf of WGRC. (c) No authorization or approval or other action by, and no notice to or filing with, any government authority or regulatory body or other Person is required for the due execution, delivery and performance by WGRC of this Agreement, any other Facility Document executed between the Sellers and WGRC or any other agreement, document or instrument delivered hereunder or thereunder except for the filing of UCC Financing Statements to evidence WGRC's ownership interests in the Receivables purchased hereunder and all proceeds thereof and to evidence the Collateral Agent's security interest in the Purchased Assets under the Revolving Credit Agreement. (d) This Agreement and each of the other Facility Documents to which WGRC is a party constitutes the legal, valid and binding obligation of WGRC enforceable against WGRC in accordance with its terms. SECTION 3.03. Representations and Warranties of the Servicer. The Servicer represents and warrants that as of the Effective Date and continuing through the Collection Date: (a) The Servicer is a corporation duly incorporated, validly existing and in good standing under the laws of its state of incorporation and has all governmental licenses, authorizations, consents and approvals required to carry on its business, and is in good standing in each jurisdiction in which its business is no conducted, except where the absence of such licenses, authorizations, consents, approvals or good standing would not have a Material Adverse Effect. (b) The execution, delivery and performance by the Servicer of this Agreement, the other Facility Documents to which it is a party and all other agreements, instruments and documents delivered by the Servicer hereunder and thereunder, and the transactions contemplated hereby and thereby, are within the Servicer's corporate powers, have been duly authorized by all necessary -15- 19 corporate action, and do not and will not (i) result in or require the creation of any Lien upon or with respect to any of its properties except as created in favor of WGRC hereunder or in favor of the Collateral Agent for the benefit of the Agents and the Banks; (ii) violate, conflict with or result in a breach or default under the Servicer's charter or by-laws; (iii) violate, conflict with or result in a breach or default under any law, rule or regulation applicable to the Servicer or its property; (iv) violate, conflict with or result in a breach or default under any contractual restriction contained in any indenture, loan or credit agreement, lease, mortgage, security agreement, bond, note, or other agreement or instrument binding on the Servicer or to which its property is subject, which violation, breach or default would have a Material Adverse Effect; or (v) violate, conflict with or result in a breach of any order, writ, judgment, award, injunction or decree binding on the Servicer or to which its property is subject. This Agreement has been duly executed and delivered on behalf of the Servicer. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery and performance by the Servicer of this Agreement, any other Facility Document executed by the Servicer or any other agreement, document or instrument delivered by the Servicer hereunder or thereunder except for the filing of UCC Financing Statements to evidence WGRC's ownership interests in the Receivables purchased from the Sellers and all proceeds thereof and to evidence the Collateral Agent's security interest in the Purchased Assets under the Revolving Credit Agreement. (d) This Agreement and each of the other Facility Documents to which the Servicer is a party constitutes the legal, valid and binding obligation of the Servicer enforceable against the Servicer in accordance with its terms. ARTICLE IV GENERAL COVENANTS OF THE SELLERS SECTION 4.01. Affirmative Covenants of the Sellers. From the date hereof until the Collection Date, each Seller will, unless WGRC (or, to the extent required under the Revolving Credit Agreement, its assigns) shall otherwise consent in writing: (a) Compliance with Laws, Etc. Comply in all respects with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards with respect to it, its business and properties and all of the Purchased Assets, including, without limitation, all Receivables and related Invoices included therein, except where the failure to so comply would not have a Material Adverse Effect. -16- 20 (b) Preservation of Corporate Existence. Preserve and maintain its corporate existence, good standing, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction in which its business is conducted, except where the failure to preserve and maintain such existence, good standing, rights, franchises, privileges and qualification would not have a Material Adverse Effect; provided, that nothing in this Section 4.01(b) shall be deemed to prohibit any Seller or any Subsidiary of a Seller from merging with or consolidating with or into, or from disposing of assets (other than Purchased Assets) to and from, any other Seller or Subsidiary or a Seller (other than WGRC); provided, however, that any survivor of any such merger or consolidation (if not a Seller) must satisfy each of the conditions precedent set forth in Section 2.06 hereunder. (c) Performance and Compliance with Receivables. At its expense, timely and fully perform and comply with all provisions, covenants and other promises required to be observed by it with respect to the Receivables included in the Purchased Assets, except where the failure to so perform and comply would not have a Material Adverse Effect. (d) Location of Records. Keep its principal place of business and chief executive office at the address of such Seller referred to in Section 7.02 hereof, and the offices where it keeps the Records, at the addresses referred to on Schedule 3.01(h) or, upon 30 days' prior written notice to WGRC and the Facility Agent, at such other locations within the United States where all action required by Section 5.05 shall have been taken and completed; provided, that, in the case of any change in a Seller's principal place of business and chief executive office to a location other than North Grafton, Massachusetts such Seller shall also provide, prior to such change, an opinion of counsel reasonably acceptable to the Facility Agent as to continued perfection of the ownership interests in the Receivables hereunder following such change. (e) Credit and Collection Policy. Comply in all material respects with the Credit and Collection Policy attached hereto as Exhibit C (as such Credit and Collection Policy may be amended in accordance with Section 4.03(c)) applicable to the Receivables and the related Invoices included in the Purchased Assets. (f) Collections. Instruct all Obligors to cause all Collections to be deposited directly to a Lock-Box Account. If such Seller or any of its agents or representatives shall receive any Collections, such recipient will comply with the terms and provisions of Section 5.01(a) hereof. (g) Audits; Information. Each Seller will furnish WGRC and its permitted assigns from time to time such information with respect to the Receivables as WGRC shall reasonably request from such Seller. At any time and from time to time during any Seller's normal business hours, with reasonable notice, such Seller shall -17- 21 permit WGRC, its permitted assigns or their respective agents or representatives, (i) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and discs) in the possession or under the control of such Seller relating to the Receivables or the other Purchased Assets, (ii) to visit the offices and properties of such Seller for the purpose of examining such materials described in clause (i) above, (iii) to discuss matters relating to the Receivables or the other Purchased Assets, or such Seller's performance hereunder with any of the officers or employees of such Seller having knowledge of such matters and (iv) to verify the validity, amount or any other matter relating to any Receivable. The Sellers further agree that WGRC or its assigns shall be entitled to have certified public accountants or other auditors conduct a review of their books and records relating to the Purchased Assets in connection with any outside review of such Purchased Assets as contemplated under Section 7.02 of the Revolving Credit Agreement. Each Seller agrees that the Facility Agent shall be permitted to substitute for and/or accompany WGRC on any such inspection or visit and to participate in any such discussion. Each Seller further agrees to instruct its independent accountants to cooperate with any reasonable request of WGRC, the Facility Agent or their respective agents or representatives, in connection with the performance of such accountants' routine verification procedures with respect to the Receivables or the Related Security. Without limiting the foregoing, each Seller shall, in connection with any review of WGRC's books and records by certified public accountants or other auditors pursuant to Section 7.02 of the Revolving Credit Agreement, permit such accountants or auditors to examine its books and records relating to the Purchased Assets and the Facility Documents. (h) Delivery of Records. Upon the request of WGRC, its agents, representatives or permitted assignees, deliver or cause to be delivered, copies of all Records, including, without limitation, computer tapes generated by or on behalf of such Seller or any of its Consolidated Affiliates, relating to the Purchased Assets (including all Receivables and Collections included therein). (i) Segregation of Collections. Use all reasonable efforts, whether in its capacity as Seller or as Servicer (if applicable), to minimize the deposit of any funds other than Collections into any of the Lock-Box Accounts and, to the extent that any such funds are nevertheless deposited into any of such Lock-Box Accounts, promptly identify any such funds to WGRC. (j) Books and Records. Maintain at all times complete books, records and accounts relating to the Purchased Assets sold by such Seller hereunder (including all Receivables and Collections included therein) in which timely entries are made in accordance with GAAP. Such books and records shall be marked to indicate the sales of all Receivables and Related Security by such Seller hereunder and shall include, without limitation, (a) all payments received and all credits and extensions granted with respect to such Receivables; (b) the return, rejection, repossessions, or -18- 22 stoppage in transit of any merchandise the sale of which has given rise to a Receivable included in the Purchased Assets; and (c) any other Dilution Factors. (k) Identification of Eligible Receivables. (i) Establish and maintain procedures as are necessary for determining whether each Receivable qualifies as an Eligible Receivable and for identi- fying, on any date, the aggregate Outstanding Balances of all Eligible Receivables; and (ii) notify WGRC in advance of Purchase if a Receivable proposed to be sold by such Seller hereunder will, to such Seller's knowledge, not be an Eligible Receivable as of the date of Purchase. (l) Notification of Noncomplying Receivables. Promptly notify WGRC, the Servicer and the Agents of such Seller's determination that any Receivables previously sold hereunder were, as of the date of Purchase thereof, Noncomplying Receivables (it being understood that monthly disclosure of such Noncomplying Receivables in connection with delivery of the Settlement Statement shall be sufficient). (m) Separate Identity. Take all actions required to maintain WGRC's status as a separate legal entity, including, without limitation, (i) not holding WGRC out to third parties as other than an entity with assets and liabilities distinct from each Seller and Wyman's other Subsidiaries; (ii) not holding itself out to be responsible for the debts of WGRC or, other than by reason of owning capital stock of WGRC (if applicable), for any decisions or actions relating to the business and affairs of WGRC; (iii) taking such other actions as are necessary on its part to ensure that all corporate procedures required by its and WGRC's respective certificates of incorporation and by-laws are duly and validly taken; (iv) keeping correct and complete records and books of account and corporate minutes; (v) not acting in any other matter that could foreseeably mislead others with respect to WGRC's separate identity; and (vi) taking such other actions as may be necessary on its part to ensure that WGRC is in compliance at all times with Section 6.01(l) and Section 7.09 of the Revolving Credit Agreement. (n) Taxes. File or cause to be filed, and cause each of its Subsidiaries with whom it shares consolidated tax liability to file, all Federal, state and local tax returns which are required to be filed by it, except where the failure to file such returns would not have a Material Adverse Effect, and pay or cause to be paid all taxes shown to be due and payable on such returns or on any assessments received by it, other than any taxes or assessments, the validity of which are being contested in good faith by appropriate proceedings and with respect to which such Seller or such Subsidiary shall have set aside adequate reserves on its books in accordance with GAAP. -19- 23 (o) Ownership of Sellers. Take all actions required on its part to ensure that, at all times through the Termination Date, Wyman continues to own (directly or indirectly) at least 80% of the issued and outstanding stock of each other Seller; provided, that Wyman shall notify the Agents and the Rating Agency of any change in ownership of the capital stock of the other Sellers. SECTION 4.02. General Reporting Requirements of the Sellers. From the date hereof until the Collection Date, each Seller (or, with respect to subsections (b), (c) and (d) below, Wyman only) shall, unless WGRC (or, to the extent required under the Revolving Credit Agreement, its assigns) shall otherwise consent in writing, furnish to WGRC (and, to the extent directed by WGRC below, to WGRC's assigns or designees): (a) As soon as practicable and in no event later than two Business Days after a senior financial officer of the Seller has actual knowledge of the occurrence of each Liquidation Event or Unmatured Liquidation Event which results from or relates to an act or omission of such Seller, a statement from such officer setting forth such Liquidation Event or Unmatured Liquidation Event and the action which such Seller proposes to take with respect thereto (copies of which shall be concurrently furnished to the Facility Agent and the Rating Agency); (b) As soon as available and in any event within one-hundred five (105) days after the end of each fiscal year of Wyman, a copy of the annual audited consolidated statements of income and cash flows for Wyman and its consolidated Subsidiaries for such fiscal year and the related consolidated balance sheet as at the end of such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year and prepared in accordance with GAAP consistently applied (except for such changes in application which are in accordance with GAAP and are approved by Wyman's independent public accountants and disclosed therein), reported on in reasonable detail and accompanied by an unqualified opinion (except for qualifications relating to contingencies which are otherwise adequately disclosed but are not quantifiable for reasons outside the Sellers' control) from Ernst & Young or other independent certified public accountants of recognized national standing selected by Wyman and reasonably acceptable to WGRC (copies of which shall be concurrently furnished to the Banks, the Agents and the Rating Agency), it being expressly understood that this clause (b) may be satisfied by delivery to the above-named parties of Wyman's annual report on Form 10-K to the Securities and Exchange Commission for the appropriate fiscal year; (c) As soon as available and in any event within sixty (60) days after the end of each of the first three fiscal quarters of each fiscal year of Wyman, a copy of the unaudited consolidated statements of income and cash flows for Wyman and its consolidated Subsidiaries for such fiscal quarter and for the period from the beginning of the respective fiscal year to the end of such fiscal quarter and the related unaudited consolidated balance sheet as at -20- 24 the end of such fiscal quarter; setting forth in each case in comparative form the corresponding figures for the preceding fiscal year and all of the foregoing to be prepared in accordance with GAAP consistently applied (except for such changes in application which are in accordance with GAAP and are approved by Wyman's financial officer preparing such statements and disclosed therein) (copies of which shall be concurrently furnished to the Banks and the Agents), it being expressly understood that this subsection (c) may be satisfied by delivery to the above-named parties of Wyman's quarterly report on Form 10-Q to the Securities and Exchange Commission for the appropriate fiscal quarter; (d) Contemporaneously with the furnishing of a copy of the annual and quarterly financial statements provided for in subsections 4.02(b) and (c), respectively, a certificate dated the date of delivery and signed by a Responsible