-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MmZhPrRxL9Z26QORUoy9WvqMnTxC3wdwtyCanZtPdOUXocBmuSiGWMQF3WCYFvq7 OTu1lXJ3XdZOo9spmlb/Nw== 0001005477-97-002407.txt : 19971031 0001005477-97-002407.hdr.sgml : 19971031 ACCESSION NUMBER: 0001005477-97-002407 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19971015 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971030 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WALTER INDUSTRIES INC /NEW/ CENTRAL INDEX KEY: 0000837173 STANDARD INDUSTRIAL CLASSIFICATION: GEN BUILDING CONTRACTORS - RESIDENTIAL BUILDINGS [1520] IRS NUMBER: 133429953 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-20537 FILM NUMBER: 97703931 BUSINESS ADDRESS: STREET 1: 1500 N DALE MABRY HGWY CITY: TAMPA STATE: FL ZIP: 33607 BUSINESS PHONE: 8138714811 MAIL ADDRESS: STREET 1: 1500 NORTH MABRY HGWY STREET 2: 1500 NORTH MABRY HGWY CITY: TAMPA STATE: FL ZIP: 33607 FORMER COMPANY: FORMER CONFORMED NAME: HILLSBOROUGH HOLDINGS CORP DATE OF NAME CHANGE: 19910814 8-K 1 FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) October 15, 1997 ------------------------------ Walter Industries, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 33-59021 13-3429953 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 1500 North Dale Mabry Highway, Tampa, FL 33607 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (813) 871-4811 ------------------------------ NOT APPLICABLE - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) 2 Item 2. ACQUISITION OR DISPOSITION OF ASSETS On October 15, 1997, Walter Industries, Inc. (the "Company") consummated the acquisition of Applied Industrial Materials Corporation ("AIMCOR") with the stockholders of AIMCOR pursuant to a stock purchase agreement (the "Stock Purchase Agreement") dated as of September 19, 1997. AIMCOR is a leading international provider of petroleum coke and related value-added services and a supplier of ferroalloys and other metals. The purchase price, which was determined pursuant to negotiations between the parties, is approximately $403 million, subject to adjustments and certain indemnity obligations of the parties as required by the Stock Purchase Agreement. The transaction was financed with proceeds from a new credit facility described below under Item 5. The foregoing is subject to the provisions of the Stock Purchase Agreement, which is incorporated herein by reference. Item 5. OTHER EVENTS On October 15, 1997, the Company completed a financing with NationsBank, N.A. ("NationsBank") whereby NationsBank is providing credit facilities consisting of a $350 million revolving credit facility and a $450 million term loan facility (collectively, the "$800 Million Credit Facility"). The $800 Million Credit Facility was used to (a) finance the acquisition of AIMCOR, (b) refinance the existing bank credit facilities, (c) pay transaction costs and (d) provide ongoing working capital. The $350 million revolving credit facility includes a sub-facility for trade and other standby letters of credit in an amount up to $75 million at any time outstanding and a sub-facility for swingline advances in an amount not in excess of $25 million at any time outstanding. The foregoing is subject to the provisions of the $800 Million Credit Facility, which is incorporated herein by reference. Item 7. FINANCIAL STATEMENTS AND EXHIBITS (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. It is impracticable to provide the financial statements relative to the acquired business described in Item 2 at the time this report on Form 8-K is filed. The Registrant intends to file the required financial statements as soon as practicable, but no later than 60 days from the date of this filing. (b) PRO FORMA FINANCIAL INFORMATION. It is impracticable to provide the pro forma financial information relative to the acquired business described in Item 2 at the time this report on Form 8-K is filed. The Registrant intends to file the required pro forma financial information as soon as practicable, but no later than 60 days from the date of this filing. 3 (c) EXHIBITS Exhibit Number Description -------------- ----------- 2.1 Stock Purchase Agreement dated as of September 19, 1997 by and among the Stockholders of Applied Industrial Materials Corporation, Certain Stockholders of AIMCOR Enterprises International, Inc. AIMCOR (Germany) Limited Partnership, and AIMCOR (Luxembourg) Limited Partnership, as first parties, and Walter Industries, Inc. as second party. 20.1 $800 Million Credit Agreement by and among Walter Industries, Inc. as Borrower, NationsBank, National Association, as Administrative Agent, Documentation Agent and Syndication Agent and the Lenders Party hereto from time to time. 99.1 Press Release Dated September 22, 1997 99.2 Press Release Dated October 16, 1997 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date October 30, 1997 --------------------------------- WALTER INDUSTRIES, INC. By: /s/ Dean M. Fjelstul ---------------------------------- Dean M. Fjelstul Title: Senior Vice President and Principal Financial Officer EX-2.1 2 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT DATED AS OF SEPTEMBER 19, 1997 BY AND AMONG THE STOCKHOLDERS OF APPLIED INDUSTRIAL MATERIALS CORPORATION, CERTAIN STOCKHOLDERS OF AIMCOR ENTERPRISES INTERNATIONAL, INC., AIMCOR (GERMANY) LIMITED PARTNERSHIP, AND AIMCOR (LUXEMBOURG) LIMITED PARTNERSHIP, AS FIRST PARTIES, AND WALTER INDUSTRIES, INC., AS SECOND PARTY TABLE OF CONTENTS Page ---- ARTICLE 1 Purchases and Sales of Shares; Closing and Manner of Payment 1.1 Purchases and Sales of Shares...............................2 1.2 Purchase Price..............................................3 1.3 Adjustments to the Base Purchase Price......................4 1.4 Manner of Payment of the Purchase Price.....................5 1.5 Determination of Adjustments to Base Purchase Price. .....................................................7 1.6 Disputes Regarding the Closing Balance Sheet and Adjusted Earnings Computation. ............................11 1.7 Manner of Delivery of Shares...............................12 1.8 Time and Place of Closing..................................13 ARTICLE 2 Representations and Warranties........................................13 2.1 General Statement..........................................13 2.2 Representations and Warranties of Purchaser................14 2.3 Joint and Several Representations and Warranties of the Stockholders...........................................16 2.4 Individual Representations and Warranties of the Stockholders...............................................36 2.5 Limitation on Warranties...................................37 2.6 Definition of Knowledge....................................37 ARTICLE 3 Conduct Prior to the Closing..........................................38 3.1 General....................................................38 3.2 Obligations of the Stockholders, Germany LP and Luxembourg LP..............................................38 3.3 Purchaser's Obligations....................................45 3.4 Joint Obligations..........................................46 ARTICLE 4 Conditions to Closing.................................................47 4.1 Conditions to Obligations of the Stockholders, Germany LP and Luxembourg LP...............................47 4.2 Conditions to Purchaser's Obligations......................48 ii ARTICLE 5 Closing...............................................................50 5.1 Form of Documents..........................................50 5.2 Purchaser's Deliveries.....................................50 5.3 Stockholders', Germany LP's and Luxembourg LP's Deliveries.................................................51 5.4 Other Transactions Occurring at the Closing.......................54 ARTICLE 6 Post-Closing Agreements...............................................55 6.1 Post-Closing Agreements....................................55 6.2 Inspection of Records......................................55 6.3 Confidentiality............................................56 6.4 Use of Trademarks..........................................57 6.5 Third Party Claims.........................................57 6.6 Further Assurances.........................................57 6.7 Agreement to Defend and Indemnify..........................58 6.8 No Solicitation............................................60 6.9 Non-Competition............................................62 6.10 Section 338(h) (10) Election; Tax Returns..................63 6.11 Pension Plans..............................................66 6.12 Certain Collections........................................67 ARTICLE 7 Indemnification.......................................................67 7.1 General....................................................67 7.2 Certain Definitions........................................67 7.3 Stockholders' Indemnification Obligations..................68 7.4 Limitation on Stockholders' Indemnification Obligations................................................70 7.5 Purchaser's Indemnification Covenants......................74 7.6 Cooperation................................................74 7.7 Third Party Claims.........................................75 7.8 Environmental Indemnities..................................78 7.9 Indemnification Exclusive Remedy...........................79 ARTICLE 8 Effect of Termination/Proceeding......................................79 8.1 General....................................................79 8.2 Right to Terminate.........................................79 8.3 Certain Effects of Termination.............................80 8.4 Remedies...................................................80 8.5 Right to Damages...........................................81 iii ARTICLE 9 Stockholders' Committee...............................................81 9.1 Appointment of Stockholders' Committee.....................81 9.2 Authority..................................................81 9.3 Reliance...................................................83 9.4 Actions by Stockholders....................................83 9.5 Indemnification of Purchaser and Its Affiliates............84 9.6 Indemnification of Stockholders' Committee.................84 ARTICLE 10 Miscellaneous.........................................................85 10.1 Fees.......................................................85 10.2 Publicity. ...............................................85 10.3 Notices....................................................85 10.4 Expenses; Transfer Taxes...................................86 10.5 Entire Agreement...........................................87 10.6 Non-Waiver.................................................88 10.7 Counterparts...............................................88 10.8 Severability...............................................89 10.9 Applicable Law.............................................89 10.10 Binding Effect; Benefit....................................89 10.11 Assignability..............................................89 10.12 Governmental Reporting.....................................89 10.13 Waiver of Trial by Jury....................................90 10.14 Consent to Jurisdiction....................................90 10.15 Definitions................................................90 10.16 Amendments.................................................93 10.17 Headings...................................................93 10.18 Trustee Exculpation........................................93 iv TABLE OF EXHIBITS Exhibit A - Stockholder List Exhibit B - Chart depicting the members and ownership of the AIMCOR Group Exhibit C - Allocation of Purchase Price Exhibit D - Form of Escrow Agreement Exhibit E - Commitment Letter Exhibit F - Material Consents Exhibit G - Form of Legal Opinion of Purchaser's Counsel Exhibit H - Form of Legal Opinion of Stockholders' Counsel Exhibit I - Form of License Agreement Exhibit J - Form of Services Agreement v STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT is made as of September 19, 1997 by and among the individuals and trusts (the "Stockholders") executing copies of this Agreement as stockholders of Applied Industrial Materials Corporation, a Delaware corporation ("AIMCOR"), and as stockholders of Aimcor Enterprises International, Inc., a Nevada corporation ("Enterprises"), Aimcor (Germany) Limited Partnership, a Delaware Limited Partnership ("Germany LP"), and Aimcor (Luxembourg) Limited Partnership, a Delaware limited partnership ("Luxembourg LP"), as first parties, and Walter Industries, Inc., a Delaware corporation, as second party ("Purchaser"). R E C I T A L S A. The Stockholders own all of the outstanding shares of stock of AIMCOR. AIMCOR owns approximately 79% of the outstanding shares of stock of all classes of Enterprises, and the Stockholders own the balance of the outstanding shares of stock of Enterprises. The Stockholders also own all of the Limited Partnership Units of Germany LP and Luxembourg LP, and certain of the Stockholders own all of the outstanding shares of stock of the general partners of Germany LP and Luxembourg LP. B. Germany LP and its general partners own all of the outstanding participation interests of AIMCOR Mannheim GmbH, a German entity ("AIMCOR Germany"). Luxembourg LP owns all of the outstanding shares of stock of AIMCOR Luxembourg S.A., a Luxembourg corporation ("AIMCOR Luxembourg"). 1 C. Purchaser desires to purchase all of the outstanding shares of stock of AIMCOR and AIMCOR Luxembourg, all of the outstanding shares of stock of Enterprises which are not owned by AIMCOR, and all of the participation interests of AIMCOR Germany. D. The Stockholders, Germany LP and Luxembourg LP desire to sell all of such shares and participation interests, on the terms and subject to the conditions herein contained. A G R E E M E N T S Therefore, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: ARTICLE 1 Purchases and Sales of Shares; Closing and Manner of Payment 1.1 Purchases and Sales of Shares. On the terms and subject to the conditions contained in this Agreement, at the Closing (as herein defined): (a) the Stockholders shall sell and transfer to Purchaser, and Purchaser shall purchase, all of the outstanding shares of stock of AIMCOR; (b) the Stockholders shall sell and transfer to Purchaser, and Purchaser shall purchase, all of the outstanding shares of stock of Enterprises which are not owned by AIMCOR; (c) Germany LP shall sell and transfer to Purchaser, Charles P. Gallagher ("Gallagher") shall cause CPG FRG, Inc. (a corporation wholly owned by Gallagher) to sell and transfer to Purchaser, and Wayne C. Kocourek ("Kocourek") shall cause WCK FRG, Inc. (a corporation wholly owned by Kocourek) to sell and transfer to Purchaser, and Purchaser shall purchase, all of the outstanding participation interests of AIMCOR Germany; and 2 (d) Luxembourg LP shall sell and transfer to Purchaser, and Purchaser shall purchase, all of the outstanding shares of stock of AIMCOR Luxembourg. The shares of stock of AIMCOR, Enterprises and AIMCOR Luxembourg, and the participation interests in AIMCOR Germany to be purchased and sold pursuant to this Agreement are referred to herein collectively as the "Purchased Shares". The number of Purchased Shares of each of the AIMCOR Entities (as defined below) to be sold by the Stockholders, Germany LP and Luxembourg LP are set forth in Exhibit A, attached hereto. AIMCOR, Enterprises, AIMCOR Germany and AIMCOR Luxembourg are referred to herein collectively as the "AIMCOR Entities" and individually as an "AIMCOR Entity", and AIMCOR, its Subsidiaries (as herein defined), AIMCOR Germany and AIMCOR Luxembourg are referred to herein collectively as the "AIMCOR Group". Attached hereto as Exhibit B is a chart depicting the members of the AIMCOR Group and the ownership of such members. 1.2 Purchase Price. Subject to Section 1.3, the aggregate purchase price ("Purchase Price") of the Purchased Shares shall be equal to (a) plus (b) plus (c) plus (d) plus (e) minus (f), where (a), (b), (c), (d), (e) and (f) are the following: (a) Four Hundred Three Million dollars ($403,000,000)(the "Base Purchase Price"); provided, however, that if the Closing shall occur after the date which is 30 days after the date hereof notwithstanding the fulfillment of all conditions of Closing set forth in Section 3.4(d) and Article IV other than Section 4.2(h), the Base Purchase Price shall be increased by an amount determined by multiplying $403,000,000 by a percentage equal to the per annum interest rate which would be payable by Purchaser pursuant to the Commitment Letter (as herein defined) if the Closing occurred on said date, and multiplying the resulting amount by a fraction the numerator of which is the number of days in the period commencing 31 days after the date hereof and ending on 3 the Closing Date, both dates inclusive, and the denominator of which is 365; (b) the aggregate amount of cash on hand and in banks, cash-equivalents and marketable securities of the AIMCOR Group as reflected on the Closing Balance Sheet (as herein defined); (c) the aggregate principal amount of, and accrued interest with respect to, all notes receivable and loans receivable from any of the Stockholders to AIMCOR ("Stockholder Notes and Loans") as of the Closing Date; (d) the amount of the deposit made by AIMCOR with the Internal Revenue Service pursuant to sections 444 and 7519 of the Code (as herein defined), as reflected on the Closing Balance Sheet; (e) the amount of interest accrued as of the Closing Date under loans made by AIMCOR to Germany LP and Luxembourg LP which is not reflected on the Closing Balance Sheet; and (f) the aggregate principal amount of the indebtedness of the AIMCOR Group for borrowed money (including all industrial revenue bonds and pollution control bonds) as of September 30, 1997 (excluding 25% of the principal amount of the indebtedness for borrowed money of TAC, as herein defined), as reflected on the Closing Balance Sheet ("Indebtedness"). The items described in paragraphs (b), (c) and (d) above are referred to herein as "Cash Equivalents". The Purchase Price shall be allocated among the Stockholders, Germany LP and Luxembourg LP as set forth in Exhibit C attached hereto. 1.3 Adjustments to the Base Purchase Price. There shall be the following adjustments to the Base Purchase Price: (a) if the Adjusted Carbon Products Group Earnings from Operations (as herein defined), computed in accordance with Section 1.5, shall be less than $37.9 million, then the Base Purchase Price shall be reduced for all purposes hereof by an amount equal to eight times the amount by which $37.9 million exceeds the Adjusted Carbon Products Group Earnings From Operations; and (b) the Base Purchase Price shall be: 4 (i) increased by the amount by which the Adjusted Net Book Value (as herein defined) exceeds $90,900,000; and (ii) reduced by the amount by which $90,900,000 exceeds the Adjusted Net Book Value. The Adjusted Net Book Value shall be (w) the combined Stockholders' Equity of the AIMCOR Group, as determined in accordance with Section 1.5, plus (x) Indebtedness, minus (y) Cash Equivalents, all as reflected on the Closing Balance Sheet. 1.4 Manner of Payment of the Purchase Price. The Purchase Price shall be paid as follows: (a) For the purposes of the Closing, the Stockholders' Committee (as herein defined) shall make a good-faith estimate of the Purchase Price (the "Estimated Cash Payment"), based upon the most recent ascertainable financial information of the AIMCOR Group. The Stockholders' Committee shall notify the Purchaser of the amount of the Estimated Cash Payment by written notice (which shall be itemized to show the amounts estimated for each of the paragraphs of Sections 1.2 and 1.3) delivered to Purchaser not later than three (3) business days prior to the Closing Date. At the Closing, Purchaser shall pay the Estimated Cash Payment, less amounts (subject to the last sentence of this Section 1.4) sufficient to fund the Escrows (as defined herein) to the Stockholders, Germany LP and Luxembourg LP, by wire transfer to such account as the Stockholders' Committee shall designate by written notice delivered to Purchaser not later than three (3) business days prior to the Closing Date. (b) At the Closing, the Stockholders' Committee, Germany LP and Luxembourg LP, Purchaser and an escrow agent to be designated by Purchaser and the Stockholders' Committee (the "Escrow Agent") shall execute and deliver an Escrow Agreement (the "Escrow Agreement") dated the Closing Date in substantially the form of Exhibit D hereto. Pursuant to the Escrow Agreement, at the Closing, Purchaser shall deposit with the Escrow Agent, in immediately available funds, (i) a portion of the Estimated Purchase Price equal to $10,000,000 (the "Hold Back Fund") to secure the obligation of the Stockholders' Committee under Section 1.4(c)(ii) and (ii) a portion of the Estimated Purchase Price equal to $8,750,000, representing the estimated amount for which the Stockholders shall indemnify Purchaser pursuant to Sections 7.3(a)(vi) and (vii) (the "Tax Indemnity Escrow") and (iii) a portion of the Estimated Purchase Price equal to $15,000,000 (the "Indemnity Escrow", and together with the Hold Back Fund and the Tax 5 Indemnity Escrow, the "Escrows") to secure the obligations of the Stockholders, Germany LP and Luxembourg LP to indemnify Purchaser pursuant to Section 7.3(a) (other than subparagraphs (vi) and (vii) thereof). As provided in the Escrow Agreement: (i) the Hold Back Fund shall terminate on the later of (x) 45 days from the date that the Closing Balance Sheet and the Adjusted Earnings Computation are received by Purchaser and (y) the resolution of all outstanding claims made against the Hold Back Fund; (ii) the Tax Indemnity Escrow shall terminate on the date on which all Tax (as herein defined) returns with respect to the matters for which the Stockholders shall be obligated to indemnify Purchaser pursuant to Sections 7.3(a)(vi) and (vii) shall have been filed; and (iii) the Indemnity Escrow shall terminate on the later of (x) the sixth anniversary of the Closing Date and (y) the resolution of all outstanding claims made against the Indemnity Escrow, except that 50% of the Indemnity Escrow shall be released 456 days after the Closing Date; provided, however, that the amount to be released on such 456th day shall be reduced by the amount of all claims against the Indemnity Escrow which have theretofore been paid from the Indemnity Escrow or are outstanding at that time; provided, further, that if after the third anniversary of the Closing Date, (w) there shall be no outstanding claims against the Indemnity Escrow, (x) all contamination (if any) with respect to AIMCOR Germany's former facility in Mannheim, Germany shall be remediated in accordance with Environmental Laws (as herein defined), and (y) all ponds for the disposal by TAC of silica breeze which are located in Bridgeport, Alabama have been closed in accordance with Environmental Laws, the Indemnity Escrow shall terminate on the date on which all three of such events shall have occurred. The Escrows will be governed by the terms and conditions of the Escrow Agreement. The parties agree to make such changes in the Escrow Agreement as may reasonably be required by the Escrow Agent. In lieu of Purchaser depositing $15,000,000 of the Estimated Purchase Price in cash in the Indemnity Escrow, by written notice to Purchaser, delivered not later than three business days prior to the Closing Date, the Stockholders' Committee may elect to deposit a letter of credit of a bank reasonably satisfactory to Purchaser in the stated amount of $15,000,000 (the "Letter of Credit"), which the Escrow Agent may draw upon in the event Purchaser shall make a claim 6 against the Indemnity Escrow. The Letter of Credit shall meet the requirements set forth in the Escrow Agreement. If the Stockholders' Committee does not elect to deposit the Letter of Credit in the Indemnity Escrow, the form of Escrow Agreement attached hereto as Exhibit D shall be appropriately modified to reflect a $15,000,000 cash deposit. (c) Following the Closing, the parties shall determine the final Purchase Price, taking into account the adjustments to the Base Purchase Price required pursuant to Section 1.3 and the final determinations of the amounts of Cash Equivalents and Indebtedness and employing the procedures and criteria set forth in Sections 1.5 and 1.6. If, based on the Purchase Price as finally determined: (i) the Purchase Price exceeds the Estimated Cash Payment, Purchaser shall forthwith pay the excess to the Stockholders, Germany LP and Luxembourg LP; (ii) the Estimated Cash Payment exceeds the Purchase Price, the Stockholders' Committee (on behalf of the Stockholders, Germany LP and Luxembourg LP) shall forthwith pay the excess to Purchaser; together with interest on such excess from the Closing Date to the date of payment, at a rate equal to the weighted average of the "prime rate" in effect from time to time as reported in the Wall Street Journal. (d) To the extent that the Stockholders' Committee is obligated to make any payment to the Purchaser pursuant to Section 1.4(c), the amount of such payment shall be paid by the Stockholders' Committee to Purchaser, in the first instance, from the Hold Back Fund and the remainder of the Hold Back Fund, if any, shall be distributed to the Stockholders' Committee. If the amount payable to the Purchaser by the Stockholders' Committee exceeds the amount in the Hold Back Fund, the amount of such excess will be paid by the Stockholders' Committee within five business days of the final determination of such amount by wire transfer of immediately available funds to an account designated by Purchaser. 1.5 Determination of Adjustments to Base Purchase Price. The amounts of Adjusted Carbon Products Group Earnings From Operations and Adjusted Net Book Value shall be determined as follows: 7 (a) Such amounts shall initially be derived from the audited financial statements of (w) AIMCOR and its subsidiaries (including, without limitation, Enterprises and Tennessee Alloys Company, an Alabama general partnership ("TAC"), net of the minority interest of Allegheny Ludlum Steel Co. in TAC) on a consolidated basis, (x) AIMCOR Germany, and (y) AIMCOR Luxembourg, as of and for the fiscal year ended September 30, 1997 (the "1997 Financial Statements"). The 1997 Financial Statements shall be prepared by the Stockholders' Committee and examined by AIMCOR's accountants, Arthur Andersen & Co., LLP (the "Accountants"), at AIMCOR's expense. The 1997 Financial Statements shall be prepared in accordance with generally accepted accounting principles applicable in the United States, Germany and Luxembourg, respectively, applied in a manner consistent with the accounting principles applied in the preparation of the Financial Statements (as herein defined) for the fiscal year ended September 30, 1996. In connection with the preparation of the 1997 Financial Statements, inventories shall be determined pursuant to physical counts taken not earlier than August 25, 1997 (which shall include, with respect to all inventory in stockpiles, quantities as determined by those independent licensed surveyors which AIMCOR has used in the past, unless otherwise agreed by the Stockholders' Committee and Purchaser) and rolled forward to September 30, 1997. To the extent such inventories have not heretofore been taken, Purchaser and its representatives shall have the right to observe the taking of the inventories. (b) From the 1997 Financial Statements, the Accountants shall prepare a combined balance sheet for (w) AIMCOR and its subsidiaries on a consolidated basis, (x) AIMCOR Germany, and (y) AIMCOR Luxembourg (the "Closing Balance Sheet"). The Closing Balance Sheet shall be prepared on the following basis: (i) the Closing Balance Sheet shall be prepared in accordance with generally accepted accounting principles applicable in the United States ("U.S. GAAP"), applied on a basis consistent with the Financial Statements of AIMCOR and its subsidiaries (on a consolidated basis) for the fiscal year ended September 30, 1996, except for the method of valuation of inventories and the omission of footnote disclosures required by U.S. GAAP, and shall include all normal year-end adjustments; (ii) inventories shall be valued at the lower of cost or market value, with cost being determined on a first in-first out basis; 8 (iii) the minority interest of the Stockholders in Enterprises shall be reflected in the combined stockholders' equity of the AIMCOR Group; (iv) notes receivable from Stockholders which represented a portion of the purchase price of their Purchased Shares shall be treated as an asset rather than as a reduction of stockholders' equity to the extent contained in the Adjusted Net Book Value target of $90,900,000; (v) any Excluded Assets (as herein defined) shall be disregarded; (vi) if in restating the financial statements of AIMCOR Germany and AIMCOR Luxembourg on a U.S. GAAP basis, the U.S. dollar amount of stockholders' equity of those companies changes from what it would be if such financial statements were stated on the basis of German GAAP and Luxembourg GAAP, respectively, then the effect of such changes on the Closing Balance Sheet shall be disregarded; and (vii) without implication that the contrary would otherwise be true, the principal of and accrued interest under loans receivable due to AIMCOR from Germany LP and Luxembourg LP shall be reflected as assets of AIMCOR. The 1997 Financial Statements and the Closing Balance Sheet shall each contain an audit opinion of the Accountants, addressed to the Stockholders' Committee. The audit opinions with respect to the 1997 Financial Statements shall be identical in form to the opinions which the Accountants rendered with respect to the Financial Statements for the fiscal year ended September 30, 1996; and the opinion with regard to the Closing Balance Sheet shall be substantially similar, except that it shall contain a qualification to reflect the adjustments described in subparagraphs (i) through (vii) above. (c) Concurrently with the delivery of the 1997 Financial Statements and the Closing Balance Sheet, the Accountants shall also deliver to the Stockholders' Committee and Purchaser (i) a statement (the "Carbon Products Group Statement of Earnings") setting forth the income from operations of the carbon products segment of the AIMCOR Group (the "Carbon Products Group") and (ii) an opinion stating that the Carbon Products Group Statement of Earnings has been derived from the 1997 Financial Statements and fairly reflects the operating earnings of the Carbon Products Group. As promptly as possible after the date of delivery of the Carbon 9 Products Group Statement of Earnings, the Stockholders' Committee shall prepare and deliver to Purchaser a computation of the Adjusted Carbon Products Group Earnings from Operations (the "Adjusted Earnings Computation"). The Adjusted Carbon Products Group Earnings from Operations shall be the income from operations of the Carbon Products Group as set forth in the Carbon Products Group Statement of Earnings, adjusted as follows: (i) the proceeds of the KHD arbitration settlement, in the approximate amount of $4,452,000, shall be excluded; (ii) all non-recurring items, other than the following, shall be excluded: (A) physical inventory adjustments made during or with respect to the 1997 fiscal year; (B) the gross margin from a certain sale in the approximate amount of $5,943,000 which was recorded for financial reporting purposes in the 1997 fiscal year but for management reporting purposes in the 1996 fiscal year, which gross margin is in the approximate amount of $731,000; (C) the proceeds of business interruption insurance resulting from a fire at the Torrance, California refinery of Mobil Corporation in the amount of $1,000,000; and (D) excise tax refunds in the approximate amount of $505,000; (iii) there shall be no charge or credit to earnings resulting from the valuation for the fiscal year ended September 30, 1997 of assets or liabilities of the Carbon Products Group which existed at September 30, 1996, where such assets or liabilities did not create earnings or expense from operations for the 1997 fiscal year; (iv) no adjustments shall be made for LIFO valuation or gains or losses on foreign currency exchange or earnings or losses from formed products; and (v) any expenses related to Excluded Assets shall be disregarded. (d) The Stockholders' Committee and Purchaser shall use their respective reasonable efforts to cause the 1997 10 Financial Statements, the Closing Balance Sheet and the Carbon Products Group Statement of Earnings to be delivered by the Accountants, and the Adjusted Earnings Computation to be delivered by the Stockholders' Committee, not later than December 31, 1997 and to cause copies thereof to be delivered to Purchaser and the Stockholders' Committee promptly upon their availability. Purchaser and the Stockholders' Committee shall cause the AIMCOR Group to make available to the Accountants the books, records and personnel of the AIMCOR Group which the Stockholders' Committee and the Accountants require in order to prepare and audit, respectively, the 1997 Financial Statements and prepare the Carbon Products Group Statement of Earnings. The Stockholders' Committee and Purchaser shall cause the Accountants to make available to Purchaser and the Stockholders' Committee and their respective accountants the Accountants' work papers. The Stockholders' Committee shall provide Purchaser and its accountants reasonable access to all information reasonably requested by Purchaser or its accountants regarding the Stockholders' Committee's preparation of the Adjusted Earnings Computation. 