Officer of Wyman, which certificate shall state (i) that said financial statements fairly present the financial position and results of operations of Wyman and its consolidated Subsidiaries in accordance with GAAP consistently applied (except for such changes in application which are in accordance with GAAP and are approved by Wyman's independent public accountants or, in the case of the quarterly reports, by such Responsible Officer and disclosed therein and further subject to normal year-end adjustments) and (ii) that the officer signing such certificate has reviewed the relevant terms of this Agreement and has made, or caused to be made under such officer's supervision, a review of each Seller's and WGRC's activities during the period covered by the statements then being furnished, and that the review has not disclosed the existence of a Liquidation Event or Unmatured Liquidation Event, or if there is such an event, describing it and the steps, if any, taken or being taken to cure it (with copies of each such certificate to be concurrently furnished to the Banks, the Agents and the Rating Agency); (e) Promptly after the filing or receipt thereof, copies of all reports and notices with respect to any Reportable Event defined in Article IV of ERISA (other than any such Reportable Event for which the Pension Benefit Guaranty Corporation has waived the 30-day notice requirement) which such Seller or any ERISA Affiliate files under ERISA with the Internal Revenue Service or the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or which such Seller or any ERISA Affiliate receives from the Pension Benefit Guaranty Corporation (copies of which shall be concurrently furnished to the Facility Agent and the Rating Agency); (f) Promptly, from time to time, such other information, documents, records or reports respecting the Purchased Assets, including, without limitation, the Receivables, or the conditions or operations, financial or otherwise, of such Seller as WGRC, the Facility Agent, or any of their respective agents, representatives or permitted assignees, may from time to time reasonably request, in order to protect the interests of WGRC and its assigns under or as contemplated by this Agreement and the other Facility Documents and to enable WGRC and the Agents to perform their respective reporting requirements under the other Facility Documents. -21- 25 The Sellers will cause any financial statements consolidated with those of WGRC to contain a footnote to the effect that WGRC's business consists of the purchase of Receivables from the Sellers and that WGRC is a separate corporate entity with its own separate creditors. SECTION 4.03. Negative Covenants of the Sellers. From the date hereof until the Collection Date, each Seller will not, without the written consent of WGRC (or, to the extent required under the Revolving Credit Agreement, the written consent of its assigns): (a) Sales, Liens, Etc. Against Receivables. Except as otherwise provided herein, (1) sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Liens (except as created in favor of WGRC hereby or as created by WGRC pursuant to any Facility Document and except for Permitted Liens) upon or with respect to any of the Receivables sold or other Purchased Assets sold or to be sold by such Seller hereunder or with respect to any Lock-Box Account; or (2) assign any right to receive income in respect of such Receivables, Purchased Assets or Lock-Box Account (except that any Seller may assign its rights under the Intercompany Notes to any other Seller). In the event that such Seller fails to keep any Purchased Assets free and clear of any Lien (except as created in favor of WGRC hereunder or as created by WGRC pursuant to any other Facility Document and except for Permitted Liens), WGRC may (without limiting its other rights with respect to such Seller's breach of its obligations hereunder) make reasonable expenditures necessary to release such Lien. WGRC shall be entitled to indemnification for any such expenditures pursuant to the indemnification provisions of Section 6.01, or WGRC may, alternatively, deduct such expenditures as an offset to the Purchase Price owed to such Seller hereunder or as a reduction to the Short-Term Note or, if applicable, the Long-Term Note; provided, however, that in the event of any dispute between such Seller and the alleged holder of such Lien as to the amount or validity of such Lien, such expenditure shall be made only after consultation with such Seller as to the status of such Lien and the action such Seller or any of its Consolidated Affiliates is taking or plans to take with respect thereto. (b) Extension or Amendment of Receivables. Except, as applicable, for any adjustments made in its capacity as Servicer or subservicer pursuant to Section 5.03(a), extend, amend or otherwise modify the terms of any of its Receivables included in the Purchased Assets without the prior consent of WGRC. (c) Change in Credit and Collection Policy and Invoice Form. (i) Make any change in the Credit and Collection Policy which could reasonably be expected to impair the collectibility of the Receivables or to result in a material delay in the collection thereof or would be inconsistent with collection practices of the industry or would otherwise adversely affect the interests of WGRC and/or the Banks' interests under the Revolving Credit Agreement in any material respect (it being understood by WGRC that, (without -22- 26 waiving its right to object to any such change) the Sellers intend to consolidate their separate policies into a single policy for reasons of organizational efficiency but without deviating from the substantive policies reflected in Exhibit C as attached hereto), (ii) make any material changes in the forms of Invoices or (iii) except as otherwise permitted under Section 5.03, amend or modify the terms of any Invoice evidencing a Receivable sold hereunder (provided, that, with respect to any such change under any of the foregoing clauses (i) through (iii), concurrent notice thereof shall be given to WGRC, the Facility Agent and the Rating Agency). (d) Change in Payment Instructions to Obligors. (i) Make any change in its instructions to Obligors directing payments other than to a Lock-Box Account or, via wire transfer, the Collection Account, or (ii) voluntarily add or terminate any bank as a Lock- Box Bank unless, with respect to the addition of a Lock-Box Bank, WGRC and the Facility Agent shall have first received and approved (which approval shall not be unreasonably withheld) (x) copies of Lock-Box Agreements executed by each new Lock-Box Bank and all applicable Sellers and (y) copies of all agreements and documents signed by all applicable Sellers or the respective Lock-Box Bank with respect to any new Lock-Box Account. (e) Change in Corporate Name. Make any change to its corporate name or conduct any business under any trade names, fictitious names or assumed names other than those identified on Schedule 3.01(j) unless (i) WGRC, the Facility Agent and the Rating Agency shall have received twenty (20) Business Days prior written notice of such name change or use and (ii) at least ten (10) Business Days prior to the effective date of any such name change or use, such Seller shall have executed and delivered to WGRC such Financing Statements (Form UCC-1 and UCC-3) which WGRC may request to reflect such name change or use, together with such other documents and instruments (including, in the case of any change to a Seller's corporate name, an opinion of counsel reasonably acceptable to the Facility Agent as to continued perfection of the ownership interests in the Receivables created hereunder following such change) that WGRC may request in connection therewith. (f) Accounting of Purchases. Prepare any financial statements which shall account for the transactions contemplated hereby in any manner other than the sale of the Purchased Assets by the Sellers to WGRC, or in any other respect account for or treat the transactions contemplated hereby (including but not limited to accounting and, where taxes are not consolidated, for tax reporting purposes) in any manner other than as a sale of the Purchased Assets by the Sellers to WGRC. (g) ERISA Matters. (i) Engage or permit any ERISA Affiliate to engage in any prohibited transaction for which an exemption is not available or has not previously been obtained from the United States Department of Labor; (ii) permit to exist any accumulated funding deficiency, as defined in Section 302(a) of ERISA and Section 412(a) of the IRC, with respect to any Benefit Plan other than a Multiemployer Plan; (iii) fail to make any payments to any Multiemployer Plan that Wyman, any other Seller or any ERISA Affiliate may be required to make under the agreement relating to -23- 27 such Multiemployer Plan or any law pertaining thereto; (iv) termi- nate or permit any ERISA Affiliate to terminate any Benefit Plan which could result in any liability of Wyman, any other Seller or any ERISA Affiliate under Title IV of ERISA; or (v) permit to exist any occurrence of any reportable event described in Title IV of ERISA which represents a material risk of a liability of Wyman, any other Seller or any ERISA Affiliate under ERISA or the IRC, if such prohibited transactions, accumulated funding deficiencies, payments, terminations and reportable events occurring within any fiscal year of Wyman, in the aggregate, would be reasonably likely to cause any Lien (other than Permitted Liens) to attach to the Purchased Assets under Title IV of ERISA. ARTICLE V ADMINISTRATION AND COLLECTION SECTION 5.01. Collection of Receivables. (a) As of its Initial Purchase Date, each Seller shall have transferred to WGRC the exclusive ownership and control of the Lock-Box Accounts used by it and all related lock-boxes, and each Seller hereby agrees to take any further action necessary or that WGRC may reasonably request to effect or maintain the effectiveness of any such transfer. From and after the Initial Purchase Date applicable to any Seller, such Seller shall not have any further right, title and/or interest in or control over any of the Lock-Box Accounts or related lock-boxes. Unless instructed otherwise by the Facility Agent or the Collateral Agent pursuant to their authority under the Revolving Credit Agreement (in which case, concurrent notice thereof shall be given to the Rating Agency), each Lock-Box Bank shall be instructed to remit, on a daily basis, via overnight or same day transfer, all amounts deposited in its Lock-Box Accounts to the Collection Account in accordance with the terms of a Lock- Box Agreement substantially in the form of Exhibit 9.03 to the Revolving Credit Agreement, with such changes as the Facility Agent may approve. The Servicer shall advise WGRC daily of the amount of Collections received or to be received into the Collection Account on such day with respect to the Receivables and WGRC shall determine the amounts of such Collections which, pursuant to the terms of the Revolving Credit Agreement, may be used by WGRC to purchase new Receivables hereunder. If any Seller or its agents or representatives shall at any time receive any cash, checks or other instruments which constitute Collections, such recipient shall promptly segregate such payment and hold such payment in trust for and in a manner acceptable to WGRC and shall, promptly upon identification of any such payment (and in any event within two Business Days following such identification), remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to a Lock-Box Account or to the Collection Account. WGRC may notify any or all of the Obligors of the ownership of Purchased Assets by WGRC and may direct any or all of the Obligors of Receivables included in the Purchased Assets to pay all amounts payable under any such Receivables directly to the Collection Account (i) at any time, with contemporaneous notice to Wyman and the applicable Seller, after the occurrence and during the continuance of a Liquidation Event or (ii) otherwise, at any time following five Business Days' advance notice to Wyman and the -24- 28 applicable Seller. At WGRC's request and at each Seller's expense, such Seller shall give notice of WGRC's ownership of Purchased Assets purchased from such Seller to each Obligor thereunder and direct that payments be made directly to the Collection Account and assemble all Records of such Seller, and make the same available to WGRC at a place selected by WGRC or its designee. Each Seller hereby authorizes WGRC, and gives WGRC its irrevocable power of attorney, which authorization shall be coupled with an interest, to take any and all steps in such Seller's name and on behalf of such Seller, which steps are necessary or desirable, in the reasonable determination of WGRC, to collect all amounts due under the Purchased Assets, including, without limitation, endorsing such Seller's name on checks and other instruments representing Collections and enforcing such Receivables and the related Invoices (it being understood that WGRC or the Servicer on behalf of WGRC, and not the Sellers, shall be responsible for such expenses of enforcement except as otherwise provided in Article VI hereof). (b) WGRC shall, following notification that collections of any receivable or other intangible owed to any Seller or any Affiliate thereof, which is not a Purchased Asset, have been deposited into the Lock-Box Accounts, request that the Collateral Agent segregate all such collections. Promptly, after such misapplied collections have been reasonably identified to WGRC and the Collateral Agent, WGRC shall (or shall cause the Collateral Agent to) turn over to such Seller or such Affiliate, as applicable, all such collections less all reasonable and appropriate out-of-pocket costs and expenses, if any, incurred by WGRC and the Collateral Agent in collecting such receivables. Except as expressly stated above in this Section 5.01(b), and notwithstanding anything to the contrary in this Agreement, WGRC shall have no obligation to collect, enforce or take any other action with respect to any receivable or other intangible not included in the Purchased Assets. SECTION 5.02. Designation of Servicer. (a) The servicing, administering and enforcement of collection of the Receivables shall be conducted by the Person (the "Servicer") so designated from time to time in accordance with this Section 5.02; provided, that the Servicer shall be entitled at any time and from time to time to designate one or more third parties to act as subservicers on its behalf in connection with its duties as Servicer hereunder; provided further, however, that no such designation shall relieve the Servicer of its obligations and liabilities as Servicer. Until WGRC or, in the event of a Servicer Termination Event, the Collateral Agent gives notice to Wyman of the designation of a new Servicer, Wyman is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms hereof, together with such other duties and obligations of the Servicer set forth in the Revolving Credit Agreement. It is expressly understood that Wyman may designate each other Seller as the subservicer with respect to the Receivables of such Seller. It is expressly understood that neither Wyman nor any subservicer shall have any rights to withdraw amounts in any Lock-Box Account. WGRC may at any time, with or without cause, designate any Person (including itself) to replace Wyman as Servicer. Any Servicer may at any time resign as Servicer upon written notice to WGRC. -25- 29 (b) WGRC and the Collateral Agent shall give concurrent notice to the Rating Agency of any resignation, replacement or removal of the Servicer. Notwithstanding anything else in this Agreement to the contrary, but subject to Section 5.02(c), no resignation, replacement or removal of the Servicer shall be effective until a successor Servicer has been appointed, has accepted such appointment and is ready to perform the duties and obligations of the Servicer hereunder. (c) In the event that the Servicer resigns or is removed under the terms of this Agreement, and a successor Servicer approved by the Facility Agent is not promptly named by WGRC hereunder, the Sellers hereby acknowledge that WGRC has agreed with the Banks to appoint the Collateral Agent as Servicer. SECTION 5.03. Duties of the Servicer; Daily Reports and Settlement Statements; Servicer Fee. (a) The Servicer shall take or cause to be taken all such actions as may be necessary or advisable to collect each Receivable included in the Purchased Assets from time to time, all in accordance with the Credit and Collection Policy; provided, however, that the Servicer shall not extend, modify or amend any Receivable without WGRC's prior consent (or, to the extent required under the Revolving Credit Agreement, the prior consent of its assigns), except that the Servicer may make adjustments to reflect Dilution, Write-Offs, and the taking of Receivable Notes in accordance with the terms of the Credit and Collection Policy. The Servicer shall, in its capacity as Servicer, exercise the same care and apply the same policies with respect to the collection of the Receivables that it would exercise and apply if it owned such Receivables, shall act in the best interests of WGRC and shall exercise loyalty to WGRC, all with reasonable care and diligence and otherwise in accordance with all applicable laws, rules and regulations and in accordance with the Credit and Collection Policy. The Servicer shall maintain all Records belonging to WGRC separate and apart from its other records and the records of other Affiliates. In addition, the Servicer shall, unless WGRC otherwise revokes such authority in writing (a copy of which revocation shall be delivered to the Facility Agent), enforce WGRC's rights and interests, if any, in and under the Receivables, the Related Security and the Invoices included in the Purchased Assets. Notwithstanding anything to the contrary contained herein, (x) WGRC shall have the absolute and unlimited right to direct the Servicer (whether the Servicer is Wyman or otherwise) to (and in the absence of such direction, the Servicer shall not) commence, prosecute or settle any legal action to enforce collection of any Receivable owned by WGRC or to foreclose upon or repossess any Related Security owned by WGRC; and (y) the Servicer shall not, under any circumstances, be entitled to make WGRC a party to any litigation without WGRC's express prior written consent. The Servicer shall adjust the Outstanding Balance of any Receivable to reflect Dilution and Write-Offs in accordance with the Credit and Collection Policy. The Servicer's authorization under this Agreement shall terminate on the Collection Date. Notwithstanding any other provision of this Agreement, Wyman's obligation to act as Servicer shall terminate on the Collection Date. -26- 30 (b) In addition to its other responsibilities hereunder, the Servicer shall prepare and deliver to WGRC and the Agents the Daily Reports and Settlement Statements as more fully described below. On each Business Day, the Servicer shall deliver to WGRC, by no later than 1:00 p.m. (Boston time) a Daily Report with respect to such date in the form of Exhibit D-1 (if such Business Day occurs prior to the commencement of the Liquidation Period) or Exhibit D-2 (if such Business Day occurs during the Liquidation Period) hereto. With respect to each Collection Period, the Servicer shall prepare and deliver to WGRC (with copies to the Agents, the Banks and the Rating Agency), by the Reporting Date of the subsequent month, a Settlement Statement, in the form of Exhibit E-1 (if the Liquidation Period has not yet commenced) or Exhibit E-2 hereto (if the Liquidation Period has commenced), as applicable. Each Seller agrees to provide to the Servicer on a timely basis all information necessary for the preparation and delivery of the foregoing reports. (c) In consideration for Wyman's services as the Servicer, WGRC shall pay to the Servicer a fee (the "Servicer Fee") as set forth in this paragraph below. The Servicer hereby acknowledges that, except for the Servicer Fee owed under this paragraph, the Servicer's costs of performing its duties as Servicer hereunder (including the accounting costs and expenses for reviews of the Purchased Assets required under the Revolving Credit Agreement and including the costs or expenses incurred by the other Sellers as subservicers hereunder) shall not be chargeable against WGRC or its assigns; the Servicer further acknowledges that the costs and expenses of one outside audit per year as contemplated under Section 7.02 of the Revolving Credit Agreement shall be paid out of the Servicer Fee it otherwise receives. For so long as Wyman or any Consolidated Affiliate of Wyman acts as Servicer hereunder, the Servicer Fee shall be paid monthly on each Settlement Date prior to the Termination Date for the immediately preceding Collection Period in an amount equal to the product of (i) the average daily Outstanding Balances of all Receivables during the prior Collection Period times (ii) one percent (1.0%) per annum calculated on the basis of actual days elapsed during such Collection Period and a year of 365 or 366 days, as applicable. After the Termination Date, the Servicer Fee will be paid as provided in Section 9.08 of the Revolving Credit Agreement. If neither Wyman nor any Consolidated Affiliate of Wyman acts as Servicer hereunder, then the Servicer Fee shall equal such fee as may be agreed to by the Facility Agent, on behalf of WGRC, and such successor Servicer; provided that the Servicer Fee for any Collection Period may in no event exceed the lesser of (1) 200% of the Servicer Fee which would be applicable to Wyman or any of its Consolidated Affiliates and (2) 110% of the sum of the aggregate reasonable costs and expenses of such Servicer incurred in the performance of its duties hereunder during such Collection Period. If Wyman is replaced as the Servicer prior to the end of a Collection Period, it shall be entitled to a pro rata portion of the Servicer Fee for such period. (d) The Servicer shall implement and maintain administrative and operating procedures reasonably necessary for the performance of its obligations hereunder (including, without limitation, an ability to recreate Records in the event of the destruction of any -27- 31 originals thereof). The Servicer shall also maintain at all times complete books, records and accounts relating to the Receivables, Collections and other Purchased Assets in which timely entries are made in accordance with GAAP, as are necessary for the performance of its obligations hereunder. Such books, records and accounts shall, without limitation, be adequate to permit the daily calculation of all information required to be included in the Daily Report. Copies of such entries shall promptly be delivered to WGRC or its agents, representatives or permitted assignees upon request. Such books and records shall be marked (by means of a general legend that will automatically appear at or near the beginning of any computer generated list or print-out of the Receivables or otherwise) to indicate the ownership by WGRC of all Receivables and Related Security sold hereunder, and such books and records shall reflect, without limitation, (i) all payments received and all credits and extensions granted with respect to the Receivables; (ii) the return, rejection, repossessions, or stoppage in transit of any merchandise the sale of which has given rise to a Receivable; (iii) any other Dilution Factors; (iv) the taking of Receivable Notes; and (v) all Write-Offs. At any time and from time to time, following one Business Day's notice from WGRC or its agents, representatives or permitted assignees, and during regular business hours, the Servicer will permit WGRC or such agent, representative or permitted assignee (A) to have access to the Servicer's offices, properties and computer software for purposes of examining and making copies of and abstracts from all such books and records and (B) to discuss matters relating to the Purchased Assets with any of the officers, employees, agents or representatives of the Servicer having knowledge of such matters. SECTION 5.04. Responsibilities of the Sellers. Anything herein to the contrary notwithstanding: (a) Each Seller shall (i) perform all of its obligations under any contracts related to the Receivables sold by it hereunder to the same extent as if such Receivables had not been sold hereunder and the exercise by WGRC of its rights hereunder shall not relieve such Seller from such obligations and (ii) pay when due any taxes relating to the origination and sale of the Receivables and the other Purchased Assets. (b) WGRC and its assignees shall have no obligation or liability with respect to any Receivable or related contracts, nor shall WGRC or any such assignee be obligated to perform any of the obligations of any Seller thereunder and each Seller agrees to indemnify and hold harmless WGRC and its assignees against and from any and all liabilities arising from or related to any such obligation or liability. SECTION 5.05. Further Action Evidencing Purchases. (a) Each Seller agrees that at any time and from time to time, at its expense, it will promptly execute and deliver all further instruments and documents, and take all further action that may be necessary to perfect, protect or more fully evidence WGRC's ownership of the Purchased Assets, or to enable WGRC to exercise or enforce any of its rights hereunder. Without limiting the generality of the foregoing, each Seller will (i) cause its -28- 32 computer files relating to the Receivables (by means of a general legend that will automatically appear at or near the beginning of any computer generated list or print-out of the Receivables or otherwise) to indicate that, unless otherwise specifically identified on such list or print-out as a Receivable not so sold, all Receivables included in such list or print-out and Related Security have been sold to WGRC in accordance with this Agreement and (ii) promptly execute and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments and notices, as may be necessary or appropriate or as WGRC or any of its agents, representatives or permitted assignees may reasonably request. (b) In the event that any Seller, within five (5) Business Days after notice from WGRC, fails to deliver to WGRC one or more financing or continuation statements, and amendments thereto and assignments thereof, that WGRC or any of its agents, representatives or permitted assignees may reasonably determine to be necessary to evidence or perfect WGRC's ownership of all or any of the Purchased Assets now existing or hereafter arising, then such Seller hereby authorizes WGRC to file any such statements without the signature of such Seller where permitted by law. A carbon, photographic or other reproduction of this Agreement or any financing statement covering the Purchased Assets or any part thereof, shall be sufficient as a financing statement. If any Seller fails to perform any of its agreements or obligations under this Agreement, following expiration of any applicable cure period, WGRC may (but shall not be required to) perform, or cause performance of, such agreement or obligation, and the reasonable expenses of WGRC incurred in connection therewith shall be payable by such Seller upon WGRC's written demand therefor (which demand shall itemize such expenses in reasonable detail). SECTION 5.06. Application of Collections. Any payment by an Obligor in respect of any indebtedness or other obligations owed by such Obligor to any Seller or WGRC shall, except as otherwise specified by such Obligor or otherwise required by law, be applied as a Collection of any Receivable of such Obligor purchased hereunder (in the order of the age by invoice date of such Receivables, starting with the oldest such Receivable) to the extent of any amounts then due and payable thereunder before being applied to (i) any Receivable arising subsequent to the Termination Date which is not purchased hereunder or (ii) any other indebtedness of such Obligor to any Seller. ARTICLE VI INDEMNIFICATION SECTION 6.01. Indemnities by the Sellers. Without limiting any other rights which WGRC may have hereunder or under applicable law, but without duplication, each Seller hereby agrees to indemnify WGRC and its permitted assignees and its and their respective officers, directors, agents and employees (all of the foregoing collectively referred to herein as "Indemnitees") from and against any and all damages, losses, claims, liabilities, costs and expenses, including reasonable attorneys' fees, and dis- bursements (all of the foregoing collectively referred to herein as -29- 33 the "Indemnified Amounts") awarded against or incurred by any Indemnitee relating to or resulting from this Agreement or the acquisitions or ownership by WGRC of any Purchased Assets (excluding, however, any such amounts to the extent the same comprise recourse for Receivables which are not collected, not paid or uncollectible on account of the insolvency, bankruptcy, inability or failure to pay or lack of creditworthiness of the applicable Obligor). Without limiting the foregoing (but subject to the exclusion in the immediately preceding sentence), each Seller shall indemnify the Indemnitees for Indemnified Amounts relating to or resulting from: (i) any representation or warranty made by such Seller (or any of its officers) (individually or as Servicer) under or in connection with this Agreement or in connection with the preparation or delivery of any Daily Report, any Settlement Statement, or any other information or report delivered pursuant hereto, which shall have been false, incomplete or incorrect in any respect when made; (ii) the failure by such Seller (individually or as Servicer) to comply with any term, provision or covenant contained in this Agreement, any other Facility Document or any agreement executed in connection with this Agreement or any other Facility Document (in each case, where such Seller is a party thereto), or with any applicable law, rule or regulation with respect to any Receivable, the related Invoice or the Related Security, or the nonconformity of any Receivable, the related Invoice or the Related Security with any such applicable law, rule or regulation; (iii) the failure of such Seller to vest and maintain vested in WGRC or to transfer to WGRC, legal and equitable title to and ownership of the Receivables and other Purchased Assets which are, or are purported to be, sold by such Seller hereunder, free and clear of any Lien (other than Liens created in favor of WGRC hereunder and Liens created under the other Facility Documents), including all amounts expended by WGRC pursuant to Section 4.03(a); (iv) the failure by such Seller to file, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables and other Purchased Assets which are, or are purported to be, sold by such Seller hereunder, whether at the time of any Purchase or at any subsequent time; (v) the failure by such Seller to be duly qualified to do business, to be in good standing or to have filed appropriate fictitious or assumed name registration documents in any jurisdiction; -30- 34 (vi) any dispute, claim, offset or defense to the payment of any Receivable (other than discharge in bankruptcy or under similar insolvency law) which is, or is purported to be, sold by such Seller hereunder which dispute, claim, offset or defense is based on the Receivable or related Invoice not being a legal, valid and binding obligation of the related Obligor, enforceable in accordance with its terms, or which relates to Dilution Factors or to such Receivables being Noncomplying Receivables on the date of Purchase or on any similar ground not related to the creditworthiness of the applicable Obligor or any other claim asserted against any Indemnitee resulting from the sale of the merchandise or services related to such Receivable or the furnishing or failure to furnish such merchandise or services; (vii) any products liability claim or personal injury or property damage suit or other similar or related claim or action of whatever sort arising out of or in connection with the goods and/or merchandise or services that are the subject of any Receivable generated by such Seller or related Invoice or contract; (viii) the failure of such Seller to pay when due (A) any taxes or charges imposed on such Seller or (B) any sales taxes or other charges imposed in connection with such Seller's transfer of Purchased Assets hereunder (other than taxes on or measured by the net income of WGRC or any of its permitted assignees); (ix) the failure of such Seller (individually or as Servicer or subservicer) or any of its agents or representatives (including, without limitation, agents, representatives and employees of such Seller acting pursuant to authority granted under Section 5.02) to perform its duties and obligations in accordance with the provisions of this Agreement, or to remit to WGRC, Collections of Purchased Assets received by such Seller or any such agent or representative; (x) the commingling of Collections of Purchased Assets with any other funds of such Seller; and (xi) claims, demands, liabilities, damages, losses, costs, changes and expenses (including reasonable attorneys' fees) which WGRC or any other Indemnitee may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit; provided, that nothing in this Section 6.01(xi) shall impose on any Seller the obligation to reimburse any Indemnitee for draws under any Letters of Credit or routine costs and expenses incidental to the issuance, administration, or funding of any draws under, any Letters of Credit. -31- 35 It is expressly agreed and understood by the parties (i) that such indemnification is not intended to constitute a guarantee of the collectibility or payment of the Receivables sold hereunder and the other Purchased Assets and (ii) that nothing in this Section 6.01 shall require any Seller to indemnify any Indemnitee (A) for damages, losses, claims or liabilities or related costs or expenses resulting from such Indemnitee's gross negligence or willful misconduct or (B) for lost profits, consequential, special or punitive damages. In addition to the foregoing, Wyman, as Servicer, agrees to indemnify the Indemnitees from and against all Indemnified Amounts relating to or resulting from any of the foregoing to the extent that such Indemnified Amounts also relate to or result from any breach of its duties to be performed