1.6 Disputes Regarding the Closing Balance Sheet and Adjusted Earnings Computation. Provided that it was prepared in accordance with Section 1.5, Purchaser shall not have the right (either directly or indirectly by disputing the Adjusted Earnings Computation) to dispute the Carbon Products Group Statement of Earnings, which, if so prepared, shall be deemed to be final when delivered by the Accountants and binding upon both Purchaser and the Stockholders. Disputes with respect to the Closing Balance Sheet or the Adjusted Earnings Computation shall be dealt with as follows: (a) Purchaser shall have forty five (45) days after receipt of the Closing Balance Sheet and the Adjusted Earnings Computation (the "Dispute Period") to dispute any of the elements of or amounts reflected on the Closing Balance Sheet or any of the adjustments set forth on the Adjusted Earnings Computation (a "Dispute"). If Purchaser does not give written notice of a Dispute within the Dispute Period to the Stockholders' Committee (a "Dispute Notice"), the Closing Balance Sheet and the Adjusted Earnings Computation shall be deemed to have been accepted and agreed to by Purchaser in the form in which they were delivered by the Stockholders' 11 Committee, and shall be final and binding upon the parties hereto. If Purchaser has a Dispute, Purchaser shall give the Stockholders' Committee a Dispute Notice within the Dispute Period, setting forth in reasonable detail the elements and amounts with which it disagrees. Within thirty (30) days after delivery of such Dispute Notice, the parties hereto shall attempt to resolve such Dispute and agree in writing upon the final content of the Closing Balance Sheet or Adjusted Earnings Computation (as the case may be). (b) If Purchaser and the Stockholders' Committee are unable to resolve any Dispute within the thirty (30) day period after the Stockholders' Committee's receipt of a Dispute Notice, the Stockholders' Committee and Purchaser shall jointly engage a nationally recognized certified public accounting firm (or, if they cannot agree on a mutually acceptable firm, they shall cause their respective accounting firms to select such firm) (the "Arbitrating Accountant") as arbitrator. In connection with the resolution of any Dispute, the Arbitrating Accountant shall have access to all documents, records, work papers, facilities and personnel necessary to perform its function as arbitrator. The Arbitrating Accountant's function shall be to review the Disputes and determine, based on the requirements of Section 1.5 and, only with respect to the Disputes, whether and to what extent the Closing Balance Sheet or the Adjusted Earnings Computation (as the case may be) requires adjustment. The arbitration before the Arbitrating Accountant shall be conducted in accordance with the commercial arbitration rules of the American Arbitration Association. The Arbitrating Accountant's award with respect to any Dispute shall be final and binding upon the parties hereto, and judgment may be entered on the award. The Stockholders' Committee shall pay a portion of the fees and expenses of the Arbitrating Accountant in an amount determined by multiplying the total amount of such fees and expenses by a fraction the numerator of which is the amount awarded to Purchaser by the Arbitrating Accountant and the denominator of which is aggregate amount which is the subject matter of the Dispute, and Purchaser shall pay the balance of such fees and expenses. Upon the resolution of all Disputes, the Closing Balance Sheet or the Adjusted Earnings Computation (as the case may be) shall be revised to reflect such resolution. 1.7 Manner of Delivery of Shares. At the Closing, the Stockholders, Germany LP and Luxembourg LP, respectively, shall deliver to Purchaser certificates evidencing the Purchased Shares of AIMCOR, Enterprises and AIMCOR Luxembourg, duly endorsed in 12 blank, or accompanied by valid stock powers duly executed in blank, in proper form for transfer, with all necessary stock transfer stamps affixed, and duly executed instruments of transfer of all participation interests of AIMCOR Germany. 1.8 Time and Place of Closing. The transaction contemplated by this Agreement shall be consummated (the "Closing") at the offices of Altheimer & Gray, 10 South Wacker, Suite 4000, Chicago, Illinois 60606 at 10:00 a.m., on October 14, 1997 or on such other date, or at such other time or place, as shall be mutually agreed upon by the Stockholders' Committee and Purchaser; provided, however, that the date of the Closing shall be automatically extended from time to time for so long as any of the conditions set forth in Sections 3.4(d), 4.1 and 4.2 hereof shall not be satisfied or waived, subject, however, to the provisions of Section 8.2. The date on which the Closing occurs in accordance with the preceding sentence is referred to in this Agreement as the "Closing Date". ARTICLE 2 Representations and Warranties 2.1 General Statement. The parties make the representations and warranties to each other which are set forth in this Article 2. All such representations and warranties shall survive the Closing (and none shall merge into any instrument of conveyance). The representations and warranties of the Stockholders made in a particular paragraph of Section 2.3 are made subject to the exceptions noted in the portion of the schedule 13 referred to in such paragraph delivered by the Stockholders' Committee to Purchaser concurrently herewith and identified by the parties as the "Disclosure Schedule". Information provided in one Schedule of the Disclosure Schedule shall suffice, without repetition or cross-reference, as a disclosure of such information in any other relevant Schedule of the Disclosure Schedule, if the disclosure in respect of such one Schedule is sufficient on its face without further inquiry reasonably to inform Purchaser of the information required to be disclosed in respect of such other relevant Schedule in order to avoid a breach of the representation or warranty corresponding thereto. Notwithstanding the foregoing, the Stockholders shall use their best efforts to identify or cross-reference in the Disclosure Schedule all applicable representations and warranties to which a particular disclosure relates. 2.2 Representations and Warranties of Purchaser. Purchaser represents and warrants to the Stockholders as follows: (a) Purchaser is a corporation duly organized, existing and in good standing, under the laws of its state of incorporation. (b) Purchaser has full corporate power and authority to enter into and perform this Agreement. This Agreement constitutes a valid and legally binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms (except to the extent that enforcement may be affected by laws relating to bankruptcy, reorganization, insolvency and creditors' rights and by the availability of injunctive relief, specific performance and other equitable remedies). (c) Except for filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), no consent, authorization, order or approval of, or filing or registration with, any governmental authority is required for or in connection with the consummation by Purchaser of the transaction contemplated hereby. 14 (d) Neither the execution and delivery of this Agreement by Purchaser, nor the consummation by Purchaser of the transaction contemplated hereby, will conflict with or result in a breach of any of the terms, conditions or provisions of its Certificate of Incorporation or by-laws, or of any statute or administrative regulation, or of any order, writ, injunction, judgment or decree of any court or governmental authority or of any arbitration award. (e) Other than Purchaser's $550,000,000 Credit Agreement dated January 22, 1996 with NationsBank, National Association (South) and other lenders party thereto, Purchaser is not a party to any unexpired, undischarged or unsatisfied written or oral contract, agreement, indenture, mortgage, debenture, note or other instrument under the terms of which performance by Purchaser according to the terms of this Agreement will be a default or an event of acceleration, or grounds for termination, or whereby timely performance by Purchaser according to the terms of this Agreement may be prohibited, prevented or delayed. (f) Except for Kohlberg Kravis Roberts & Co., L.P. or its Affiliates (as herein defined), neither Purchaser nor any of its Affiliates has dealt with any person or entity who is entitled to a broker's commission, finder's fee, investment banker's fee or similar payment for arranging the transaction contemplated hereby or introducing the parties to each other. As used herein, an "Affiliate" is any person or entity which controls Purchaser or any member of the AIMCOR Group, which Purchaser or a member of the AIMCOR Group controls, or which is under common control with Purchaser or a member of the AIMCOR Group, but the term "Affiliate" does not include the members of the AIMCOR Group themselves. For purposes of the preceding sentence, the term "control" means the power, direct or indirect, to direct or cause the direction of the management and policies of a person or entity through voting securities, contract or otherwise. In the case of the AIMCOR Group, the term Affiliate shall include Gallagher and Kocourek. (g) In connection with the consummation of the transaction contemplated hereby and the incurrence of any indebtedness therewith, Purchaser does not intend that the AIMCOR Group would incur, and does not believe that the AIMCOR Group will incur, debts that would be beyond the AIMCOR Group's ability to pay as such debts mature. (h) Purchaser is an "accredited investor" within the meaning of Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the "Securities Act") and is acquiring the Purchased Shares for its own account for investment and with no present intention of distributing or 15 reselling such shares or any part thereof in any transaction which would constitute a "distribution" within the meaning of the Securities Act. Purchaser understands that the Purchased Shares have not been registered under the Securities Act or any state securities laws and are being transferred to Purchaser, in part, in reliance on the foregoing representation. (i) Attached as Exhibit E hereof is a true and complete copy of the letter addressed to Purchaser, dated August 11, 1997, issued by NationsBank National Association (South) in connection with the financing of the transactions contemplated by this Agreement (the "Commitment Letter"). 2.3 Joint and Several Representations and Warranties of the Stockholders. The Stockholders jointly and severally represent and warrant to Purchaser that, except as set forth in the Disclosure Schedule: CORPORATE (a) Each of the AIMCOR Entities is a corporation duly existing and in good standing under the laws of its jurisdiction of incorporation. (b) Each of the AIMCOR Entities has qualified as a foreign corporation, and is in good standing, under the laws of all jurisdictions where the nature of its business or the nature or location of its assets requires such qualification, except in such jurisdictions where the failure to so qualify would not, individually or in the aggregate, have a Material Adverse Effect (as herein defined). For the purposes of this Agreement, "Material Adverse Effect" means a material adverse effect on the business, assets, results of operations or financial condition of the AIMCOR Group, taken as a whole. (c) Each of the AIMCOR Entities has all necessary corporate power and authority to carry on its respective business as such business is now being conducted. (d) Except for filings under the HSR Act, no consent, authorization, order or approval of, or filing or registration with, any U.S. or foreign court, administrative agency or governmental authority is required for or in connection with the consummation by the Stockholders, Germany LP and Luxembourg LP of the transaction contemplated hereby and the continuation of the business of the AIMCOR Group thereafter. 16 (e) Neither the execution and delivery of this Agreement by the Stockholders, Germany LP and Luxembourg LP, nor the consummation by the Stockholders, Germany LP and Luxembourg LP of the transactions contemplated hereby, will conflict with or result in a breach of any of the terms, conditions or provisions of the Certificate of Incorporation or by-laws (or similar organizational documents) of any of the AIMCOR Entities, or of any statute or administrative regulation, or of any order, writ, injunction, judgment or decree of any U.S. or foreign court, administrative agency or governmental authority or of any arbitration award to which any member of the AIMCOR Group is a party or by which any member of the AIMCOR Group is bound. (f) True and complete copies of the Certificate of Incorporation and all amendments thereto, the by-laws as amended and currently in force, similar organizational documents (in the case of AIMCOR Germany and AIMCOR Luxembourg), all stock records, and corporate minute books and records, of the AIMCOR Entities, have been furnished for inspection by Purchaser. (g) Neither AIMCOR Germany nor AIMCOR Luxembourg has any subsidiaries. Schedule 2.3(g) of the Disclosure Schedule contains a complete list of the direct and indirect subsidiaries of AIMCOR, including Enterprises(collectively, the "Subsidiaries"). For the purposes of the preceding sentence, a Subsidiary shall be an entity a majority of whose voting securities are owned, directly or indirectly, by AIMCOR. Other than the Subsidiaries, no member of the AIMCOR Group owns, whether beneficially or of record, any equity interest in any other person. Each of the Subsidiaries is duly organized, existing and in good standing under the laws of its jurisdiction of incorporation or organization (as the case may be), has full power to carry on its business as it is now conducted, and is qualified as a foreign corporation or other foreign entity in all jurisdictions where the nature of its respective businesses or the nature and location of its respective assets requires such qualification, except in such jurisdictions where the failure to so qualify would not, individually or in the aggregate, have a Material Adverse Effect. (h) The authorized capital of: (i) AIMCOR consists of 11,000 shares of voting common stock, $.01 par value, of which 9,325.8 shares are issued and outstanding and 1,089,000 shares of non-voting common stock, $.01 par value, of which 923,254.2 shares are issued and outstanding. There are no shares of capital stock of AIMCOR of any other class authorized, issued or outstanding. All of the issued 17 and outstanding shares of stock of AIMCOR have been validly issued, are fully paid and nonassessable, and are owned beneficially and of record by the Stockholders. There are no outstanding subscriptions, options, warrants, rights (including preemptive rights), calls, convertible securities or agreements or commitments of any character relating to the issued or unissued capital stock or other securities of AIMCOR obligating AIMCOR to issue or sell any securities of any kind; (ii) Enterprises consists of 1,000,000 shares of Class A common stock, $.01 par value, of which 461,202.3809 shares are issued and outstanding, and 1,000,000 shares of Class B common stock, $.01 par value, of which 461,202.3809 shares are issued and outstanding. There are no shares of capital stock of Enterprises of any other class authorized, issued or outstanding. All of the issued and outstanding shares of stock of Enterprises have been validly issued, are fully paid and nonassessable, and are owned beneficially and of record by AIMCOR and the Stockholders. AIMCOR owns 367,944.3809 shares of Class A common stock, and 367,944.3809 shares of Class B common stock, of Enterprises, free and clear of all claims, equities, security interests, liens, proxies, restrictions on transfer, voting trusts and voting agreements. There are no outstanding subscriptions, options, warrants, rights (including preemptive rights), calls, convertible securities or agreements or commitments of any character relating to the issued or unissued capital stock or other securities of Enterprises obligating Enterprises to issue or sell any securities of any kind; (iii) AIMCOR Germany consists of a single class of participation interests, all of which are issued and outstanding. There are no participation