hereunder and under the other Facility Documents as Servicer. From and after the notice to the Sellers of any assignment by any Indemnitee to another Indemnitee (including, without limitation, the assignments by WGRC to the Agents and the Banks), the gross negligence or willful misconduct of such assignor (including, without limitation, WGRC or its officers, directors, agents or employees) shall not be a defense to, or in any other way adversely affect, mitigate or diminish such assignee Indemnitee's right or claim to indemnification under this Section 6.01; in addition, the gross negligence or willful misconduct of any Bank entitled to indemnification hereunder shall not be a defense to, or in any other way adversely affect, mitigate or diminish any other Bank's right to indemnification under this Section 6.01. Any amounts subject to the indemnification provisions of this Section 6.01 shall be paid by the applicable Seller to the Collection Account for distribution to the applicable Indemnitees within five (5) Business Days following such Indemnitees' written demand therefor, setting forth in reasonable detail the basis for such demand. Notwithstanding anything to the contrary in this Agreement, for purposes of this Section 6.01, the representations, warranties and covenants contained in Sections 3.01(a), 3.01(b), 3.01(k), 3.01(w), 4.01(a), 4.01(b), 4.01(c), and 4.01(n) shall not be deemed to be limited to failures to perform or comply or to events, circumstances, conditions or changes that did give rise to a Material Adverse Effect. ARTICLE VII MISCELLANEOUS SECTION 7.01. Amendments, Etc. No amendment to or waiver of any provision of this Agreement nor consent to any departure by any Seller or WGRC therefrom, shall in any event be effective unless the same shall be in writing and signed by each Seller and WGRC and such other parties (including the Rating Agency) whose consent may be required under the Revolving Credit Agreement. WGRC shall give concurrent notice of any such amendment, waiver or consent to the Rating Agency whether or not such confirmation from the Rating Agency is required. Any such waiver, consent or approval shall be effective only in the specific instance and for the specific purpose for which given. -32- 36 SECTION 7.02. Notices, Etc. Any notice shall be conclusively deemed to have been received by a party hereto and, subject to Section 7.04, to be effective (i) if sent by regular mail, commercial delivery service or by personal delivery, on the day on which delivered to such party at its address set forth under its name on the signature pages hereof (or at such other address as such party shall specify to the other parties hereto in writing); (ii) if sent by telex, graphic scanning or other telecopy communications of the sending party, when delivered by such equipment to the number set forth under its name on the signature pages hereof with receipt confirmed in full by telephone or (iii) if sent by registered or certified mail, on the day on which delivered to such party (or delivery is refused), addressed to such party at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices required to be delivered to the Facility Agent, the Collateral Agent or the Rating Agency shall be given in the manner described in, and shall be effective in accordance with the terms of, Section 12.05 of the Revolving Credit Agreement. Notwithstanding the foregoing, notices and communications pursuant to Article II will not be effective until received by the addressee. SECTION 7.03. No Waiver; Remedies. No waiver of any breach or default of or by any Seller or of or by WGRC under this Agreement shall be deemed a waiver of any other previous breach or default or any thereafter occurring. No failure on the part of WGRC on the one hand, or a Seller on the other hand, to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder, or any abandonment or discontinuation of steps to enforce such right, preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 7.04. Binding Effect; Assignability. This Agreement shall be binding upon and inure to the benefit of each Seller and WGRC and their respective successors and permitted assigns. No Seller may assign any of its rights and obligations hereunder or any interest herein or any other Facility Documents (except for assignments of rights hereunder or under the Intercompany Notes from one Seller to another) without the prior written consent of WGRC, the Facility Agent and all of the Banks and reconfirmation by the Rating Agency of its rating with respect to the Facility; provided, that nothing herein shall be deemed to prohibit or require any consent with respect to the transfer of the capital stock of WGRC by any Seller to another Seller or any other Person. WGRC may (with concurrent notice to the Rating Agency) assign any of its rights hereunder to any Person who (a) is not (and none of whose Affiliates or Persons related thereto are) a competitor of or engages in a business similar to that of any Seller, (b) agrees in writing to observe the confidentiality provisions of Section 7.07 hereof, and (c) to the extent applicable, has the financial ability to perform WGRC's obligations hereunder. Each Seller acknowledges that WGRC intends, pursuant to the Revolving Credit Agreement, to grant to the Collateral Agent for the benefit of the Banks a -33- 37 security interest in the Purchased Assets and to assign to the Collateral Agent, as further security, all of WGRC's rights under this Agreement. Each Seller consents to such grant and such assignment, subject to the limitations on enforcement set forth in the Revolving Credit Agreement and provided, further, that each of the Agents, the Issuing Bank and the Banks acknowledge and agree in writing to observe the confidentiality provisions thereof for the benefit of the Sellers. Each Seller acknowledges and agrees that the indemnification provisions of Article VI hereof run to the benefit of each of the Facility Agent, the Collateral Agent, the Banks and their respective officer,s directors, agents and employees, as permitted assigns of WGRC, all of which parties are entitled to the benefits of such Article. Each Seller agrees that the Collateral Agent (and any other permitted assignee of WGRC or of the Collateral Agent) shall have the right, as the assignee of WGRC (or the assignee of such assignee) and subject to the terms of the Facility Documents, to enforce this Agreement and to exercise directly all of WGRC's rights and remedies under this Agreement. Each Seller also agrees that (i) such Seller shall simultaneously send to the Facility Agent a copy of all notices, financial statements and certificates and supporting material, required to be given by such Seller to WGRC hereunder; (ii) upon its receipt of a notice of further assignment by WGRC or an assignee of WGRC, such Seller shall send the assignee identified in such notice a copy of all notices required to be given by such Seller to WGRC hereunder; and (iii) so long as the Revolving Credit Agreement remains in effect, such Seller shall make any payments required to be made to WGRC under this Agreement directly to the Collection Account or to such other account as the Collateral Agent may direct. WGRC and each Seller hereby acknowledge and agree that the Agents, the Issuing Bank and the Banks have each relied upon the terms and provisions set forth in this Agreement in entering into the Revolving Credit Agreement. This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until the Collection Date; provided, however, that the provisions of Article VI, Section 7.06 and Section 7.07 shall be continuing and shall survive any termination of this Agreement. SECTION 7.05. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF PERSONAL SERVICE AND VENUE; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES) EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE INTERESTS OF WGRC IN THE PURCHASED ASSETS OR REMEDIES HEREUNDER OR THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. EACH OF THE SELLERS AND WGRC HEREBY AGREES TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE CITY OF NEW YORK, NEW YORK (AND ANY COURTS HEARING APPEALS FROM SUCH STATE OR FEDERAL COURT), OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO SUCH PARTY AT THE ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF. EACH OF THE -34- 38 SELLERS AND WGRC HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER WITHIN THE STATE OF NEW YORK AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY ANY COURT IN SUCH STATE. NOTHING IN THIS SECTION 7.05 SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF WGRC TO BRING ANY ACTION OR PROCEEDING AGAINST ANY SELLER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION TO THE EXTENT NECESSARY FOR REALIZING ON ITS INTEREST IN ANY PURCHASED ASSETS. EACH OF THE SELLERS AND WGRC HEREBY EXPRESSLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT, POWER OR REMEDY UNDER OR IN CONNECTION WITH THIS AGREEMENT OR UNDER OR IN CONNECTION HEREWITH, AND AGREES THAT ANY SUCH ACTION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE TERMS AND PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT. SECTION 7.06. Costs, Expenses and Taxes. In addition to the rights of indemnification under Article VI hereof, each Seller agrees to pay on demand all reasonable costs and expenses of WGRC in connection with the sales of Receivables hereunder, the negotiation, preparation, execution and delivery of this Agreement and all amendments with respect to this Agreement, including the reasonable fees and out-of-pocket expenses of counsel for WGRC with respect thereto and with respect to advising WGRC as to its rights and remedies under this Agreement, and all costs and expenses (including reasonable counsel fees and expenses) of WGRC and its permitted assigns (including the Agents, the Banks and/or the Issuing Bank) in connection with the enforcement as against the Sellers of this Agreement and the other Facility Documents executed by them. In addition, each Seller will pay any and all stamp and similar taxes and fees payable or determined to be payable in connection with the execution, delivery, filing, recording or enforcement of this Agreement or the other Facility Documents, and hereby indemnifies and saves WGRC harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. SECTION 7.07. Confidentiality. WGRC hereby acknowledges that the Records and other information which the Sellers must assign and/or deliver to WGRC hereunder may contain information in which the Sellers have a proprietary interest and which may not, at the time of assignment and/or delivery, be generally available to and known by the public (including, without limitation, information contained in the Information Memorandum). WGRC hereby agrees to maintain as confidential all such information obtained from the Sellers and not to disclose such information to any other Person, provided, however, that nothing in this Section 7.07 shall (a) restrict any Seller from disclosing such confidential information to any Person nor (b) prevent WGRC from disclosing such information (i) to any permitted assignee of WGRC, the Agents, the Issuing Bank or any Bank (or their permitted prospective participants and assignees), provided that each such party agrees in writing, for the benefit of the Sellers, (x) to use such information and keep such information confidential in accordance with the same terms set -35- 39 forth herein or, in the case of the Agents, the Issuing Bank, any Bank or any of their participants or assigns, as set forth in Section 12.08 of the Revolving Credit Agreement as in effect on the date hereof and (y) that it will not disclose such information to any of its Affiliates which is not a financial institution or a parent company of a financial institution, (ii) to its employees, agents, attorneys, auditors and accountants, (iii) subject to the further requirements set forth in this Section 7.07, upon the order of any court or administrative agency or upon the request or demand of any regulatory agency, authority or official having jurisdiction over WGRC, (iv) which has (other than through a breach of this Section 7.07) been obtained from any Person other than WGRC, any Seller or any other party hereto, or (v) as otherwise expressly contemplated by this Agreement or Section 12.08 of the Revolving Credit Agreement as in effect on the date hereof. WGRC (a) will provide the Sellers with prompt written notice of any subpoena or any request or requirement by any governmental authority (other than any such request or requirement in connection with an audit or other regulatory review of a financial institution) for disclosure of any confidential information so that the Sellers may seek a protective order or other appropriate remedy prior to such disclosure and (b) shall consult with the Sellers to a reasonable extent on the advisability of taking legally available steps to resist or narrow such request or requirement. In the event that such protective order or other remedy is not obtained, WGRC will exercise all reasonable efforts (x) to limit the information disclosed to such information which it is legally required to disclose and (y) to obtain reliable assurance that confidential treatment will be accorded any such information so disclosed. SECTION 7.08. Execution in Counterparts; Severability. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. SECTION 7.09. Termination Date. The agreement of the Sellers to sell Receivables hereunder and the agreement of WGRC to purchase Receivables shall in any event automatically terminate on the Termination Date. Wyman shall have the right, by giving notice to WGRC and to the Facility Agent as described in clause (vi) of the definition of Liquidation Period in Annex I hereto, to cause the Termination Date to occur on the date so designated in such notice. Upon the occurrence and during the continuance of any Liquidation Event, WGRC shall have the right, by giving notice to Wyman and to the Facility Agent as described in clause (vii) of the definition of Liquidation Period in Annex I hereto, to cause the Termination Date to occur on the date so designated in such notice. Notwithstanding any such termination described above, all other provisions of this Agreement shall remain in full force and effect as provided in Section 7.04. WGRC shall give the Rating Agency prompt notice of the occurrence of the Termination Date. On or -36- 40 after the Collection Date, WGRC will, at the request and expense of Wyman, execute and deliver to Wyman such UCC termination statements and other documents and take such other action as Wyman may reasonably request to evidence such termination. SECTION 7.10. No Recourse. The obligations of each Seller and WGRC hereunder shall be solely the obligations of such Seller and/or WGRC, as applicable, and shall in all respects be non- recourse to all of its respective officers, directors, controlling persons or stockholders, and each of the Sellers and WGRC acknowledges the same with respect to the other and, to the fullest extent permitted by law, waives any such recourse and any claim against any of such parties of the other arising hereunder, provided that nothing herein shall constitute a waiver of any rights that one Person may have against any other Person on account of any claim for intentional fraud, including any such claims for deceit or intentional misrepresentation or omission. SECTION 7.11. No Proceedings. Each Seller and the Servicer hereby agrees, on behalf of itself and of all holders of the Intercompany Notes, that it will neither (i) institute against WGRC any involuntary proceeding of the type referred to in the definition of "Insolvency Event" so long as this Agreement remains in full force and effect and for at least one year and one day following termination of this Agreement nor (ii) in its capacity (if any) as a shareholder of WGRC, cause WGRC to file any voluntary proceeding of the type referred to in the definition of "Insolvency Event" except as otherwise permitted under WGRC's certificate of incorporation. SECTION 7.12. Entire Agreement. This Agreement, together with the other Facility Documents, including the annexes, exhibits and schedules hereto and thereto, contains a final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all previous oral statements and other writings with respect thereto. SECTION 7.13. Survival of Agreement. All covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the Effective Date and/or the Initial Purchase Date, as applicable, and each Purchase thereafter and shall continue in full force and effect until the later of (i) the Collection Date and (ii) the expiration of all Letters of Credit. -37- 41 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. WYMAN-GORDON COMPANY, in its individual capacity and as Seller and Servicer By: /s/ Wallace F. Whitney Title : Vice President Address: 244 Worcester Street No. Grafton, MA 01536 Telephone: (508) 839-4441 Telecopy: (508) 839-7529 WYMAN-GORDON INVESTMENT CASTINGS, INC., in its individual capacity and as Seller By: /s/ Wallace F. Whitney Title: Vice President Address: 244 Worcester Street No. Grafton, MA 01536 Telephone: (508) 839-4441 Telecopy: (508) 839-7529 PRECISION FOUNDERS, INC., in its individual capacity and as Seller BY: /s/ Wallace F. Whitney Title: Vice President Address: 244 Worcester Street No. Grafton, MA 01536 WYMAN-GORDON RECEIVABLES CORPORATION, in its individual capacity and as Purchaser By: /s/ Luis E. Leon Title: President Address: 244 Worcester Street No. Grafton, MA 01536 Telephone: (508) 839-8350 Telecopy: (508) 839-7529 -38- EX-99.9 10 1 EXHIBIT 99.9 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is entered into effective May 24, 1994 by and between Wyman-Gordon Company, a Massachusetts corporation (the "Company"), and David P. Gruber (the "Executive"). WHEREAS, the Company wishes to retain the services of the Executive to serve as its President and Chief Executive Officer; and WHEREAS, the Executive is willing to serve the Company in such capacity; NOW THEREFORE, in consideration of the Executive's service to the Company and the mutual agreements contained herein, the Company and the Executive hereby agree as follows: 1. Employment The Company agrees to employ the Executive, and the Executive agrees to serve, as the Company's President and Chief Executive Officer (the "Office") on the conditions and subject to the agreements expressed herein. 