interests of AIMCOR Germany of any other class authorized, issued or outstanding. All of the issued and outstanding participation interests of AIMCOR Germany have been validly issued, are fully paid and nonassessable. Germany LP is the beneficial and of record owner of 98.8468% of the participation interests of AIMCOR Germany, free and clear of all claims, equities, security interests, liens, proxies, restrictions on transfer, voting trusts and voting agreements. CPG Mannheim Inc. (a Delaware corporation wholly owned by Gallagher) and WCK Mannheim Inc. (a Delaware corporation wholly owned by Kocourek) are the beneficial and of record owners of a combined total of 1.1532% of the participation interests of AIMCOR 18 Germany, free and clear of all claims, equities, security interests, liens, proxies, restrictions on transfer, voting trusts and voting agreements. There are no outstanding subscriptions, options, warrants, rights (including preemptive rights), calls, convertible securities or agreements or commitments of any character relating to the issued or unissued securities of AIMCOR Germany obligating AIMCOR Germany to issue or sell any securities of any kind; (iv) AIMCOR Luxembourg consists of a class of ordinary stock, without par value, of which 24,420 shares are issued and outstanding, and a class of preferred stock, without par value, of which 91,023 shares are issued and outstanding. There are no shares of capital stock of AIMCOR Luxembourg of any other class authorized, issued or outstanding. All of the issued and outstanding shares of stock of AIMCOR Luxembourg have been validly issued, are fully paid and nonassessable, and are owned beneficially and of record by Luxembourg LP, free and clear of all claims, equities, security interests, liens, proxies, restrictions on transfer, voting trusts and voting agreements. There are no outstanding subscriptions, options, warrants, rights (including preemptive rights), calls, convertible securities or agreements or commitments of any character relating to the issued or unissued capital stock or other securities of AIMCOR Luxembourg obligating AIMCOR Luxembourg to issue or sell any securities of any kind. (v) Other than borrowings under the instruments set forth on Schedule 2.3(h)(v) of the Disclosure Schedule, no member of the AIMCOR Group has any outstanding indebtedness for borrowed money. The loans and other extensions of credit under the instruments set forth on Schedule 2.3(h)(v) of the Disclosure Schedule are each prepayable in full in accordance with their respective terms. FINANCIAL (i) Copies of (a) the consolidated balance sheet, statement of earnings, statement of shareholders' equity, statement of cash flows and notes to financial statements (together with any supplementary information thereto) of AIMCOR and the Subsidiaries, (b) the balance sheet, income statement and notes to financial statements of AIMCOR Germany, and (c) the balance sheet, statement of profit and loss, statement of cash flows and notes to the annual accounts (together with any supplementary information thereto)of AIMCOR Luxembourg, each as of and for the fiscal years ended 19 September 30, 1996 and September 30, 1995 and each as audited by the Accountants, are contained in Schedule 2.3(i) of the Disclosure Schedule. The financial statements described in the preceding sentence are referred to herein as the "Financial Statements". Copies of the respective unaudited balance sheets and statements of income of AIMCOR and the Subsidiaries (on a consolidated basis), AIMCOR Germany and AIMCOR Luxembourg, each as of and for the nine month periods ended June 30, 1997 and June 30, 1996, are also contained in Schedule 2.3(i) of the Disclosure Schedule. The financial statements described in the preceding sentence are referred to herein as the "Interim Financial Statements". The Financial Statements and the Interim Financial Statements present fairly, in all material respects, the respective financial position of AIMCOR (on a consolidated basis), AIMCOR Luxembourg and AIMCOR Germany as of the dates thereof and the results of operations and (in the case of the Financial Statements) cash flows of AIMCOR (on a consolidated basis), AIMCOR Luxembourg and AIMCOR Germany for the periods covered by said statements, in conformity with U.S. GAAP, consistently applied, except (w) as disclosed therein, (x) in the case of the Interim Financial Statements, for normal year-end adjustments, and (y) in the case of the Interim Financial Statements, for the omission of footnote disclosures required by U.S. GAAP. Schedule 2.3(i) of the Disclosure Schedule also contains pro forma versions of the Financial Statements and the Interim Financial Statements, which present fairly, in all material respects, the combined financial condition of the AIMCOR Group as of the dates and for the periods then ended, subject to the adjustments described in such pro forma statements (including, without limitation, elimination from the Financial Statements and the Interim Financial Statements the Excluded Assets and the effects of the disposition of the Excluded Assets on the financial position, results of operations and cash flows of AIMCOR for the periods covered by the Financial Statements and the Interim Financial Statements). As of September 30, 1996, there was no liability or obligation of any kind required to be disclosed under U.S. GAAP, whether accrued, absolute, fixed or contingent, of any member of the AIMCOR Group that is not disclosed, reflected or reserved against in the Financial Statements as of that date. No member of the AIMCOR Group has any obligation to make any "earn out" or similar payments. (j) The members of the AIMCOR Group (including TAC) have good title to their respective assets (including, without limitation, the Intellectual Property (as herein defined)), free and clear of any liens, claims, encumbrances and security interests, except for the following: (i) statutory liens for Taxes (as defined herein) not yet due, (ii) statutory liens of landlords, carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business for sums not yet 20 due; (iii) liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations; and (iv) minor irregularities of title, none of which individually or in the aggregate materially detract from the value or use of the assets of the AIMCOR Group. The foregoing representation and warranty shall not apply to the Real Estate (as defined herein), which is dealt with exclusively in paragraph (u), or the Leased Premises (as defined herein), which is dealt with exclusively in paragraph (v). (k) (i) As used in this Agreement, the following terms shall have the following meanings: (A) the term "Taxes" means all federal, state, provincial, local, foreign and other income, sales, use, ad valorem, value added, transfer or other taxes, fees, assessments or charges of any kind, together with any interest and any penalties, with respect thereto, and the term "Tax" means any one of the foregoing Taxes; (B) the term "Tax Return" means any return, declaration, report, claim for refund or information return or statement relating to Taxes, including any schedule or attachment thereto and including any amendment thereof; and (C) the term "Code" means the Internal Revenue Code of 1986, as amended. (ii) All Tax Returns required to be filed by or with respect to each member of the AIMCOR Group have been timely filed, except where the failure to so file such Tax Returns would not, individually or in the aggregate, have a Material Adverse Effect, and all such Tax Returns are complete and correct in all material respects. Each member of the AIMCOR Group has timely paid all Taxes that are due, or that have been asserted in writing by any taxing authority to be due, from or with respect to it for the periods ending prior to the date hereof (including Taxes attributable to the period ending on the Closing Date). (iii) There are no outstanding agreements, waivers or arrangements extending the statutory period of limitation applicable to any claim for, or the period 21 for the collection or assessment of, Taxes due from or with respect to any member of the AIMCOR Group for any taxable period, and no power of attorney granted by or with respect to any member of the AIMCOR Group relating to Taxes is currently in force. (iv) No audit or other proceeding by any governmental entity has formally commenced and no written notification, and, to the Stockholders' knowledge, no oral notification has been given to any member of the AIMCOR Group that such an audit or other proceeding is pending or threatened with respect to any Taxes due from or with respect to any member of the AIMCOR Group or any Tax Return filed by or with respect to any member of the AIMCOR Group. No assessment of Tax has been proposed in writing to any member of the AIMCOR Group against any member of the AIMCOR Group or any of its assets or properties. (v) As of the Closing Date, no member of the AIMCOR Group shall be a party to, be bound by or have any obligation under, any Tax sharing agreement, indemnification arrangement, or similar contract or arrangement. During the ten year period ending on the date hereof, none of members of the AIMCOR Group (A) has been a member of an affiliated group filing a consolidated federal income tax return (other than Enterprises and its Subsidiaries), or (B) has any liability for the Taxes of any person under Treas. Reg. ss. 1.1502-6 (or any similar provision of state, local or foreign law), or as a transferee or successor, by contract, or otherwise. (vi) There is no contract or agreement, plan or arrangement by any member of the AIMCOR Group covering any person that, individually or collectively, would give rise to the payment of any amount that would not be deductible by any such member of the AIMCOR Group by reason of section 280G of the Code. No member of the AIMCOR Group has filed a consent under section 341(f) of the Code. (vii) Each member of the AIMCOR Group has duly and timely withheld from employee salaries, wages and other compensation and paid over to the appropriate taxing authorities all amounts required to be so withheld and paid over for all periods under all applicable laws and regulations. (viii) Each member of the AIMCOR Group has collected substantially all sales and use Taxes required to be collected, and have remitted, or will 22 remit on a timely basis, such amounts to the appropriate governmental authorities, or has been furnished properly completed exemption certificates. Each member of the AIMCOR Group (A) has in its possession all records and supporting documents required by all applicable sales and use Tax statutes and regulations regarding the collection and payment of all sales and use Taxes required to be collected and paid over and regarding all exempt transactions for all periods open under the applicable statute of limitations as of the Closing Date, and (B) has maintained all such records and supporting documents, in all material respects in the manner required by all applicable sales and use Tax statutes and regulations. (ix) No member of the AIMCOR Group has, for less than fair market value, acquired property from, disposed of property to, performed services for, or otherwise transacted business with, any person with whom it does not deal at arm's length; provided, however, that this subparagraph (ix) shall not apply to any of the transactions described in subparagraphs (a)-(l) of Section 3.2(d)(v); (x) At all times since July 1, 1989, AIMCOR has been both a validly electing S corporation within the meaning of Code ss.ss. 1361 and 1362 and a validly electing S corporation within the meaning of the applicable state law statutes in the states listed on Schedule 2.3(k)(x) of the Disclosure Schedule. (xi) Except as set forth on Schedule 2.3(k)(xi) of the Disclosure Schedule, no member of the AIMCOR Group will be liable for any Tax under Code ss. 1374 in connection with the deemed sale of AIMCOR's assets (including the assets of any qualified subchapter S subsidiary) caused by any election under Code ss. 338(h)(10) (and any corresponding election under state, local and foreign law) with respect to the purchase and sale of AIMCOR's stock hereunder (the "Section 338(h)(10) Election"). Except as set forth on Schedule 2.3(k)(xi) of the Disclosure Schedule, neither AIMCOR nor any qualified subchapter S subsidiary of AIMCOR has, in the past 10 years, (A) acquired assets from another corporation in a transaction in which AIMCOR's Tax basis for the acquired assets was determined, in whole or in part, by reference to the Tax basis of the acquired assets (or any other property) in the hands of the transferor, or (B) acquired the stock of any corporation which became a qualified subchapter S subsidiary. 23 CONDUCT OF BUSINESS (l) Since June 30, 1997 (September 30, 1996 in the case of subparagraph (iv)), no member of the AIMCOR Group has: (i) sold, leased, mortgaged, pledged, encumbered or transferred or otherwise disposed of any assets or properties which would be material to the AIMCOR Group, taken as a whole, except for sales of its inventory and transfers of cash in payment of trade payables and cash dividends to the Stockholders, all in the usual and ordinary course of business, and except as permitted by this Agreement; (ii) suffered any loss, or any interruption in use, of any assets or property (whether or not covered by insurance), which would be material to the AIMCOR Group, taken as a whole, on account of fire, flood, riot, strike or other hazard or Act of God; (iii) suffered any change to its business, either individually or together with other changes to its business, which would have a Material Adverse Effect; (iv) incurred any liabilities or obligations (whether absolute, accrued, contingent or otherwise) material to the AIMCOR Group, taken as a whole (collectively, "Liabilities"), except (i) Liabilities incurred in the ordinary course of business and (ii) Liabilities incurred in connection with or as a result of this Agreement and the transaction contemplated hereby; (v) waived any right which would be material to the AIMCOR Group, taken as a whole, other than in the ordinary course of business; (vi) without limitation by the enumeration of any of the foregoing, entered into any material transaction other than in the usual and ordinary course of business, except as permitted by this Agreement (the foregoing representation and warranty shall not be deemed to be breached by virtue of the entry by the Stockholders, Germany LP and Luxembourg LP into this Agreement or their consummation of the transaction contemplated hereby); or (vii) taken any action which, if it had been taken after the date hereof, would have required the consent of Purchaser under Section 3.2(d) hereof. 