2. Extent of Service Executive agrees to devote his full time and best efforts to fulfilling the responsibilities of the Office, as defined from time to time by the Board of Directors (the "Board"), to which he shall report and from which he shall take direction. As part of his responsibilities the Executive shall develop a succession plan for the office of Chief Executive Officer and shall report annually to the Board on such plan. 3. Term of Employment (a) The Executive's employment under this Agreement shall continue for a period of two years from May 24, 1994 (the "Employment Period"). The Employment Period may be extended by written agreement of the parties. (b) The Company shall be permitted to terminate the Executive's employment during the Employment Period only in the event of Executive's Disability or death or for Cause. For purposes of this Agreement, "Disability" shall mean an illness or injury that prevents Executive from performing his duties hereunder (as they existed immediately before the illness or injury) on a full-time basis for at least six consecutive months and qualifies him for benefits under the Company's Long-Term Disability Plan. The Company shall have "Cause" to terminate the Executive's employment only if the Executive (i) intentionally engages in a dishonest act or acts with respect to the Company or its subsidiaries; (ii) is convicted -19- 2 of a crime involving moral turpitude or (iii) willfully or through gross negligence commits a material violation of his responsibilities to the Company hereunder or refuses to follow legitimate direction from the Board, which violation or refusal continues for more than 30 days after written notice to the Executive setting forth in reasonable detail the nature of the violations, given pursuant to a vote of a majority of the members of the Board voting at a duly-held regular or special meeting. 4. Compensation The Executive shall receive during the Employment Period a monthly gross base salary paid at the rate of $300,000 per year or such higher rate as the Board shall approve. In addition to his base salary, Executive shall be eligible to participate in the Company's Management Incentive Plan, as such Plan may be in effect from time to time. 5. Benefits The Executive shall be entitled to participate in the Company's Supplemental Retirement Plan for Senior Executives, and receive, on the same basis as the Company's other executive employees, all other benefits maintained by the Company for its executive employees generally, including medical, dental, life and disability insurance, vacation, participation in the Savings/Investment Plan, the Long-Term Incentive Plan, the Retirement Income Plan and any other health and welfare benefit plans and perquisites, as in effect from time to time. 6. Benefits Upon Employment Termination If the Company should terminate Executive's employment hereunder during the Employment Period for reasons other than Cause or Executive's death or Disability or if Executive should resign his employment hereunder for Good Reason, as defined below, he shall be entitled to the following: (a) Payment of his base salary in effect at the time of termination shall continue to be made during a period of two years after such termination (the "post-termination period"). (b) All benefits including, without limitation, medical, dental and life insurance, shall remain in effect during the post-termination period or until the date on which Executive first becomes eligible for insurance coverage of a similar nature provided by a firm that employs him following such termination of employment, whichever first occurs. Notwithstanding the foregoing, nothing in this Agreement shall require the Company to make any payment or to provide any benefit to the Executive that the Company is otherwise required to provide under any other contract, agreement, policy, plan or arrangement, including, without limitation, an Executive Severance Agreement dated as of October 16, 1991 by and between the Company and the Executive. -2- 3 7. Termination for Good Reason The Executive shall have a Good Reason for terminating his employment with the Company only if one or more of the following occurs: (a) an involuntary change in the Executive's status or position with the Company that represents a demotion from the Executive's then current status or position; (b) the assignment to the Executive by the Board of any duties or responsibilities that are materially inconsistent with the Executive's then current status or position; (c) layoff or involuntary termination of the Executive's employment, except in connection with the termination of the Executive's employment for Cause or as a result of the Executive's Disability, death or retirement; (d) a reduction by the Company in the Executive's base salary, other than in the case of reductions in salary with respect to the Company's executive officers generally; (e) any action or inaction by the Company that would adversely the Executive's continued participation in any Benefit Plan on at least as favorable a basis as was the case at the time of such action or inaction, or that would materially reduce the Executive's benefits in the future under the Benefit Plan or deprive him of any material benefits that he then enjoyed, except to the extent that such action or inaction by the Company (i) is also taken or not taken, as the case may be, in respect of covered employees generally, (ii) is required by the terms of any Benefit Plan as in effect immediately before such action or inaction, or (iii) is necessary to comply with applicable law or to preserve the qualification of any Benefit Plan under section 401(a) of the Internal Revenue Code; (f) the Company's failure to obtain the express assumption of this Agreement by any successor to the Company; and (g) any material violation by the Company of a Performance Share Agreement of even date, an Executive Severance Agreement dated as of October 16, 1991, or any agreement under the Wyman-Gordon Long-Term Incentive Plan (or any similar plan). Notwithstanding the foregoing, no action by the Company shall give rise to a Good Reason if it results from the Executive's termination for Cause, death or retirement, and no action by the Company specified in paragraphs (a) through (d) of the preceding sentence shall give rise to a Good Reason if it results from the Executive's Disability. For purposes of this Section 7, "Benefit Plan" means any compensation plan, such as an incentive (including the Management Incentive Plan or comparable executive incentive plan) or stock option plan, or any employee benefit plan, such as a thrift, pension, profit-sharing, stock bonus, long-term -3- 4 performance award, medical, disability, accident, or life insurance plan, or any other plan, program or policy of the Company that is intended to benefit employees. 8. Non-Competition The Executive agrees that for a period of two years following expiration or termination of the Employment Period, except where termination by the Company is made without Cause or termination by the Executive is made with Good Reason, he will not engage in any employment or other activity, whether as an employee, director, principal, guarantor or creditor of, or as a consultant or advisor to, or as an investor (other than as an investor in less than one percent of the outstanding stock of a corporation whose stock is publicly traded) in or for the benefit of, any corporation, partnership, trust, proprietorship, business or other entity whose business is in competition with any business of the Company as then conducted. 9. Confidential Information Executive agrees that he shall not at any time during or following the Employment Period disclose to any person, client, employer, company or other party any confidential information obtained by him incident to his employment by the Company relating to the processes, products, machinery, apparatus, financial data, business information or trade secrets of the Company, unless in connection with the performance of his duties while employed hereunder or, if after the termination of his employment or the expiration of this Agreement, unless specifically authorized in writing by the Board or successor Chief Executive Officer. Any such information which the Company does not generally make available to the public shall be considered confidential for purposes of this Agreement, provided that any such information that becomes public knowledge other than as a result of Executive's breach of his obligations hereunder shall not be considered confidential for purposes of this Agreement. 10. General Provisions (a) Governing Law. Except as otherwise expressly provided herein, this Agreement and the rights and obligations hereunder shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts. (b) Successor to the Company. This Agreement shall inure to the benefit of and shall be binding upon and enforceable by the Company and any successor thereto, including, without limitation, any corporation or corporations acquiring directly or indirectly all or substantially all of the business or assets of the Company, whether by merger, consolidation, sale or otherwise, but shall not otherwise be assignable by the Company. Without limitation of the foregoing sentence, the Company shall require any successor (whether direct or indirect, by merger, consolidation, sale or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form satisfactory to -4- 5 the Executive, expressly, absolutely and unconditionally to assume and to agree to perform this Agreement in the same manner and to the same extent as the Company would have been required to perform it if no such succession had taken place. (c) Successor to the Executive. This Agreement shall inure to the benefit of and shall be binding upon and enforceable by the Executive and his personal and legal representatives, executors, administrators, heirs, distributees and legatees ("Successors") but may not otherwise be assigned by Executive. (d) Notices. All notices provided for in this Agreement shall be in writing. Notices to the Company shall be deemed given when personally delivered or sent by certified or registered mail or overnight delivery service to Wyman-Gordon Company, 244 Worcester Street, North Grafton, Massachusetts, Attention: Company Clerk. Notices to the Executive shall be deemed given when personally delivered or sent by certified or registered mail or overnight delivery service to the last address for the Executive shown on the records of the Company. Either the Company or the Executive may, by notice to the other, designate an address other than the foregoing for the receipt of subsequent notices. (e) Arbitration. All disputes arising under this Agreement which cannot, after reasonable efforts, be resolved by the parties shall be submitted to and settled by arbitration. Such arbitration shall be effected by an arbitrator selected by and shall be conducted in accordance with the Rules existing at the date of such submission of the American Arbitration Association. Any arbitration award shall be binding and enforceable in any court of competent jurisdiction. Each of the parties shall bear its own costs, expenses and attorneys' fees in prosecuting, defending or enforcing any arbitration hereunder. (f) Waivers. No waiver of any provision of this Agreement shall be valid unless approved in writing by the party giving such waiver. No waiver of a breach under any provision of this Agreement shall be deemed to be a waiver of such provision or any other provision of this Agreement or any subsequent breach. No failure on the part of either the Company or the Executive to exercise, and no delay in exercising, any right or remedy conferred by law or this Agreement shall operate as waiver of such right or remedy, and no exercise or waiver, in whole or in part, of any right or remedy conferred by law or herein shall operate as a waiver of any other right or remedy. (g) Severability. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part, such invalidity or unenforceability shall not affect any other provision of this Agreement or part thereof, each of which shall remain in full force and effect. -5- 6 (h) Counterparts. This Agreement may be executed in a number of counterparts, each of which shall be deemed to be an original but all of which together shall constitute a single instrument. (i) Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof. No amendment to this Agreement may be made except in writing signed by both the Company and the Executive. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ATTEST: WYMAN-GORDON COMPANY /s/Wallace F. Whitney, Jr. By /s/John M. Nelson Wallace F. Whitney, Jr. John M. Nelson ATTEST: /s/ Wallace F. Whitney, Jr. /s/David P. Gruber Wallace F. Whitney, Jr. David P. Gruber -6- EX-99.10 11 1 EXHIBIT 99.10 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is entered into effective March 4, 1994 by and between Wyman-Gordon Company, a Massachusetts corporation with its principal place of business at 244 Worcester Street, North Grafton, Massachusetts 01536-8001 (the "Company"), and J. Douglas Whelan of 15739 Tanya Circle, Houston, Texas 77079-5060 (the "Executive"). WHEREAS, the Company wishes to retain the services of the Executive as the President of its Forged Products Division; and WHEREAS, the Executive is willing to serve the Company in such capacity; NOW THEREFORE, in consideration of the Executive's service to the Company and the mutual agreements contained herein, the Company and the Executive hereby agree as follows: 1. Employment The Company agrees to employ the Executive, and the Executive agrees to serve, as the President of the Company's Forged Products Division (the "Office") on the conditions and subject to the agreements expressed herein. 2. Extent of Service Commencing May 1, 1994 Executive agrees to devote his full time and best efforts to fulfilling the responsibilities of the Office, as defined from time to time by the Company's Board of Directors (the "Board"). In carrying out the duties of the Office, Executive shall be responsible for consolidating and managing the combined operations of the Company's Aerospace Forging Division ("AFD") and Cameron Forged Products Company ("Cameron") which the Company proposes to acquire pursuant to a Stock Purchase Agreement between the Company and Cooper Industries, Inc. dated January 10, 1994. In carrying out such duties, Executive shall be principally located in Houston, Texas; provided, however, that he shall travel regularly to the AFD's Massachusetts facilities; and provided, further that if the Company does not complete the acquisition of Cameron, Executive agrees to relocate, at the Company's expense in accordance with its relocation policy, to the Worcester, Massachusetts area. 3. Term of Employment (a) The Executive's employment under this Agreement shall commence on the date hereof and shall continue until December 31, 1996 (the "Employment Period"). -20- 2 (b) The Company shall be permitted to terminate the Executive's employment during the Employment Period only in the event of Executive's Disability or death or for Cause. For purposes of this Agreement, "Disability" shall mean an illness or injury that prevents Executive from performing his duties hereunder (as they existed immediately before the illness or injury) on a full-time basis for at least six consecutive months and qualifies him for benefits under the Company's Long-Term Disability Plan. The Company shall have "Cause" to terminate the Executive's employment only if the Executive (i) intentionally engages in a dishonest act or acts with respect to the Company or its subsidiaries; (ii) is convicted of a crime involving moral turpitude or (iii) willfully or through gross negligence commits a material violation of his responsibilities to the Company hereunder or refuses to follow legitimate direction from the Board, which violation or refusal continues or is not remedied for more than 30 days after written notice to the Executive setting forth in reasonable detail the nature of the violations, given pursuant to a vote of a majority of the members of the Board voting at a duly-held regular or special meeting. 