24 CONTRACTS (m) Schedule 2.3(m) of the Disclosure Schedule contains a description of the following undischarged written contracts, agreements, leases and other instruments to which any member of the AIMCOR Group is a party: (i) agreements for the employment for any period of time whatsoever, or in regard to the employment, or restricting the employment, of any employee of any member of the AIMCOR Group; (ii) consulting agreements; (iii) collective bargaining agreements; (iv) contracts or arrangements providing for bonuses, options, deferred compensation or stock appreciation rights; (v) leases or subleases, either as lessee or sublessee, lessor or sublessor, of personal property, where the lease or sublease provides for an annual rent in excess of $50,000 and has an unexpired term as of the Closing Date in excess of one (1) year, and leases or subleases of personal property where the lease or sublease provides for an annual rent in excess of $100,000 and has an unexpired term as of the Closing Date of less than one year; (vi) agreements restricting in any manner the right of any member of the AIMCOR Group to compete with any other person or entity, restricting the right of any member of the AIMCOR Group to sell to or purchase from any other person or entity, or restricting the right of any other party to compete with any member of the AIMCOR Group or the ability of such person or entity to employ any of the employees of any member of the AIMCOR Group; (vii) agreements between any member of the AIMCOR Group and any of their respective Affiliates with respect to the purchase of goods or the performance of services (other than employment-related agreements in the ordinary course of business); (viii) agreements of agency, representation, distri bution, or franchise which cannot be canceled by the member of the AIMCOR Group which is a party thereto without payment or penalty upon notice of sixty (60) days or less; 25 (ix) service agreements affecting any of the assets of any member of the AIMCOR Group where the annual service charge is in excess of $50,000 or has an unexpired term as of the Closing Date in excess of one (1) year; (x) guaranties, performance, bid or completion bonds, and surety or indemnification agreements; (xi) loan agreements, promissory notes, indentures, bonds, security agreements or other instruments involving the borrowing of money in an amount in excess of $50,000; (xii) agreements, commitments or understandings to make any gifts or sponsor any events; (xiii) all agreements or arrangements between any member of the AIMCOR Group, on the one hand, and any Stockholder, Germany LP or Luxembourg LP or any of their respective Affiliates (other than any member of the AIMCOR Group) on the other hand (such agreements and arrangements are hereinafter referred to as "Affiliate Transactions"); and (xiv) any other agreements which provide for the receipt or expenditure of more than $50,000, except agreements for the purchase or sale of goods or rendering of services in the ordinary course of business. All agreements, leases, subleases and other instruments referred to in this subsection 2.3(m) are binding upon the AIMCOR Group and, to the Stockholders' knowledge, the other parties thereto. No default by any member of the AIMCOR Group has occurred thereunder and, to the Stockholders' knowledge, no default by the other contracting parties has occurred thereunder, which default would, individually or in the aggregate, have a Material Adverse Effect. (n) Neither any member of the AIMCOR Group nor any of the Stockholders is a party to, or bound by, any unexpired, undischarged or unsatisfied written contract, agreement, indenture, mortgage, debenture, note or other instrument under the terms of which performance by the Stockholders, Germany LP and Luxembourg LP according to the terms of this Agreement (i) will be a default (or an event which with notice or lapse of time or both could become a default) or an event of acceleration, or result in the loss of a material benefit under, or grounds for termination, except such defaults, accelerations, losses or terminations which would not individually or in the aggregate, have a Material Adverse 26 Effect, or (ii) would be prohibited, prevented or delayed. Other than the Material Consents (as herein defined), the execution, delivery and performance by the Stockholders, Germany LP and Luxembourg LP of this Agreement and the consummation by the Stockholders, Germany LP and Luxembourg LP of the transactions contemplated hereby will not require any consent, approval or authorization of, or notice to, any third party, except such consents, approvals, authorizations, and notices the failure of which to obtain or make would not, individually or in the aggregate, have a Material Adverse Effect. (o) The AIMCOR Group possesses all licenses, permits, registrations and government approvals (the "Permits") (other than Environmental Permits (as defined herein), which are exclusively provided for in Section 2.3(t)) which are required in order for them to conduct their respective businesses as presently conducted, except where the failure to possess such Permits would not, individually or in the aggregate, have a Material Adverse Effect. EMPLOYEES (p) With respect to the AIMCOR Group and its employees: (i) AIMCOR maintains, administers, contributes to or has any liability with respect to only those employee pension benefit plans (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), whether or not excluded from coverage under specific Titles or Subtitles of ERISA) for the benefit of employees of AIMCOR which are listed in Schedule 2.3(p)(i) of the Disclosure Schedule (the "Pension Plans"); (ii) AIMCOR maintains, administers, contributes to or has any liability with respect to only those employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or not excluded from coverage under specific Titles or Subtitles of ERISA) for the benefit of employees of AIMCOR which are listed in Schedule 2.3(p)(ii) of the Disclosure Schedule (the "Welfare Plans"); (iii) AIMCOR maintains, administers, contributes to or has any liability with respect to only those stock purchase, stock option, severance, employment, change-in-control, bonus, incentive and deferred compensation plans, agreements, programs, or policies (whether formal or informal, written or (to the Stockholders' knowledge) oral, and whether or not subject to ERISA) 27 under which any employee or former employee of AIMCOR has any present or future right to benefits or under which AIMCOR has any present or future material liability, which are listed in Schedule 2.3(p)(iii) of the Disclosure Schedule. All such plans, agreements, programs, policies and arrangements, together with the Pension Plans and Welfare Plans, shall be collectively referred to as the "Company Plans"; (iv) with respect to each Company Plan, AIMCOR has delivered or made available to the Purchaser a current, accurate and complete copy (or, to the extent no such copy exists, an accurate description) thereof and, to the extent applicable, (a) any related trust agreement, annuity contract or other funding instrument; (b) the most recent determination letter; (c) any summary plan description by AIMCOR to its employees concerning the extent of the benefits provided under a Company Plan; and (d) for the three most recent years (1) the Form 5500 and attached schedules; (2) audited financial statements; (3) actuarial valuation reports; and (4) attorney's responses to an auditor's request for information; (v) all Company Plans and any related trust agreements or annuity contracts (or any related trust instruments) comply in all material respects with and are and have been operated in all material respects in accordance with their terms and each applicable provision of ERISA, the Code (including, without limitation, the requirements of Code section 401(a) to the extent any Pension Plan is intended to conform to that section) and other applicable laws, rules and regulations (including, without limitation, state insurance law), except where non-compliance with such terms and laws, rules and regulations, would not, individually or in the aggregate, have a Material Adverse Effect. AIMCOR has not received any written notice, and none of the Stockholders has any knowledge, of any violation of any of the foregoing by any Company Plan, which violation has not heretofore been corrected. A favorable determination as to the qualification under the Code of each of the Pension Plans has been made by the Internal Revenue Service ("IRS"); (vi) there has been no "reportable event" (as defined in Section 4043(c) of ERISA) for which the 30 day reporting requirement is applicable and has not been waived with respect to any Company Plan. Neither AIMCOR nor any affiliate of AIMCOR as determined under Code Section 414(b), (c), (m) or (o) ("ERISA 28 Affiliate") has incurred or permitted to exist any "accumulated funding deficiency" (as defined in Section 302 of ERISA) whether or not waived by the IRS, involving any Pension Plan subject to section 412 of the Code or Part 3 of Title I(B) of ERISA. No withdrawals have occurred so as to cause any Pension Plan to become subject to the provisions of Section 4063 of ERISA, nor has AIMCOR or any ERISA Affiliate ceased making contributions to any employee benefit plan subject to Section 4064(a) of ERISA to which either AIMCOR or any ERISA Affiliate made contributions during the six (6) years prior to the date hereof; (vii) with respect to each Company Plan, no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the Stockholders' knowledge, threatened. To the Stockholders' knowledge, no event has occurred and no condition exists that would be reasonably expected to subject AIMCOR or its Subsidiaries, either directly or through their ERISA Affiliates, to any Tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other applicable laws, rules and regulations, whether by indemnity or otherwise, which Tax, fine, lien, penalty or liability would have a material adverse effect on any of the Company Plans. Neither AIMCOR nor, to the Stockholders' knowledge, any other party has engaged in a prohibited transaction (as defined in Section 406 of ERISA and Section 4975 of the Code) which would subject AIMCOR or the Purchaser to any Taxes, penalties or other liabilities under ERISA or the Code with respect to any of the Company Plans, which Taxes, penalties or liabilities would have a material adverse effect on any of the Company Plans; (viii) neither AIMCOR nor any ERISA Affiliate has incurred any liability to the Pension Benefit Guaranty Corporation ("PBGC") as a result of the voluntary or involuntary termination of any Pension Plan subject to Title IV of ERISA; there is currently no active filing by AIMCOR or any ERISA Affiliate with the PBGC (and no proceeding has been commenced by the PBGC) to terminate any Pension Plan subject to Title IV of ERISA maintained or funded, in whole or in part, by AIMCOR or any ERISA Affiliate. None of the Company Plans is a multiemployer plan as defined in Section 3(37) of ERISA. Neither AIMCOR nor any ERISA affiliate sponsors, maintains, contributes to or has any liability with respect to a multiemployer plan; 29 (ix) with respect to any plan maintained outside the United States for the purpose of providing or otherwise making available retirement or other benefits to employees of the members of the AIMCOR Group other than AIMCOR (collectively, "Non-U.S. Plans"), each Non-U.S. Plan is in compliance in all material respects with its terms and the provisions of all material laws applicable to each such Non-U.S. Plan, except where noncompliance with such terms or laws would not have a Material Adverse Effect. All required employer contributions under any such plans have been made and the applicable pension funds have been funded in accordance with the terms of the plan and in compliance with all laws applicable thereto except where noncompliance with such laws would not have a Material Adverse Effect; (x) there are no strikes, work stoppages or disputes pending, or, to the Stockholders' knowledge, threatened between any member of the AIMCOR Group and any current or former employees, and there is no request for union representation or organizational effort by any labor union or other collective bargaining unit pending, or, to the Stockholders' knowledge, threatened against the business of any member of the AIMCOR Group; (xi) there are no pending, or, to the Stockholders' knowledge, threatened unfair labor practice charges or employee grievance charges with respect to the business of any member of the AIMCOR Group; (xii) the Disclosure Schedule contains a list of all employees of the members of the AIMCOR Group as of July 1, 1997, whose annual salaries exceed $50,000 and said list correctly reflects their employer, base salaries, dates of employment and positions; (xiii) with the exception of the agreements referred to in Section 3.2(e), no Company Plan exists that could result in the payment to any present or former employee of the AIMCOR Group or its Subsidiaries of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of the AIMCOR Group or its Subsidiaries as a result of the transaction contemplated by this Agreement, whether or not such payment would constitute a parachute payment as defined in Section 280G of the Code, or whether or not some other further event or condition is required for payment or entitlement on or after the transaction. 30 LITIGATION AND CLAIMS (q) There is no litigation or proceeding, in law or in equity, and there are no proceedings or governmental investigations before any commission or other administrative authority, pending or, to the Stockholders' knowledge, threatened against any member of the AIMCOR Group, or any of their respective officers, directors or Affiliates, with respect to or affecting the operations, assets, business, products, sales practices or financial condition of any member of the AIMCOR Group, which has a reasonable probability of being decided adversely to the applicable member of the AIMCOR Group and which, if decided adversely to such member, would have a Material Adverse Effect, or prohibit, present or delay the consummation of the transaction contemplated hereby. No present or former director, officer, employee or agent of the members of the AIMCOR Group is a defendant in any litigation commenced by stockholders of any member of the AIMCOR Group with respect to the performance of his or her duties as a director, officer, employee or agent of a member of the AIMCOR Group under any federal or state law (including litigation under federal and state securities laws). With the exception of the provisions of AIMCOR's Certificate of Incorporation, here exist no indemnification agreements with any of the present or former directors, officers, employees or agents of any member of the AIMCOR Group. (r) No member of the AIMCOR Group is a party to, or bound by, any decree, order or arbitration award (or agreement entered into in any administrative, judicial or arbitration proceeding with any governmental authority) with respect to or affecting the properties, assets, personnel or business activities of any member of the AIMCOR Group, the enforcement of which or compliance with which would have a Material Adverse Effect. (s) Except for laws, rules and regulations relating to the environment (which are exclusively provided for in Section 2.3(t) hereof) each member of the AIMCOR Group is in compliance with all decrees, orders or arbitration awards or laws, statutes, or regulations of or agreements with, or any Permits from, any federal, foreign, state, provincial or local governmental authority to which the property, assets, personnel or business activities of the AIMCOR Group are subject, including, without limitation, federal, foreign, state, provincial or local laws, statutes and regulations relating to equal employment opportunities, fair employment practices, occupational health and safety, wages and hours, and discrimination, except such failures to be in compliance which would not, individually or in the aggregate, have a Material Adverse Effect. 31 ENVIRONMENTAL MATTERS (t) Each member of the AIMCOR Group is, and has been, in compliance with all Environmental Laws (as herein defined), except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, and, to the Stockholders' knowledge, there is no condition that would reasonably be expected to prevent or materially interfere with such compliance. The AIMCOR Group possesses all Environmental Permits which are required for the operation of their respective businesses, where the failure to possess such Environmental Permits would reasonably be expected to result in a Material Adverse Effect, and is in compliance with the provisions of all such Environmental Permits, except where the failure to so comply would not reasonably be expected to result in a Material Adverse Effect. No modification, revocation, reissuance, alteration, transfer or amendment of any material Environmental Permit, or any review by, or approval of, any third party of any material Environmental Permit is required in connection with the execution or delivery of this Agreement or the consummation of the transactions contemplated hereby or the continuation of the business of the AIMCOR Group. All material Environmental Permits possessed by the AIMCOR Group are listed in Schedule 2.3(t) of the Disclosure Schedule. Except as would not reasonably be expected to result in a Material Adverse Effect, none of the AIMCOR Group has received any Environmental Action (as herein defined) which has not been fully remediated and none of the Stockholders is aware of any threatened Environmental Action. None of the AIMCOR Group has entered into, has agreed to, or is subject to any judgment, decree, order or other similar requirement of any governmental authority under any Environmental Laws. Except as would not reasonably be expected to result in a Material Adverse Effect, Hazardous Materials (as herein defined) have not been generated, transported, treated, stored, disposed of, released or threatened to be released at, on, from or under any of the properties or facilities currently or formerly owned, leased or otherwise used by any of the AIMCOR Group, in violation of, or in a manner or to a location that could give rise to liability to any of the AIMCOR Group under, any Environmental Laws. Except as would not reasonably be expected to result in a Material Adverse Effect, none of the AIMCOR Group has contractually assumed any liabilities or obligations under any Environmental Laws. For the purposes of this Agreement: (i) "Environmental Laws" means all applicable federal, foreign, state, provincial and local statutes, regulations, ordinances, rules, regulations and policies having the force of law, and all court orders and decrees and arbitration awards, which pertain to environmental or 32 safety matters or radiation or contamination of any type whatsoever and are in effect as of the date hereof; (ii) "Environmental Permits" means licenses, permits, registrations, governmental approvals, agreements and consents which are required under or are issued pursuant to Environmental Laws; (iii) "Environmental Action" means any written notice, claim, demand, action, suit, complaint, proceeding or other communication by any person alleging liability or potential liability (including without limitation liability or potential liability for investigatory costs, cleanup costs, governmental response costs, natural resource damages, property damage, personal injury, fines or penalties) arising out of, relating to, based on or resulting from (w) the presence, discharge, emission, release or threatened release of any Hazardous Materials at any location, (x) circumstances forming the basis of any violation or alleged violation of any Environmental Laws or Environmental Permits, or (y) otherwise relating to obligations or liabilities under any Environmental Laws; and (iv) "Hazardous Materials" means all hazardous, dangerous or toxic substances, wastes, materials or chemicals, petroleum (including crude oil or any fraction thereof) and petroleum products, asbestos and asbestos-containing materials, pollutants, contaminants and all other materials or substances regulated pursuant to any Environmental Laws or that could reasonably be expected to result in liability under any Environmental Laws. REAL ESTATE AND LEASED PREMISES (u) All real property owned by any member of the AIMCOR Group is identified in Section 2.3(u) of the Disclosure Schedule, which shall for the purposes of this Agreement include TAC's Bridgeport, Alabama facility (together with all buildings, structures and other improvements located thereon, the "Real Estate"). The member of the AIMCOR Group identified in Section 2.3(u) of the Disclosure Schedule as owning particular parcels of Real Estate holds good and marketable fee simple title to such Real Estate, subject only to real estate taxes not delinquent and easements, covenants, conditions and restrictions which do not materially and adversely affect the marketability of title or the uses to which the Real Estate is put. The Real Estate is not subject to any leases or tenancies. (v) All real estate leased or subleased by, or subject to any other occupancy agreement in favor of, any member of 33 the AIMCOR Group is identified in the Disclosure Schedule (together with all buildings, structures and other improvements located thereon, the "Leased Premises"). The Leased Premises are leased to the member of the AIMCOR Group identified in the Disclosure Schedule as leasing parcels of the Leased Premises pursuant to written leases, true and complete copies of which have been made available to Purchaser and such party has good title to the leasehold estate to such Leased Premises. Each lease and sublease which permits any member of the AIMCOR Group to occupy a Leased Premises is in full force and effect and constitutes a legal, valid and binding obligation of, and is legally enforceable against, the member of the AIMCOR Group which is the lessee and, to the Stockholders' knowledge, the lessors thereof, and grants the leasehold interest it purports to grant free and clear of all covenants, conditions, restrictions, easements, mortgages, liens, security interests, encumbrances, rights of way and other similar restrictions created by or imposed upon any member of the AIMCOR Group, or, to the Stockholders' knowledge, any other party. Neither the member of the AIMCOR Group which is the lessee of particular Leased Premises is in default under any agreement relating to such Leased Premises nor, to the Stockholders' knowledge, is any other party thereto in default thereunder, which default would have a Material Adverse Effect. (w) To the Stockholders' knowledge, there are no violations of any restriction, condition or agreement contained in any instrument of record against the Real Estate or the Leased Premises. To the Stockholders' knowledge, all buildings, structures and other improvements included within the Real Estate and the Leased Premises, including but not limited to the roofs and structural elements thereof, are in good working order in all material respects and free of material structural defects. None of the AIMCOR Group nor the Stockholders has received notice or otherwise has knowledge of any pending, threatened or contemplated condemnation proceeding affecting the Real Estate or the Leased Premises or any part thereof or of any sale or other disposition of any Real Estate or Leased Premises or any part thereof in lieu of condemnation. INTELLECTUAL PROPERTY (x) All material U.S. or foreign intellectual property of the AIMCOR Group, including, without limitation, each material (i) trademark, service mark, slogan, trade name, trade dress and the like (collectively, and together with the associated goodwill of each, "Trademarks"), including information regarding each registration and pending application to register any such Trademarks; (ii) common law Trademark; (iii) patent application; (iv) registration of and 34 application to register any copyright; and (v) license of rights in Trademarks, patents, copyrights, unpatented formulations, and know-how, whether to or by any member of the AIMCOR Group, is listed in the Disclosure Schedule. The scheduled rights, together with all other intellectual property of the AIMCOR Group, including trade secrets, technology, inventions and know-how, are referred to herein collectively as the "Intellectual Property." (y) The members of the AIMCOR Group own or have the right to use all material Intellectual Property necessary for the AIMCOR Group to conduct its business as it is currently being conducted and consistent with past practice. Such Intellectual Property is valid, unexpired and has not been abandoned. The members of the AIMCOR Group have taken reasonable steps to protect, maintain and safeguard their Intellectual Property, including any material Intellectual Property for which improper or unauthorized disclosure would impair its value or validity, and have caused their employees and third parties who are reasonably likely to have access thereto to execute agreements in connection with the foregoing. (z) The Stockholders have no knowledge: (i) that any other firm, corporation, association or person claims the right to use in connection with similar or closely related goods and in the same geographic area, any mark which is identical or confusingly similar to any of the Trademarks; (ii) of any claim that any third party (other than a licensor of Intellectual Property to a member of the AIMCOR Group) asserts ownership rights in any of the Intellectual Property; (iii) of any claim that the use by any member of the AIMCOR Group of any Intellectual Property infringes any right of any third party; and (iv) that any third party is infringing any of the rights of any member of the AIMCOR Group in any of the Intellectual Property. GENERAL (aa) With the exception of Goldman, Sachs & Co., neither the Stockholders, nor any of their Affiliates, nor any member of the AIMCOR Group, have dealt with any person, firm or corporation who is entitled to a broker's commission, finder's fee, investment banker's fee or similar payment for arranging the transaction contemplated hereby or introducing the parties to each other. (bb) Schedule 2.3(bb) of the Disclosure Schedule lists all insurance policies of the members of the AIMCOR Group covering the assets, products, employees and current and historical operations of the AIMCOR Group as of the date hereof. All such policies are in full force and effect, all 35 premiums due thereon have been paid by the AIMCOR Group and the members of the AIMCOR Group have complied in all material respects with the provisions of such policies and have not received any notice from any of its insurance brokers or carriers that such broker or carrier will not be willing or able to renew their existing coverage. (cc) The assets of the AIMCOR Group comprise all of the assets necessary to conduct the businesses of the AIMCOR Group in the same manner as such businesses were being conducted on September 30, 1996; provided, however, that no representation or warranty is made with respect to corporate services rendered to the AIMCOR Group from AIMCOR's Denver, Colorado headquarters. 2.4 Individual Representations and Warranties of the Stockholders. Each of the Stockholders, individually, and each of Germany LP and Luxembourg LP, individually, represents and warrants to Purchaser as follows: (a) Such Stockholder, Germany LP or Luxembourg LP (as the case may be) has full power and authority to execute and perform this Agreement. This Agreement constitutes a valid and legally binding of such Stockholder, Germany LP or Luxembourg LP, enforceable against such Stockholder, Germany LP or Luxembourg LP (as the case may be) in accordance with its terms (except to the extent that enforcement may be affected by laws relating to bankruptcy, reorganization, insolvency and creditors' rights and by the availability of injunctive relief, specific performance and other equitable remedies). (b) If such Stockholder, Germany LP or Luxembourg LP (as the case may be) is a limited partnership, trust or entity (a "Stockholder Entity"), such Stockholder Entity is duly organized, existing and in good standing under the laws of its jurisdiction of formation. The execution and delivery of this Agreement by it and the performance by it of all of its obligations under this Agreement have been duly approved prior to the date of this Agreement by all requisite action of its general partners, trustees or the like, as the case may be. No other approval is required for it to execute this Agreement or consummate the transaction contemplated hereby. This Agreement has been duly executed and delivered by it. Neither the execution and delivery of this Agreement by such Stockholder Entity, nor the consummation by it of the transaction contemplated hereby will conflict with or constitute a breach of any of the terms, conditions or provisions of its Agreement of Limited Partnership, trust 36 agreement or declaration of trust, or other organizational documents, as the case may be. (c) Such Stockholder owns the numbers of Purchased Shares listed opposite such Stockholder's name on Exhibit A, free and clear of all claims, equities, security interests, liens, proxies, restrictions on transfer, voting trusts and voting agreements, other than agreements between AIMCOR and/or Enterprises and such Stockholder which will be terminated as of the Closing. 2.5 Limitation on Warranties. Except as expressly set forth in Sections 2.3 and 2.4, the Stockholders, Germany LP and Luxembourg LP make no express or implied warranty of any kind whatsoever, including, without limitation, any representation as to physical condition or value of any of the assets of the AIMCOR Group or the future profitability or future earnings performance of the AIMCOR Group. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED. 2.6 Definition of Knowledge. For the purposes of this Agreement, the knowledge of the Stockholders shall be deemed to be limited to the actual knowledge as of the Closing Date of Gallagher, Kocourek, William Ehmer ("Ehmer"), Jon Burns ("Burns"), Peter Scott-Hansen, Charles Kopec, Kevin Manion and John Straka, without giving effect to imputed knowledge. 37 ARTICLE 3 Conduct Prior to the Closing 3.1 General. The Stockholders, Germany LP, Luxembourg LP and Purchaser shall have the rights and obligations with respect to the period between the date hereof and the Closing Date which are set forth in the remainder of this Article 3. 3.2 Obligations of the Stockholders, Germany LP and Luxembourg LP. The following are the obligations of the Stockholders, Germany LP and Luxembourg LP: (a) the Stockholders, Germany LP and Luxembourg LP shall and shall use their best efforts to cause the AIMCOR Group to give to Purchaser's officers, employees, agents, attorneys, consultants, accountants and lenders reasonable access during normal business hours to all of the properties, books, contracts, documents, insurance policies, records, attorneys, consultants, accountants, advisors and personnel of or with respect to the AIMCOR Group and shall furnish to Purchaser and such persons as Purchaser shall designate to the Stockholders' Committee such information as Purchaser or such persons may at any time and from time to time reasonably request (including without limitation, all work papers and supporting information of the Accountants). The right of inspection granted to Purchaser under this Section 3.2(a) includes the right to make reasonable extracts or copies. No investigation pursuant to this Section 3.2(a) shall affect any representations or warranties of the parties herein or the conditions to the obligations of the parties hereto. (b) The Stockholders, Germany LP and Luxembourg LP shall (and Purchaser shall cooperate with the Stockholders, Germany LP and Luxembourg LP to) cause the members of AIMCOR Group to use their reasonable best efforts to obtain the consents to the consummation of the transaction contemplated hereby under or with respect to, each contract, lease, agreement, Permit, Environmental Permit, and other instrument, which is enumerated in Exhibit F attached hereto (the "Material Consents") and, in addition to the Material Consents, any consents with respect to any other Environmental Permit for which a consent with regard to the consummation of the transaction contemplated hereby would be required under Environmental Laws. 38 (c) The Stockholders, Germany LP and Luxembourg LP shall each use its best efforts to (i) maintain the present business organization of the AIMCOR Group, (ii) purchase and sell inventory, pay payables and other accrued liabilities and collect receivables in the usual and ordinary course of business, consistent with past practices and otherwise operate the AIMCOR Group in the ordinary and regular course of business consistent with past practice; (iii) maintain the AIMCOR Group's books and records in accordance with past practices; (iv) keep available the services of the AIMCOR Group's officers and employees (other than Gallagher, Kocourek and employees of Consumer Products (as herein defined) and employees located at its Denver, Colorado headquarters); (v) comply in all material respects with all applicable laws, including, without limitation, applicable Environmental Laws; and (vi) maintain reasonably satisfactory relationships with licensors, suppliers, employees, creditors, distributors, customers and others transacting business with the Company, except as permitted by this Agreement. (d) Without the prior written consent of Purchaser, and without limiting the generality of any other provision of this Agreement, the Stockholders, Germany LP and Luxembourg LP shall use their best efforts to cause the members of the AIMCOR Group not to: (i) amend their respective certificates or articles of incorporation or by-laws, partnership agreements, or other organizational documents; (ii) make any change in the authorized capital stock of any member of the AIMCOR Group, or issue or sell any shares of stock of any class of stock of any member of the AIMCOR Group, or issue, grant or become a party to any subscriptions, warrants, rights, options, calls, convertible securities or agreements or commitments of any character relating to the issued or unissued capital stock of the members of the AIMCOR Group, or to other equity securities or interest of any member of the AIMCOR Group, or grant any stock appreciation, phantom stock or similar rights; (iii) (x) increase the compensation or fringe benefits of any present or former director, officer or employee of the AIMCOR Group or its Subsidiaries (except for increases in salary or wages in the ordinary course of business consistent with past practice), (y) grant any severance or termination pay to any present or former director, officer or employee of the AIMCOR Group or its Subsidiaries or (z) establish, adopt, enter into, amend or terminate any Company Plan or any plan, agreement, program, policy, trust, fund or other arrangement that 39 would be a Company Plan if it were in existence as of the date of this Agreement; provided, however, that in connection with the formation and sale of Consumer Products, AIMCOR may cause Company Plans applicable only to Consumer Products to be established, provided that no cost