4. Compensation The Executive shall receive during the Employment Period a monthly gross base salary paid at the rate of $204,000 per year or such higher rate as the Board shall approve. In addition to his base salary, the Company shall pay Executive $50,000 on May 1, 1994. 5. Benefits (a) Stock Options The Company's Management Resources and Compensation Committee shall grant, at its first meeting following the date on which Executive starts to provide services hereunder, options to Executive to purchase 75,000 shares under the Company's Long-Term Incentive Plan (the "Plan"), such grant to be on customary terms and conditions relating to grants under the Plan. (b) Performance Bonus The Company is currently devising an incentive compensationplan for key Cameron and AFD employees responsible for implementing the combination of Cameron with the AFD. Executive shall participate in such incentive compensation plan upon the same terms and conditions as are applicable to other key Cameron and AFD employees. Such incentive compensation program will be based on the annual savings arising out of the combination and will be paid at such time as the savings have been implemented. By way of illustration, it is anticipated that such plan will pay out approximately two times salary if $25 million of annual savings are achieved. -2- 3 (c) Executive Severance Agreement The Company and the Executive shall enter into an Executive Severance Agreement in the standard form between the Company and certain of its executive officers. (d) Relocation Expenses The Company agrees to pay for the cost of air freight shipment of the Executive's household furnishings from Milwaukee, Wisconsin to his home in Houston, Texas and the cost of moving other household items out of storage into Executive's Houston, Texas home. In addition, the Company shall reimburse Executive or Ladish Co., Inc. ("Ladish") for the cost of rental of the Executive's Milwaukee, Wisconsin apartment and furniture incurred after the date of Executive's termination of employment with Ladish. (e) Indemnification The Company agrees to indemnify and hold Executive harmless from and against any claims by Ladish that the Executive breached the terms of a letter agreement dated December 20, 1993 between the Executive and Ladish. In this regard Executive shall not disclose, nor shall the Company require Executive to disclose, any confidential or proprietary information of Ladish. (f) Post-Retirement Medical The Company shall provide Executive post-retirement medical coverage upon terms equivalent to those formerly offered to Executive by Cooper Industries, Inc. (g) Vacation The Company shall give Executive credit for prior service with Cameron for purposes of annual vacation entitlement. (h) General The Executive shall be entitled to receive, on the same basis as the Company's other executive employees, all other benefits maintained by the Company for its executive employees generally, including medical, dental, life and disability insurance, vacation, participation in the Savings/Investment Plan, the Long-Term Incentive Plan, the Retirement Income Plan and any other health and welfare benefit plans and perquisites, as in effect from time to time. 6. Benefits Upon Employment Termination If the Company should terminate Executive's employment hereunder during the Employment Period for reasons other than Cause or Executive's death or Disability or if Executive should resign his employment hereunder for Good Reason, as defined below, he shall be entitled to the following: -3- 4 (a) Payment of his base salary in effect at the time of termination shall continue to be made during a period of two years after such termination, or if such employment terminates prior to December 31, 1994, until December 31, 1996 (the "post-termination period"). (b) All benefits including, without limitation, medical, dental and life insurance, shall remain in effect during the post-termination period or until the date on which Executive first becomes eligible for insurance coverage of a similar nature provided by a firm that employs him following such termination of employment, whichever first occurs. Notwithstanding the foregoing, nothing in this Agreement shall require the Company to make any payment or to provide any benefit to the Executive that the Company is otherwise required to provide under any other contract, agreement, policy, plan or arrangement, including, without limitation, the Executive Severance Agreement referred to above in Section 5(c). 7. Termination for Good Reason The Executive shall have a Good Reason for terminating his employment with the Company only if one or more of the following occurs: (a) an involuntary change in the Executive's status or position with the Company that represents a demotion from the Executive's then current status or position; (b) the assignment to the Executive by the Board of any duties or responsibilities that are materially inconsistent with the Executive's then current status or position; (c) layoff or involuntary termination of the Executive's employment, except in connection with the termination of the Executive's employment for Cause or as a result of the Executive's Disability, death or retirement; (d) a reduction by the Company in the Executive's base salary, other than in the case of reductions in salary with respect to the Company's executive officers generally; (e) any action or inaction by the Company that would adversely affect the Executive's continued participation in any Benefit Plan on at least as favorable a basis as was the case at the time of such action or inaction, or that would materially reduce the Executive's benefits in the future under the Benefit Plan or deprive him of any material benefits that he then enjoyed, except to the extent that such action or inaction by the Company (i) is also taken or not taken, as the case may be, in respect of covered employees generally, (ii) is required by the terms of any Benefit Plan as in effect immediately before such action or inaction, or (iii) is necessary to comply with applicable law or to preserve the qualification of any Benefit Plan under section 401(a) of the Internal Revenue Code; -4- 5 (f) the Company's failure to obtain the express assumption of this Agreement by any successor to the Company; and (g) any material violation by the Company of any agreement (including this Agreement) between it and the Executive. Notwithstanding the foregoing, no action by the Company shall give rise to a Good Reason if it results from the Executive's termination for Cause, death or retirement, and no action by the Company specified in paragraphs (a) through (d) of the preceding sentence shall give rise to a Good Reason if it results from the Executive's Disability. For purposes of this Section 7, "Benefit Plan" means any compensation plan, such as an incentive or stock option plan, or any employee benefit plan, such as a thrift, pension, profit-sharing, stock bonus, long-term performance award, medical, disability, accident, or life insurance plan, or any other plan, program or policy of the Company that is intended to benefit employees. 8. Confidential Information Executive agrees that he shall not at any time during or following the Employment Period disclose to any person, client, employer, company or other party any confidential information obtained by him incident to his employment by the Company relating to the processes, products, machinery, apparatus, financial data, business information or trade secrets of the Company, unless in connection with the performance of his duties while employed hereunder or, if after the termination of his employment or the expiration of this Agreement, unless specifically authorized in writing by the Board or successor Chief Executive Officer. Any such information which the Company does not generally make available to the public shall be considered confidential for purposes of this Agreement, provided that any such information that becomes public knowledge other than as a result of Executive's breach of his obligations hereunder shall not be considered confidential for purposes of this Agreement. 9. General Provisions (a) Governing Law. Except as otherwise expressly provided herein, this Agreement and the rights and obligations hereunder shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts. (b) Successor to the Company. This Agreement shall inure to the benefit of and shall be binding upon and enforceable by the Company and any successor thereto, including, without limitation, any corporation or corporations acquiring directly or indirectly all or substantially all of the business or assets of the Company, whether by merger, consolidation, sale or otherwise, but shall not otherwise be assignable by the Company. Without limitation of the foregoing sentence, the Company shall require any successor (whether direct or indirect, by merger, consolidation, sale or otherwise) to all or substantially all of the business or -5- 6 assets of the Company, by agreement in form satisfactory to the Executive, expressly, absolutely and unconditionally to agree to perform this Agreement in the same manner and to the same extent as the Company would have been required to perform it if no such successio had taken place. (c) Successor to the Executive. This Agreement shall inure to the benefit of and shall be binding upon and enforceable by the Executive and his personal and legal representatives, executors, administrators, heirs, distributees and legatees ("Successors") but may not otherwise be assigned by Executive. (d) Notices. All notices provided for in this Agreement shall be in writing. Notices shall be deemed given when personally delivered or sent by certified or registered mail or overnight delivery service to a party at the address at the beginning of this Agreement. Either the Company or the Executive may, by notice to the other, designate an address other than the foregoing for the receipt of subsequent notices. (e) Arbitration. All disputes arising under this Agreement which cannot, after reasonable efforts, be resolved by the parties shall be submitted to and settled by arbitration. Such arbitration shall be effected by an arbitrator selected by and shall be conducted in accordance with the Rules existing at the date of such submission of the American Arbitration Association. Any arbitration award shall be binding and enforceable in any court of competent jurisdiction. Each of the parties shall bear its own costs, expenses and attorneys' fees in prosecuting, defending or enforcing any arbitration hereunder. (f) Waivers. No waiver of any provision of this Agreement shall be valid unless approved in writing by the party giving such waiver. No waiver of a breach under any provision of this Agreement shall be deemed to be a waiver of such provision or any other provision of this Agreement or any subsequent breach. No failure on the part of either the Company or the Executive to exercise, and no delay in exercising, any right or remedy conferred by law or this Agreement shall operate as waiver of such right or remedy, and no exercise or waiver, in whole or in part, of any right or remedy conferred by law or herein shall operate as a waiver of any other right or remedy. (g) Severability. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part, such invalidity or unenforceability shall not affect any other provision of this Agreement or part thereof, each of which shall remain in full force and effect. (h) Counterparts. This Agreement may be executed in a number of counterparts, each of which shall be deemed to be an original but all of which together shall constitute a single instrument. -6- 7 (i) Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof. No amendment to this Agreement may be made except in writing signed by both the Company and the Executive. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ATTEST: WYMAN-GORDON COMPANY /s/Shirley A. Pero By /s/David P. Gruber Shirley A. Pero David P. Gruber ATTEST: /s/Wallace F. Whitney, Jr. /s/J. Douglas Whelan Wallace F. Whitney, Jr. J. Douglas Whelan -7- EX-99.11 12 1 EXHIBIT 99.11 PERFORMANCE SHARE AGREEMENT UNDER THE WYMAN-GORDON COMPANY LONG-TERM INCENTIVE PLAN WYMAN-GORDON COMPANY, a Massachusetts corporation (the "Company"), in consideration of services heretofore rendered and to be rendered during the term of this Agreement, hereby issues and transfers to David P. Gruber of 16 Carding Mill Road, Sudbury, Massachusetts (the "Grantee"), President and Chief Executive Officer of the Company, 150,000 shares (the "Shares") of the Company's common stock, par value $1.00 per share, (the "Company Common Stock") having a restricted period beginning on May 24, 1994 and ending on May 24, 1999 (the "Restricted Period") pursuant to the terms and conditions set forth in the Wyman-Gordon Company Long-Term Incentive Plan, as it may be amended from time to time in accordance with its terms (the "Plan") and this Performance Share Agreement, as it may be amended from time to time in accordance with its terms (the "Agreement"). By execution of this Agreement, the Grantee acknowledges receipt of a copy of the Plan and further agrees to be bound thereby and by the actions, pursuant to the Plan, of the Committee referred to in the Plan (the "Committee") and of the Company's Board of Directors. (1) The Grantee acknowledges receipt of a stock certificate registered in his name for the Shares and bearing a legend setting forth the restrictions set forth in Section (2) of this Agreement. The Grantee agrees, concurrently with the execution of this Agreement, to deposit such stock certificate with the Company together with a stock power relating thereto endorsed in blank. (2) The Grantee acknowledges that the Shares may not be sold, assigned, transferred, pledged or otherwise encumbered during the Restricted Period except in accordance with the terms of this Agreement. If the Grantee ceases to be employed by the Company prior to the end of the Restricted Period, his rights to the Shares shall thereupon be forfeited and revert to the Company. Notwithstanding the foregoing if the Grantee's employment is so terminated by Grantee's death or permanent disability, the Restricted Period shall be deemed to have ended on the date of Executive's death or permanent disability for the purposes of determining the number of Shares, if any, as to which restrictions would lapse in accordance with Section (3) below. The number of shares as to which restrictions shall lapse under this Section (2) in the event of such death or permanent disability shall be the number of Shares determined in accordance with the previous sentence multiplied by a fraction the numerator of which shall be the full number of months the Executive has served as Chief Executive Officer of the Company during the Restricted Period and the denominator of which shall be 60. The restrictions contained herein on the number of Shares as so determined shall be deemed lapsed and terminated and such Shares shall not be forfeited and shall vest in Grantee or Grantee's Beneficiary referred to in -21- 2 Section (15) hereof. For example, if the price of the Shares reaches $10.00 for the period specified in clause (ii) of the first sentence of Section (3) and the Executive shall have served as Chief Executive Officer of the Company for 28 months during the Restricted Period, then the number of shares as to which restrictions shall lapse shall be 100,000 shares multiplied by 28 and divided by 60 or 46,666 2/3 shares. If an event of a Change of Control, as hereinafter defined, shall occur, the Committee in its sole discretion may, but need not, determine that the restrictions shall be deemed lapsed and terminated with respect to some or all of the Shares and such Shares, if any as determined by the Committee, shall not be forfeited and shall vest in the Grantee. (3) At the end of the Restricted Period, the Committee shall determine the average closing price of the Company Common Stock on the NASDAQ National Market System, or on any successor market or exchange in which the Company Common Stock is publicly traded, as quoted in the Wall Street Journal for each of the following periods (i) the last 30 business days of the Restricted Period and (ii) the period of 90 consecutive business days during which the Company Common Stock had the highest average closing price at any time during the Restricted Period. The higher of the prices determined pursuant to the previous sentence shall be the "Target Price." Restrictions on all or a portion of the Shares will lapse at the conclusion of the Restricted Period only if the Target Price has reached the amounts set forth below: Portion of Shares on which Target Price Restrictions will Lapse Less than $10.00 None $10.00 66 2/3% More than $10.00 but Pro rata portion between Less than $12.00 66 2/3% and 100% $12.00 or More 100% (4) Upon the expiration or termination of the Restricted Period and the satisfaction of all other conditions contained in this Agreement, including those set forth in Section 3 above, the restrictions applicable to the Shares shall lapse and a stock certificate for the number of Shares with respect to which the restrictions have lapsed shall be delivered to the Grantee, free of all such restrictions except (i) any that may be imposed by law and (ii) the further restriction that the Grantee shall retain 33 1/3% of such Shares for as long as he continues to serve as Chief Executive Officer of the Company. Any Shares as to which the restrictions shall not have lapsed hereunder shall be transferred to the Company without any further action of the Grantee. The Company shall not be required to deliver any fractional share of Stock but will pay, in lieu thereof, the fair market value (determined as of the date the restrictions lapse) of such fractional share to the Grantee. -2- 3 (5) The Grantee shall have all voting and dividend rights with respect to the Shares, provided that dividends paid in stock or other property shall be deposited with the Company together with a stock power or other appropriate instrument of transfer endorsed in blank and shall be subject to the same restrictions as the Shares. (6) The Shares have not been registered for resale under the Securities Act of 1933, as amended, and may be offered and sold only if registered pursuant to the provisions of that Act or if an exemption from registration is available. The Grantee hereby acknowledges that the Shares have not been so registered and agrees to offer or sell same only if they have been registered pursuant to the provisions of that Act or if an exemption from registration is available. The Grantee understands that the Company may place stop-transfer instructions with its transfer agents with respect to the Shares and may cause all certificates representing the Shares to be conspicuously legended to evidence the fact that the Shares have not been registered under the Securities Act of 1933, as amended, and may be offered or sold only if registered pursuant to the provisions of that Act or if an exemption from registration is available. The Grantee hereby represents that he accepts the Shares for his own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof and the Grantee acknowledges that he or his beneficiary may be required by the Committee to repeat this representation in writing upon the delivery of shares which are free of restrictions under this Agreement. (7) If Grantee properly elects, within 30 days of the date of this Agreement, to include in gross income for federal income tax purposes an amount equal to the aggregate value of the Shares subject to the Award based on the closing price of the Stock on the date of this Agreement, Grantee shall make arrangements satisfactory to the Committee to pay to the Company any federal, state or local taxes required to be withheld with respect to such Shares. If the Grantee shall fail to make such tax payments as are required, the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Grantee any federal, state or local taxes of any kind required by law to be withheld with respect to the Shares. If the Grantee does not make the election described above in this Section 7, Grantee shall, no later than the date as of which the restrictions referred to in Section 3 and such other restrictions as may have been imposed under this Agreement, shall lapse, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld with respect to the Shares, and the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Grantee any federal, state or local taxes of any kind required by law to be withheld with respect to the Shares. Any tax withholding may be satisfied, at the discretion of the Committee, by the Company's withholding Shares, otherwise deliverable to Grantee hereunder with a Fair Market Value (as defined in the Plan) equal to all or a portion of the amount to be withheld. -3- 4 At the sole discretion of the Committee, the Company may make a loan to Grantee in such amount as may be required to discharge his federal income tax liability on account of the lapsing of restrictions under Section (3) above assuming the resulting income is taxable at the maximum applicable individual federal income tax rate. Such loan shall have such maturity and other terms and conditions as the Committee shall determine in its sole discretion, and shall bear interest at the applicable federal rate under Section 1274(d) of the Internal Revenue Code or any successor provision thereto. (8) The issuance of the Shares to Grantee shall be subject to the condition that if at any time the Company shall determine (in accordance with the provisions of the following sentence) that it is necessary as a condition of, or in connection with, such exercise (a) to satisfy withholding tax or other withholding liabilities, (b) to effect the listing, registration, or qualification on any securities exchange or under any state or Federal law of any Shares otherwise deliverable in connection with such exercise, or (c) to obtain the consent or approval of any regulatory body, then in any such event such exercise shall not be effective unless such withholding, listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company in its reasonable and good faith judgment. Any such determination (described in the preceding sentence) by the Company must be reasonable, must be made in good faith, and must be made without any intent to postpone or limit such exercise, grant or distribu- tion beyond the minimum extent necessary and without any intent otherwise to deny or frustrate the Grantee's rights in respect thereof. In seeking to effect or obtain any such withholding, listing, registration, qualification, consent or approval, the Company shall act with all reasonable diligence. (9) This Agreement is in all respects governed by the terms of the Plan. All of the terms and provisions of the Plan are hereby incorporated into this Agreement by reference and are made a part of this Agreement. Each and every provision of this Agreement shall be administered, interpreted, and construed so that this Agreement shall conform to the provisions of the Plan. Any provisions of this Agreement that cannot be so administered, interpreted, or construed shall be disregarded, and, accordingly, in the event of any conflict between this Agreement and the Plan, the latter will govern. Any capitalized terms used herein and not defined herein have the respective meanings ascribed to them in the Plan. Whenever the word "Grantee" is used herein in a context where the provision should logically be construed to apply to the Grantee's Beneficiary, the word "Grantee" shall be deemed to include such Beneficiary. (10) In the event that there is any change in the Company Common Stock through merger, consolidation, reorganization, recapitalization, or otherwise; or if there shall be any dividend on the Shares, payable in Shares, or an extraordinary cash dividend or other extraordinary distribution; or if there shall be a stock split, reverse stock split, combination of Shares, exercisability of stock purchase rights received under the Company's Stockholder -4- 5 Rights Plan, or other similar corporate transaction or event that affects the Shares, such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the rights of the Grantee or of the potential benefits intended to be made available under this Agreement, the number and kind of Shares and the other relevant provisions of this Agreement shall be appropriately adjusted as provided in Section 13 of the Plan. (11) For purposes of this Agreement, a Change in Control shall be deemed to have occurred when and only when the first of the following events occurs: (a) the acquisition (including by purchase, exchange, merger or other business combination, or any combination of the foregoing) by any individuals, firms, corporations or other entities, other than a Major Stockholder on the date of this Agreement, acting in concert ("Person"), together with all Affiliates and Associates of such Person, of beneficial ownership of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding voting securities; or (b) members of the Incumbent Board cease to constitute a majority of the Board of Directors. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to clause (a), above, (i) solely because 20 percent or more of the combined voting power of the Company's outstanding securities is acquired by one or more employee benefit plans maintained by the Company, or (ii) if the Grantee is included among the individuals, firms, corporations or other entities that, acting in concert, acquire the Company's securities. For purposes of this Paragraph 11, the terms "Affiliates" and "Associates" shall have the meanings set forth in Rule 12b-2 of the General Rules and Regulations promulgated under the 1934 Act; the terms "beneficial ownership" and "beneficially owned" shall have the meaning set forth in section 13(d) of the 1934 Act, as amended, and in Rule 13d-3 promulgated thereunder; the term "Major Stockholder" shall mean all Shares beneficially owned by the Fuller Foundation, the Stoddard Charitable Trust, and descendants of Harry G. Stoddard and their spouses; and the term "Incumbent Board" shall mean (i) the members of the Board of Directors on the date hereof, to the extent that they continue to serve as members of the Board of Directors, and (ii) any individual who becomes a member of the Board of Directors after the date hereof, if his election or nomination for election as a director was approved by a vote of at least three quarters of the then Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors. (12) Notices hereunder shall be mailed or delivered to the Treasurer of the Company at its principal place of business at Grafton, Massachusetts, and shall be mailed or delivered to Grantee at his address set forth above or at such other address as he may subsequently furnish the Treasurer of the Company in writing. -5- 6 (13) The Committee may not, without the written consent of the Grantee, cause this Agreement to be revoked, and may not without such written consent make or change any determination or change any term, condition or provision hereunder if the determination or change would reduce or adversely affect the Grantee's rights hereunder. (14) Notwithstanding anything herein to the contrary, on or after the occurrence of a Change in Control, as defined above, the Committee may not under any circumstances make or change any determination or change any term, condition, or provision affecting this Agreement if the determination or change would reduce or adversely affect the Grantee's rights hereunder. (15) The Grantee shall designate a Beneficiary in writing and in such manner as is acceptable to the Company. If the Grantee fails so to designate a Beneficiary, or if no such designated Beneficiary survives the Grantee, the Grantee's beneficiary shall be the Grantee's estate. (16) Nothing in this Agreement shall confer upon the Grantee the right to continue in the employment or service of the Company or affect any right that the Company may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) the Grantee at any time for any reason. (17) So long as this Agreement shall remain in effect, the Company shall furnish to the Grantee, as and when available, a copy of any Prospectus issued with respect to the Shares covered hereby, and also a copy of all material hereinafter distributed by the Company to its stockholders generally. (19) This Agreement is nontransferable by Grantee other than by will or by the laws of descent and distribution. This Agreement and the provisions thereof shall be binding upon, and inure to the benefit of, any successor or successors of the Company and the person or entity to whom his rights hereunder may have been transferred by will, the laws of descent and distribu- tion, or beneficiary designation hereunder. (22) This Agreement shall be governed and its provisions construed, enforced and administered in accordance with the laws of the Commonwealth of Massachusetts except to the extent that such laws may be superseded by any Federal law. It may not be modified orally. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of May 24, 1994. WYMAN-GORDON COMPANY By: /s/ John M. Nelson John M. Nelson, Chairman /s/ David P. Gruber David P. Gruber -6- EX-99.12 13 1 EXHIBIT 99.12 EXECUTIVE SEVERANCE AGREEMENT This AGREEMENT ("Agreement") dated May 1, 1994, by and between Wyman-Gordon Company, a Massachusetts corporation (the "Company"), and J. Douglas Whelan (the "Executive"). W I T N E S S E T H WHEREAS, the Company desires to have the services of the Executive as its President, Forged Products Division; and WHEREAS, the Executive is willing to serve the Company as its President, Forged Products Division, but desires assurance that he will not be materially disadvantaged by a change in control of the Company; NOW, THEREFORE, in consideration of the Executive's service to the Company and the mutual agreements herein contained, the Company and the Executive hereby agree, as follows: ARTICLE I ELIGIBILITY FOR BENEFITS Section 1.1 Qualifying Termination. The Company shall not be required to provide any benefits to the Executive pursuant to this Agreement unless a Qualifying Termination occurs before the Agreement expires in accordance with Section 6.1 hereof. For purposes of this Agreement, a Qualifying Termination shall occur only if (a) a Change in Control occurs, and (b) within three years after the Change in Control, (i) The Company terminates the Executive's employment other than for Cause; or (ii) the Executive terminates his employment with the Company for Good Reason; provided, that a Qualifying Termination shall not occur if the Executive's employment with the Company terminates by reason of the Executive's Disability, death, or retirement. For the purposes hereof "retirement" shall mean any termination of employment which occurs at or after age 65. Section 1.2 Change in Control. Except as provided a below, a Change in Control shall be deemed to occur when and only when the first of the following events occurs: (a) the acquisition (including by purchase, exchange, merger or other business combination, or any combination of the foregoing) by any individuals, firms, corporations or other entities, other than a Major Stockholder on the -22- 2 date of this Agreement, acting in concert ("Person"), together with all Affiliates and Associates of such Person, of beneficial ownership of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding voting securities; or (b) members of the Incumbent Board cease to constitute a majority of the Board of Directors. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to paragraph (a), above, (i) solely because 20 percent or more of the combined voting power of the Company's outstanding securities is acquired by one or more employee benefit plans maintained by the Company, or (ii) if the Executive is included among the individuals, firms, corporations or other entities that, acting in concert, acquire the Company's securities. For purposes of this Section 1.2, the terms "Affiliates" and "Associates shall have the meanings set forth in Rule 12b-2 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934 (the Exchange Act"); the terms "beneficial ownership" and "beneficially owned" shall have the meaning set forth in section 13(d) of the Exchange Act, as amended, and in Rule 13d-3 promulgated thereunder, the term "Major Stockholder" shall mean all shares beneficially owned by the Fuller Foundation, the Stoddard Charitable Trust, and descendants of Harry G. Stoddard and their spouses; the term "Board of Directors" shall mean the Board of Directors of the Company and the term "Incumbent Board" shall mean (i) the members of the Board of Directors on the date hereof, to the extent that they continue to serve as members of the Board of Directors, and (ii) any individual who becomes a member of the Board of Directors after the date hereof, if his election or nomination for election as a director was approved by a vote of at least three quarters of the then Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors. Section 1.3. Termination for Cause. The Company shall have Cause to terminate the Executive's employment with the Company for purposes of Section 1.1 hereof only if the Executive (a) engages in unlawful acts intended to result in the substantial personal enrichment of the Executive at the Company's expense or (b) engages (except (i) by reason of incapacity due to illness or injury or (ii) in connection with an actual or anticipated termination of employment by the Executive for Good Reason) in a material violation of his responsibilities to the Company that results in a material injury to the Company. Section 1.4 Termination for Good Reason. The Executive shall have a Good Reason for terminating employment with the Company only if one or more of the following occurs after a Change in Control: -2- 3 (a) a change in the Executive's status or position (including for this purpose a change in the principal place of the Executive's employment on a basis that does not conform with the Company's present policies for executive relocation, but excluding required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations) with the Company that, in the Executive's reasonable judgment, represents an adverse change from the Executive's status or position in effect immediately before the Change in Control; (b) the assignment to the Executive of any