to the AIMCOR Group (other than Consumer Products) results therefrom; (iv) incur or commit to incur any investment or capital expenditures not set forth in Schedule 3.2(d)(iv) of the Disclosure Schedule in excess of $100,000 in the aggregate; (v) subject any of the assets of the AIMCOR Group to any lien, mortgage, security interest or encumbrance or otherwise permit or allow the members of the AIMCOR Group to sell, transfer or otherwise dispose of any asset or property (including sales, leases or transfers to Affiliates), except for sales of inventory and for transfers of cash in payment of the trade payables of the members of the AIMCOR Group all in the usual and ordinary course of business in accordance with past practices and payment of cash dividends to the Stockholders to the extent permitted in Section 3.2(d)(ix), and except for the following transactions with all or certain Stockholders or their designees which are out of the ordinary course of business: a. the sale of AIMCOR Consumer Products LLC ("Consumer Products"); b. the sale of the outstanding shares of Panoramica, Inc. which are owned by AIMCOR; c. the sale of the outstanding shares of Servicios AIMCOR, A.C. which are owned by AIMCOR Inversiones S.A. de C.V., a subsidiary of Enterprises; d. the sale of one general aviation aircraft known as a Westwind 1124, Serial Number 310, F.A.A. Registration Number N78GJ, together with hangar deposits, prepaid insurance and spare parts relating to such aircraft, and the assumption by the purchaser of AIMCOR's obligations under that certain Aircraft Administrative Agreement dated June 12, 1997 between AIMCOR and Pal-Waukee Aviation, Inc.; e. the novation of that certain lease, dated July 16, 1996 between AIMCOR and The CIT Group, Inc., relating to one Falcon 900B aircraft, and the 40 concurrent (i) sale to the person to whom such lease is novated of all spare parts for such aircraft, all hangar deposits, and all prepaid insurance relating thereto and (ii) assumption by such person of all obligations of AIMCOR under that certain Hangar Occupancy Agreement dated August 26, 1996 by and between Anschutz Corporation and AIMCOR; f. the assignments to Gallagher, Kocourek, Burns and Ehmer of the leases of automobiles leased by AIMCOR for their respective benefit and the assumption by Gallagher, Kocourek, Burns and Ehmer, respectively, of AIMCOR's obligations under such leases; g. the assignment of AIMCOR's rights as lessee under that certain lease, dated March 3, 1993, between Brookfield Republic, Inc. as lessor, and AIMCOR, as lessee, relating to premises commonly known as Suite 5600, 370 Seventeenth Street, Denver, Colorado, and the assumption by the assignee of all obligations of AIMCOR thereunder; h. the sale to Gallagher and Kocourek, respectively, or their respective designees, of AIMCOR's rights in split dollar insurance policies owned by AIMCOR on their respective lives; i. the sale to Gallagher of all tangible personal property located at Suite 5600, 370 Seventeenth Street, Denver, Colorado; j. the sale to Kocourek of all office furniture located in the office which he occupies at 750 Lake Cook Road, Buffalo Grove, Illinois; k. the sale to Kocourek of all rights of AIMCOR in sporting event tickets at the United Center; and l. the sale to Gallagher of all rights of AIMCOR in sporting event tickets at Mile High Stadium, McNichols Arena, the Pepsi Center, the FlatIrons Club at the University of Colorado and Coors Field. The assets to be sold pursuant to this subparagraph (v) are referred to herein as the "Excluded Assets". The purchase prices of the Excluded Assets shall be represented by promissory notes of said Stockholders or their designees, which notes shall be payable on demand 41 and bear interest, due upon demand, at the rate of 6% per annum and, shall be included among the Stockholder Notes and Loans; (vi) prepay any of its material obligations other than in the ordinary course of business consistent with past practice (except that AIMCOR may make contributions to the Pension Plans in advance of their due dates, to the extent such contributions are reflected on the 1997 Financial Statements and AIMCOR may repay any amounts owed by it to any member of the AIMCOR Group and the members of the AIMCOR Group may repay any amounts owed to them by AIMCOR); (vii) borrow any money or incur, whether directly or by way of guarantee or similar arrangement, any obligation for borrowed money, other than borrowings under lines of credit described in Section 2.3(m)(xi) of the Disclosure Schedule in the ordinary course of business and consistent with past practice; (viii) except as permitted pursuant to subparagraph (d)(v), directly or indirectly cause to be purchased, redeemed or otherwise acquired or disposed of any equity securities of or interest in any member of the AIMCOR Group; (ix) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock or property, with respect to any capital stock of any of the members of the AIMCOR Group (except that cash dividends (i) may be declared and paid on or prior to September 30, 1997 and (ii) with a payment date after September 30, 1997 and prior to the Closing Date may be declared and paid prior to the Closing Date in order to pay Tax liabilities (other than Tax liabilities resulting from the transactions contemplated by this Agreement) of the Stockholders relating to AIMCOR which arose after September 15, 1997 and are required to be paid prior to the Closing Date), or make any other payment to any Stockholder, Germany LP or Luxembourg LP or any of their Affiliates (in their capacities as stockholders, directors, employees or otherwise) other than (i) salaries and bonuses paid prior to the Closing Date in the ordinary course of business and consistent with past practice, (ii) incentive bonuses (including bonuses to Gallagher and Kocourek in the estimated amount of $2,200,000) payable under the Company Plans with respect to the 1997 fiscal year of the AIMCOR Group, and (iii) payments required to be made prior to the Closing pursuant to the terms of any Affiliate Transaction with such person; 42 (x) assume, guarantee, or otherwise become responsible for the obligations of, or make any loans or advances to, any other individual, firm or corporation (other than the endorsement of checks in the ordinary course of business); (xi) waive or release any rights of material value, or cancel, compromise, release or assign any material indebtedness owed to it or any material claims held by it; (xii) cancel or terminate any insurance policy naming it as a beneficiary or a loss payable payee; (xiii) enter into or amend any collective bargaining agreements; (xiv) except as may be required as a result of a change in law or in U.S. GAAP, change any of the accounting practices or principles used by any member of the AIMCOR Group; (xv) make any material Tax election or settle or compromise any material federal, state, local or foreign Tax liability; (xvi) except as permitted by subparagraph (ix) or Section 3.2(d)(v), enter into any Affiliate Transactions or alter or amend the terms of any Affiliate Transaction in existence on the date hereof; (xvii) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of any member of the AIMCOR Group; (xviii) purchase the assets (other than purchases of inventory in the ordinary course of business) or equity securities of any entity, or merge or consolidate with any entity; (xix) agree to take, in writing or otherwise, any of the actions described in Sections 3.2(d)(i) through 3.2(d)(xviii) (other than those permitted pursuant to Section 3.2(d)(v) or (ix)); or (xx) cause or permit AIMCOR to revoke AIMCOR's election to be taxed as an S corporation within the meaning of Code ss.ss.1361 and 1362, or take or allow to be taken any action that would result in the termination of AIMCOR's status as a validly electing S corporation within the meaning of Code ss.ss.1361 and 1362. 43 (e) On or prior to the Closing Date, the Stockholders shall cause AIMCOR to make payments to Edmond De Demo and Julian Storck in consideration of the termination of phantom stock agreements between AIMCOR, on the one hand, and those individuals, on the other hand. If such payments are made after September 30, 1997, the effects thereof shall be reflected on the Closing Balance Sheet; (f) On or before the Closing Date, each Stockholder shall furnish Purchaser with a certification of non-foreign status that satisfies the requirements of Code ss. 1445(b) (2) and Treas. Reg. ss. 1.1445-2. (g) Prior to the earlier of the termination of this Agreement or the Closing, each of the Stockholders, Germany LP and Luxembourg LP will not, and will cause the members of the AIMCOR Group and their respective officers, directors, employees and agents not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making of any proposal with respect to, or engage in any negotiations concerning, provide any confidential information or data to, have any discussions with or enter into any agreements with, any person relating to any acquisition, business combination, reorganization or purchase of all or any portion of the capital stock or assets of the AIMCOR Group other than in the ordinary course of business and in compliance with the other provisions of this Agreement. Each of the Stockholders, Germany LP and Luxembourg LP will, and will cause the members of the AIMCOR Group to, immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any such potential transactions involving the AIMCOR Group. Each of the Stockholders, Germany LP and Luxembourg LP will, and will cause the members of the AIMCOR Group to, immediately notify the Purchaser if any inquiries are received in respect of any member of the AIMCOR Group, and shall provide details with respect thereto. Each of the Stockholders, Germany LP and Luxembourg LP will not pledge, encumber or dispose of the Purchased Shares or any other securities of any member of the AIMCOR Group beneficially owned by them prior to the Closing. (h) Each of the Stockholders, Germany LP and Luxembourg LP agrees that, at the request of the Purchaser, it will, and will cause the AIMCOR Group to, call for prepayment or redemption, or to prepay, redeem and/or renegotiate, as the case may be, any then existing indebtedness for borrowed money of the AIMCOR Group (other than the industrial revenue bonds and pollution control bonds owed by TAC), conditional upon the occurrence of the Closing; provided that no such prepayment or 44 redemption shall actually be made until contemporaneously with or after the Closing Date. (i) Each of the Stockholders, Germany LP and Luxembourg LP agrees that it will, and will cause the AIMCOR Group to, promptly (but in no event later than 5 business days) notify Purchaser in the event that they or any member of the AIMCOR Group receive any written or oral communication from the PBGC in respect of any Pension Plan subject to Title IV of ERISA concerning the funded status of any such plan or any transfer of assets and liabilities from any such plan in connection with the transactions contemplated herein. (j) The Stockholders shall cause Aimcor Formed Products Limited Partnership, a Delaware limited partnership, to be liquidated and dissolved or, in the alternative, for AIMCOR's interest therein to be distributed to the Stockholders. (k) As promptly as practicable and in any event no later than twenty days after the end of each fiscal month ending after the date hereof and before the Closing Date, the Stockholders will deliver to Purchaser true and complete copies of the unaudited consolidated balance sheets and statements of income of AIMCOR as of and for each such fiscal month and the portion of the fiscal year then ended, together with the notes, if any, relating thereto, which financial statements shall be prepared on a basis consistent with the Interim Financial Statements. (l) Notwithstanding anything to the contrary contained in this Section 3.2, the written consent of Purchaser shall not be required in the event any action otherwise prohibited by this Section 3.2 is taken by any of the members of the AIMCOR Group if such action has no adverse effect on the AIMCOR Group or Purchaser and does not result in a liability not reflected on the Closing Balance Sheet and if such actions, taken as a whole, involve assets the fair market value of which in the aggregate does not exceed $100,000.00. Such assets may consist of such things as cash, U.S. Treasury securities, equity securities, foreign currencies and limited partnership interests, but shall not include real estate, tangible personal property or general partnership interests. 3.3 Purchaser's Obligations. The following are Purchaser's obligations: (a) Purchaser shall comply with its obligations under that certain letter agreement, between AIMCOR and Kohlberg Kravis Roberts & Co., L.P., dated April 4, 1997 and that letter from Purchaser to AIMCOR, dated July 10, 1997 (collectively, the "Confidentiality Letter"); and 45 (b) Purchaser shall use its all commercially reasonable efforts to obtain financing for the transaction contemplated hereby in accordance with the Commitment Letter (it being understood that (x) Purchaser shall not consent to the lender's syndicating the loans contemplated thereby if it would result in a delay in the Closing, and (y) Purchaser shall not be required to agree to any loan documentation which is commercially unreasonable in the context of loan transactions of the type and size contemplated by the Commitment Letter). If Purchaser is unable to obtain the financing contemplated by the Commitment Letter, Purchaser shall use commercially reasonable efforts to obtain replacement financing, on terms substantially similar to those contained in the Commitment Letter. 3.4 Joint Obligations. The following shall apply with equal force to the Stockholders, Germany LP and Luxembourg LP, on the one hand, and Purchaser, on the other hand: (a) Each of the parties hereto shall use all reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate the transaction contemplated hereby as soon as practicable. (b) Each party shall promptly give the other party written notice of the existence or occurrence of any condition which would make any representation or warranty herein contained of either party untrue or which might reasonably be expected to prevent the consummation of the transaction contemplated hereby. (c) Except as permitted by Sections 3.2(d)(v), 3.2(d)(ix) and 3.2(e), no party shall perform any act which, if performed, or intentionally omit to perform any act which, if omitted to be performed, would prevent or excuse the performance of this Agreement by any party hereto or which would result in any representation or warranty herein contained of said party being untrue. (d) The parties shall forthwith make all filings and perform all acts required by them respectively under the HSR Act; and, in addition to the conditions set forth in Article 4, the obligations of each of the parties to this Agreement shall each be conditional upon the expiration or early termination of the waiting period set forth in the HSR Act and the rules promulgated thereunder. 46 ARTICLE 4 Conditions to Closing 4.1 Conditions to Obligations of the Stockholders, Germany LP and Luxembourg LP. In addition to the condition set forth in Section 3.4(d), the obligation of the Stockholders, Germany LP and Luxembourg LP to close the transaction contemplated hereby is subject to the fulfillment of all of the following conditions on or prior to the Closing Date, upon the non-fulfillment of any of which this Agreement may, at the Stockholders' Committee's option, be terminated pursuant to and with the effect set forth in Article 8: (a) Each representation and warranty of Purchaser which is expressly qualified by any materiality qualification shall be true and correct, subject to such materiality qualification, and each of the remaining representations and warranties of Purchaser shall be true and correct in all material respects, in each case, on and as of the Closing Date as though such representations and warranties were made on such date, except that any representations and warranties that are made as of a specified date shall be true as of such date; provided, however, that a breach of any of the foregoing representations and warranties shall not constitute the non-fulfillment of the foregoing condition unless such breach, individually or in the aggregate with all other breaches, is material to the AIMCOR Group as a whole. 