duties or responsibilities that, in the Executive's reasonable judgment, are inconsistent with the Executive's status or position in effect immediately before the Change in Control; (c) layoff or involuntary termination of the Executive's employment, except in connection with the termination of the Executive's employment for Cause or as a result of the Executive's Disability, death or retirement; (d) a reduction by the Company in the Executive's total compensation as in effect at the time of the Change in Control (which shall be deemed, for this purpose, to be equal to his base salary plus the most recent award that he has earned under the Company's Incentive Compensation Plan, as amended from time to time, or any successor thereto (the "ICP")) or as the same may be increased from time to time; (e) the failure by the Company to continue in effect any Plan in which the Executive is participating at the time of the Change in Control (or plans or arrangements providing the Executive with substantially equivalent benefits) other than as a result of the normal expiration of any such Plan in accordance with its terms as in effect at the time of the Change in Control; (f) any action or inaction by the Company that would adversely affect the Executive's continued participation in any Plan on at least as favorable a basis as was the case at the time of the Change in Control, or that would materially reduce the Executive's benefits in the future under the Plan or deprive him of any material benefits that he enjoyed at the time of the Change in Control, except to the extent that such action or inaction by the Company is required by the terms of the Plan as in effect immediately before the Change in Control, or is necessary to comply with applicable law or to preserve the qualification of the Plan under section 401(a) of the Internal Revenue Code, and except to the extent that the Company provides the Executive with substantially equivalent benefits; -3- 4 (g) the Company's failure to obtain the express assumption of this Agreement by any successor to the Company as provided by Section 6.3 hereof; (h) any material violation by the Company of any agreement (including this Agreement) between it and the Executive; or (i) the failure by the Company, without the Executive's consent, to pay to him any portion of his current compensation, or to pay to the Executive any portion of any deferred compensation, within 30 days of the date the Executive notifies the Company that any such compensation payment is past due. Notwithstanding the foregoing, no action by the Company shall give rise to a Good Reason if it results from the Executive's termination for Cause, death or retirement, and no action by the Company specified in paragraphs (a) through (d) of the preceding sentence shall give rise to a Good Reason if it results from the Executive's Disability. A Good Reason shall not be deemed to be waived by reason of the Executive's continued employment as long as the termination of the Executive's employment occurs within the time prescribed by Section 1.1(b) hereof. For purposes of this Section 1.4, "Plan" means any compensation plan, such as an incentive or stock option plan, or any employee benefit plan, such as a thrift, pension, profit-sharing, stock bonus, long-term performance award, medical, disability, accident, or life insurance plan, or any other plan, program or policy of the Company that is intended to benefit employees. Section 1.5 Disability. For purposes of this Agreement, "Disability" shall mean illness or injury that prevents the Executive from performing his duties (as they existed immediately before the illness or injury) on a full-time basis for six consecutive months. Section 1.6 Notice. If a Change in Control occurs, the Company shall notify the Executive of the occurrence of the Change in Control within two weeks after the Change in Control. ARTICLE II BENEFITS AFTER A QUALIFYING TERMINATION Section 2.1 Basic Severance Payment. If the Executive incurs a Qualifying Termination following a Change in Control that occurs on or before termination of this Agreement as provided in Section 6.1 hereof, the Company shall pay within 30 days after the date of the Qualifying Termination to the Executive a single lump sum cash amount equal to his Total Annual Compensation multiplied by the lesser of (a) 2.50 or (b) .0833 multiplied by the number of full months remaining between termination and his attaining age 65. "Total Annual Compensation" shall mean the sum of annual base salary in effect immediately preceding termination or the Change of Control, whichever is higher, and annual incentive compensation earned under the "ICP" (annualized in the case of less than a full year's service) in the last full fiscal year immediately preceding termination or the Change of Control, whichever is higher. -4- 5 Section 2.2 Insurance. If the Executive incurs a Qualifying Termination following a Change in Control that occurs on or before termination of this Agreement as provided in Section 6.1 hereof, the Company shall provide the Executive, at the Company's expense, for a period beginning on the date of the Qualifying Termination, the same medical, accident, disability, life and any other insurance coverage as was provided to him by the Company immediately before the Change in Control (or, if greater, as in effect immediately before the Qualifying Termination occurs); such coverage shall end upon the earlier of (a) the expiration of 24 months after the Qualifying Termination or (b) with respect to each coverage, the date on which the Executive first becomes eligible for insurance coverage of a similar nature provided by a firm that employs his following the Qualifying Termination. Section 2.3 Executive Long-Term Incentive Program. If the Executive incurs a Qualifying Termination following a Change in Control that occurs on or before termination of this Agreement as provided in Section 6.1 hereof, all of the options to purchase common stock of the Company (and the alternative common stock appreciation rights) granted to the Executive prior to termination of this Agreement as provided in Section 6.1 hereof, under the Executive Long-Term Incentive Program shall become exercisable in accordance with the terms set forth in the applicable Certificate of Grant except that such options (and the alternative common stock appreciation rights) shall be exercised within three years after the Qualifying Termination. Section 2.4 Nonduplication. Nothing in this Agreement shall require the Company to make any payment or to provide any benefit or service credit that the Company is otherwise required to provide under any other contract, agreement, policy, plan, or arrangement. ARTICLE III EFFECT OF SEVERANCE POLICY Section 3.1 Effect on Severance Policy. If the Executive becomes entitled to receive benefits hereunder, the Executive shall not be entitled to any benefits under any other Company severance policy. ARTICLE IV TAX MATTERS Section 4.1 Withholding. The Company may withhold from any amount payable to the Executive hereunder all federal, state or other taxes that the Company may reasonably determine are required to be withheld pursuant to any applicable law or regulation. Section 4.2 Certain Additional Payments by the Company. Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive that is considered paid or payable or distributed or distributable in connection with a Change in Control (a "Payment"), would be subject -5- 6 to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, being collectively the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes on the Gross-Up Payment (including, without limitation, any income taxes and Excise Tax imposed upon the Gross-Up Payment and any interest or penalties imposed with respect to such taxes), the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments (as determined without regard to the Gross-Up Payment). All determinations required to be made under this Section 4.2, including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by a nationally recognized independent accounting firm selected by the Company (the "Accounting Firm") which shall provide detailed supporting calculations to the Company and the Executive within 30 business days following the date of the Qualifying Termination, if applicable, or such earlier time as the Company may request. All fees and expenses of the Accounting Firm shall borne by the Company. The Gross-Up Payment; if any, as determined pursuant to this Section 4.2, shall be paid to the Executive within ten days following receipt by the Company of the Accounting Firm's determination. The Accounting Firm shall either make the determination that a Payment is subject to the Excise Tax or it shall furnish the Executive with an opinion that failure to report the Excise Tax on the Executive's applicable Federal income tax return would not result in the imposition of a negligence or similar penalty, and, in the latter case (subject to the last sentence of this paragraph), no Gross-Up Payment shall be required. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the applicable of Section 4999 of the Code, it is possible that Gross- Up Payments which will not have been made by the Company should have been made (an "Underpayment") or that Gross-Up Payments which have been made by the Company should not have been made (an "Overpayment") or that Gross-Up Payments which have been made by the Company should not have been made (an "Overpayment"), consistent with the calculations required to be made hereunder. The Accounting firm shall determine the amount of any Underpayment or Overpayment that has occurred and (i) an amount equal to any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive and (ii) any amount refunded to the Executive as a result of such Overpayment shall be promptly paid by the Executive to the Company in an amount which will result in the Executive being made whole on an after-tax basis. ARTICLE V COLLATERAL MATTERS Section 5.1 Nature of Payments. All payments to the Executive under this Agreement shall be considered either payments in consideration of his continued service to the Company or severance payments in consideration of his past services thereto. -6- 7 Section 5.2 Legal Expenses. The Company shall pay all legal fees and expenses that the Executive may incur as a result of the Company's contesting the validity, the enforceability or the Executive's interpretation of, or determinations under, this Agreement. Section 5.3 Mitigation. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement either by seeking other employment or otherwise. The amount of any payment provided for herein shall not be reduced by any remuneration that the Executive may earn from employment with another employer or otherwise following his Qualifying Termination. Section 5.4 Authority. The execution of this Agreement has been authorized by the Board of Directors of the Company. ARTICLE VI GENERAL PROVISIONS Section 6.1 Term of Agreement. This Agreement shall be come effective on the date hereof and shall continue in effect until the earliest of (a) December 31, 1996 if no Change in Control has occurred before that date; provided, however, that commencing on January 1, 1997 and each January 1 thereafter, the term of this Agreement shall automatically be extended for an additional year unless, not later than January 30 of the same year, the Company shall have given notice that it does not wish to extend this Agreement; (b) the termination of the Executive's employment with the Company for any reason prior to a Change in Control; (c) the Company's termination of the Executive's employment for Cause, or the Executive's resignation for other than Good Reason, following a Change in Control and the Company's and the Executive's fulfillment of all of their obligations hereunder; and (d) the expiration following a Change in Control of three years and the fulfillment by the Company and the Executive of all of their obligations hereunder. Furthermore, nothing in this Article VI shall cause this Agreement to terminate before both the Company and the Executive have fulfilled all of their obligations hereunder. Section 6.2 Governing Law. Except as otherwise expressly provided herein, this Agreement and the rights and obligations hereunder shall be construed and enforced in accordance with the laws of The Commonwealth of Massachusetts. Section 6.3 Successor to the Company. This Agreement shall inure to the benefit of and shall be binding upon and enforceable by the Company and any successor thereto, including, without limitation, any corporation or corporations acquiring directly or indirectly all or substantially all of the business or assets of the Company, whether by merger, consolidation, sale or otherwise, but shall not otherwise be assignable by the Company. Without limitations of the foregoing sentence, the Company shall require any successor (whether direct or indirect, by merger, consolidation, sale or otherwise) to all of substantially all of the business or assets of the Company, by agreement in form satisfactory to the Executive, expressly, absolutely and -7- 8 unconditionally to assume and to agree to perform this Agreement in the same manner and to the same extent as the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as heretofore defined and any successor to all or substantially all of its business or assets that executes and delivers the agreement provided for in this Section 6.3 or that becomes bound by this Agreement either pursuant to this Agreement or by operation of law. Section 6.4 Successor to the Executive. This Agreement shall inure to the benefit of and shall be binding upon and enforceable by the Executive and his personal and legal representatives, executors, administrators, heirs, distributees, legatees and, subject to the Section 6.6 hereof, his designees ("Successors"). If the Executive should die while amounts are or may be payable to him under this Agreement, references hereunder to the "Executive" shall, where appropriate, be deemed to refer to this Successors; provided that nothing in this Section 6.5 shall supersede the terms of any plan or arrangement (other than this Agreement) that is affected by this Agreement. Section 6.5 Nonalienability. No right of or amount payable to the Executive under this Agreement shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, hypothecation, encumbrance, charge, execution, attachment, levy or similar process or to setoff against any obligations or to assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall be void. However, this Section 6.6 shall not prohibit the Executive from designating one or more persons, on a form satisfactory to the Company, to receive amounts payable to him under this Agreement in the event that he should die before receiving them. Section 6.6 Notices. All notices provided for in this Agreement shall be in writing. Notices to the Company shall be deemed given when personally delivered or sent by certified or registered mail or overnight delivery services to Wyman-Gordon Company, 244 Worcester Street, No. Grafton, Massachusetts 01613, Attention: Company Clerk. Notices to the Executive shall be deemed given when personally delivered or sent by certified or registered mail or overnight delivery service to the last address for the Executive shown on the records of the Company. Either the Company or the Executive may, be notice to the other, designate an address other than the foregoing for the receipt of subsequent notices. Section 6.7 Amendment. No amendment to this Agreement shall be effective unless in writing and signed by both the Company and the Executive. Section 6.8 Waivers. No waiver of any provision of this Agreement shall be valid unless approved in writing by the party giving such waiver. No waiver of a breach under any provision of this Agreement shall be deemed to be a waiver of such provision or any other provision of this Agreement or any subsequent breach. No failure on the part of either the Company or the Executive to -8- 9 exercise, and no delay in exercising, any right or remedy conferred by law or this Agreement shall operate as waiver of such right or remedy, and no exercise or waiver, in whole or in part, or any right or remedy conferred by law or herein shall operate as a waiver of any other right or remedy. Section 6.9. Severability. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part, such invalidity or unenforceability shall not affect any other provision of this Agreement or part thereof, each of which shall remain in full force and effect. Section 6.10. Captions. The captions to the respective articles and sections of this Agreement are intended for convenience of reference only and have no substantive significance. Section 6.11. Counterparts. This Agreement may be executed in a number of counterparts, each of which shall be deemed to be an original but all of which together shall constitute a single instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ATTEST: WYMAN-GORDON COMPANY /s/ Shirley A. Pero By: /s/ John M. Nelson Shirley A. Pero John M. Nelson, Chairman and Chief Executive Officer ATTEST: /s/ Wallace F. Whitney, Jr. /s/ J. Douglas Whelan Wallace F. Whitney, Jr. J. Douglas Whelan -9- -----END PRIVACY-ENHANCED MESSAGE-----