47 (b) All obligations of Purchaser to be performed hereunder through, and including on, the Closing Date (including, without limitation, all obligations which Purchaser would be required to perform at the Closing if the transaction contemplated hereby was consummated) shall have been fully performed in all material respects. (c) On the Closing Date there shall be no suit, proceeding or investigation pending by any governmental authority on any grounds to restrain, enjoin or hinder the consummation of the transaction contemplated hereby. (d) Purchaser shall have made the deliveries to the Stockholders' Committee specified in Sections 5.2(b) through 5.2(f). (e) Purchaser shall have delivered to the Stockholders' Committee the written opinion of Simpson Thacher & Bartlett, counsel for Purchaser, dated as of the Closing Date, in substantially the form of Exhibit G attached hereto. 4.2 Conditions to Purchaser's Obligations. In addition to the condition set forth in Section 3.4(d), the obligation of Purchaser to close the transaction contemplated hereby is subject to the fulfillment of all of the following conditions on or prior to the Closing Date, upon the non-fulfillment of any of which this 48 Agreement may, at Purchaser's option, be terminated pursuant to and with the effect set forth in Article 8: (a) Each representation and warranty of the Stockholders, Germany LP and Luxembourg LP which is expressly qualified by any materiality qualification shall be true and correct, subject to such materiality qualification, and each of the remaining representations and warranties of the Stockholders, Germany LP and Luxembourg LP shall be true and correct in all material respects, in each case, on and as of the Closing Date as though such representations and warranties were made on such date, except that any representations and warranties that are made as of a specified date shall be true as of such date; provided, however, that a breach of any of the foregoing representations and warranties shall not constitute the nonfulfillment of the foregoing condition unless such breach is material to the AIMCOR Group as a whole. (b) All obligations of the Stockholders, Germany LP and Luxembourg LP to be performed hereunder through, and including on, the Closing Date (including, without limitation, all obligations which the Stockholders, Germany LP and Luxembourg LP would be required to perform at the Closing if the transaction contemplated hereby was consummated) shall have been fully performed in all material respects. (c) All of the Material Consents shall have been obtained. (d) On the Closing Date there shall be no suit, proceeding or investigation pending by any governmental authority on any grounds to restrain, enjoin or hinder the consummation of the transaction contemplated hereby. (e) The Stockholders, Germany LP and Luxembourg LP shall have delivered to Purchaser the written opinion of Altheimer & Gray, counsel to Stockholders, Germany LP and Luxembourg LP, dated as of the Closing Date, in substantially the form of Exhibit H attached hereto. (f) The Stockholders' Committee shall have made the deliveries to the Purchaser specified in Sections 5.3(a) through 5.3(q). (g) Since June 30, 1997, no event shall have occurred which, individually or together with all other events, has had or is reasonably likely to have a Material Adverse Effect. (h) Purchaser shall have received the proceeds of the financing contemplated by the Commitment Letter, or the 49 proceeds of substitute financing as contemplated by Section 3.3(b). ARTICLE 5 Closing 5.1 Form of Documents. At the Closing, the parties shall deliver the documents, and shall perform the acts, which are set forth in this Article 5. All documents which the Stockholders' Committee shall deliver shall be in form and substance reasonably satisfactory to Purchaser and Purchaser's counsel. All documents which Purchaser shall deliver shall be in form and substance reasonably satisfactory to the Stockholders' Committee and the Stockholders' counsel. 5.2 Purchaser's Deliveries. Subject to the fulfillment or waiver of the conditions set forth in Sections 3.4(d) and 4.2, Purchaser shall duly execute and/or deliver to the Stockholders' Committee all of the following: (a) the Estimated Cash Payment less the amounts, subject to the last sentence of Section 1.4, to be deposited with the Escrow Agent to fund the Escrows; (b) a certified copy of Purchaser's Certificate of Incorporation and by-laws; (c) a certificate of good standing of Purchaser, issued not earlier than twenty (20) days prior to the Closing Date by the Secretary of State of Delaware; (d) an incumbency and specimen signature certificate with respect to the officers of Purchaser executing this Agreement, and any other document delivered hereunder, on behalf of Purchaser; (e) a certified copy of resolutions of Purchaser's board of directors, authorizing the execution, delivery and 50 performance of this Agreement, and any other document delivered by Purchaser hereunder; (f) a closing certificate executed by the President of Purchaser (or any other officer of Purchaser specifically authorized by Purchaser's board of directors to do so), on behalf of Purchaser, pursuant to which Purchaser represents and warrants to the Stockholders that Purchaser's representations and warranties to the Stockholders (i) in the case of any thereof that are expressly qualified by any materiality qualification, are true and correct, subject to such materiality qualification, and (ii) in the case of each other representation and warranty, such representation and warranty is true and correct in all material respects, in each case on and as of the Closing Date as though such representations and warranties were made on such date, except that any representations and warranties that are made as of a specified date shall be true as of such date (or, if any such representation or warranty shall fail to satisfy such standard in any respect, specifying the respect in which the standard is failed), that all covenants required by the terms hereof to be performed by Purchaser on or before the Closing Date, to the extent not waived by the Stockholders' Committee in writing, have been so performed in all material respects (or, if any such covenant has not been so performed, indicating that such covenant has not been performed), and that all documents to be executed and delivered by Purchaser at the Closing have been executed and delivered by duly authorized officers of Purchaser; and (g) without limitation by specific enumeration of the foregoing, all other documents reasonably required from Purchaser to consummate the transaction contemplated hereby. 5.3 Stockholders', Germany LP's and Luxembourg LP's Deliveries. Subject to the fulfillment or waiver of the conditions set forth in Sections 3.4(d) and 4.1, the Stockholders' Committee, Germany LP and Luxembourg LP shall duly execute and/or deliver to Purchaser all of the following: (a) certified copies of the Certificates of Incorporation and by-laws of AIMCOR and Enterprises and certified copies of the limited partnership agreements of Germany LP and Luxembourg LP; (b) certificates of good standing of AIMCOR issued not earlier than twenty (20) days prior to the Closing Date by the Secretaries of State of Delaware, Illinois, Alabama, 51 California, Colorado, Connecticut, Indiana, Montana, Pennsylvania and Texas; (c) a certificate of good standing of Enterprises issued not earlier than twenty (20) days prior to the Closing Date by the Secretary of State of Nevada; (d) a certificate of good standing of Germany LP and Luxembourg LP issued not earlier than twenty (20) days prior to the Closing Date by the Secretary of State of the State of Delaware; (e) certificates representing: (i) all outstanding shares of stock of AIMCOR; (ii) all outstanding shares of stock of Enterprises not owned by AIMCOR; and (iii) all outstanding shares of stock of AIMCOR Luxembourg; in each case duly endorsed in blank or with duly executed stock powers attached with all necessary stock transfer stamps affixed; (f) documents effecting the transfer of all the outstanding participation interests in AIMCOR Germany, including, without limitation, the participation interests held by CPG FRG Inc. and WCK FRG Inc.; (g) instruments duly executed by AIMCOR and the Stockholders, terminating all stockholder agreements between AIMCOR and any of the Stockholders, effective as of the Closing; (h) instruments duly executed by Enterprises and the Stockholders, terminating all stockholder agreements between Enterprises and any of the Stockholders, effective as of the Closing; (i) a closing certificate duly executed by the Stockholders' Committee, pursuant to which the Stockholders' Committee, on behalf of the Stockholders, Germany LP and Luxembourg LP, represents and warrants to Purchaser that: (i) the representations and warranties of the Stockholders, Germany LP and Luxembourg LP to Purchaser (i) in the case of any thereof that are expressly qualified by any materiality qualification, are true and correct, subject to such materiality qualification, and (ii) in the case of each other representation and warranty, each such representation and 52 warranty is true and correct in all material respects, in each case on and as of the Closing Date as though such representations and warranties were made on such date, except that any representations and warranties that are made as of a specified date shall be true as of such date (or if any such representation or warranty fail to satisfy such standard in any respect, specifying the respect in which the standard is failed) (it being understood and agreed that with respect to the representations and warranties of the individual Stockholders contained in Section 2.4, such closing certificate shall be deemed to have been executed and delivered separately by each individual Stockholder and to pertain only to the representations and warranties in Section 2.4 made by such Stockholder); (ii) all covenants required by the terms hereof to be performed by the Stockholders, Germany LP or Luxembourg LP on or before the Closing Date, to the extent not waived in writing by Purchaser, have been so performed in all material respects (or if any such covenant has not been so performed, indicating that such covenant has not been performed); and (iii) all documents to be executed by the Stockholders, the Stockholders' Committee, Germany LP, Luxembourg LP, Enterprises and AIMCOR and delivered at the Closing have been executed and delivered by duly authorized officers of AIMCOR; (j) the written resignations, effective as of the Closing Date, of Gallagher and Kocourek as directors and officers of the members of the AIMCOR Group and written resignations, effective as of the Closing Date, of all other directors of AIMCOR, if any; (k) physical possession of all books, records, tangible assets, licenses, policies, contracts, plans, leases or other instruments owned by or pertaining to the AIMCOR Group, which are in the possession of or under the control of any Stockholder; (l) copies of the Material Consents; (m) the minute books and stock records of the members of the AIMCOR Group; (n) legally binding documentation evidencing the termination without liability to the Purchaser or any member of the AIMCOR Group of all Affiliate Transactions (other than agreements with respect to the transactions contemplated by Section 3.2(d) (v)); (o) documentation evidencing that AIMCOR, effective as of the Closing Date, has called for redemption all existing indebtedness for borrowed money of the AIMCOR Group (other than industrial revenue bonds and pollution control bonds owed 53 by TAC) and has terminated all other loan agreements to which any member of the AIMCOR Group is a party; (p) documentation evidencing that Germany LP and Luxembourg LP have eliminated the use of the word "AIMCOR" as part of their company name; (q) if the Stockholders' Committee shall have elected to deliver the Letter of Credit, the Letter of Credit; and (r) without limitation by specific enumeration of the foregoing, all other documents reasonably required from the Stockholders, Germany LP and Luxembourg LP to consummate the transaction contemplated hereby. 5.4 Other Transactions Occurring at the Closing. In addition to the deliveries to be made at the Closing pursuant to Sections 5.2 and 5.3, on or prior to the Closing Date; (a) the Stockholders who are obligated under Stockholder Notes and Loans shall pay, and the Stockholders whose designees are obligated under Stockholder Loans and Notes shall cause such designees to pay, the entire outstanding principal amount thereof and all accrued and unpaid interest thereon in full; (b) the Stockholders shall cause the principal and all accrued interest under all loans made by AIMCOR to Germany LP and Luxembourg LP to be paid in full; (c) AIMCOR and Consumer Products shall enter into a Trademark License Agreement in the form attached hereto as Exhibit J, pursuant to which and subject to the terms thereof AIMCOR shall grant to Consumer Products the perpetual, royalty-free license to use the AIMCOR(R) mark on the terms and conditions set forth therein; (d) AIMCOR, Consumer Products and the Stockholders Committee shall enter into a Services Agreement in the form attached hereto as Exhibit K; (e) the Stockholders, Germany LP and Luxembourg LP, Purchaser and the Escrow Agent shall enter into the Escrow Agreement; (f) Purchaser shall deposit with the Escrow Agent the monies necessary to fund the Escrows; and (g) the Stockholders' Committee shall cause the employment of all employees located at AIMCOR's Denver, 54 Colorado corporate office to be transferred to one or more entities controlled by Gallagher and/or Kocourek and/or members of their respective families, without cost to the AIMCOR Group. ARTICLE 6 Post-Closing Agreements 6.1 Post-Closing Agreements. From and after the Closing, the parties shall have the respective rights and obligations which are set forth in the remainder of this Article 6. 6.2 Inspection of Records. The Stockholders, Germany LP and Luxembourg LP, on the one hand, and Purchaser, on the other hand, shall each make their respective books and records with respect to the AIMCOR Group (including, in the case of Purchaser, the books and records of the members of the AIMCOR Group) available for inspection by the other party, or by its duly accredited representatives, for reasonable business purposes at all reasonable times during normal business hours upon reasonable advance notice, for a five (5) year period after the Closing Date, with respect to all transactions of the AIMCOR Group occurring prior to and relating to the Closing, and the historical financial condition, assets, liabilities, operations and cash flows of the AIMCOR Group. As used in this Section 6.2, the right of inspection includes the right to make reasonable extracts or copies, at the expense of the inspectors. The representatives of a party inspecting the records of the other party shall be reasonably satisfactory to the other party. During the period from the fifth anniversary of the Closing Date to the seventh anniversary of the Closing Date, Purchaser 55 agrees not to, and to cause the members of the AIMCOR Group not to, destroy at any time any books or records which are subject to this Section 6.2 without giving written notice to the Stockholders' Committee, and giving the Stockholders' Committee 30 days following receipt of such notice to request in writing that all or a portion of the records intended to be destroyed be delivered to the Stockholders' Committee at the Stockholders' Committee's expense. The Stockholders' Committee acknowledges that Purchaser shall not be liable to the Stockholders' Committee in the event of any inadvertent destruction of such books and records. 6.3 Confidentiality. Each of the Stockholders, Germany LP and Luxembourg LP agrees that for a period of three years after the Closing Date, such Stockholder, Germany LP or Luxembourg LP will not, without the prior written consent of Purchaser, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity any Confidential Information (as defined below) pertaining to the business of the AIMCOR Group, except when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of the members of the AIMCOR Group, or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order a Stockholder, Germany LP or Luxembourg LP to divulge, disclose or make accessible such information. For purposes of this Section 6.3, "Confidential Information" shall mean non-public information concerning the financial data, strategic business plans, product development (or 56 other proprietary product data), customer lists, marketing plans and other non-public, proprietary and confidential information of the AIMCOR Group or customers that, in any case, is not otherwise available to the public (other than by a Stockholder's, Germany LP's, Luxembourg LP's or their respective Affiliates' breach of the terms hereof). 6.4 Use of Trademarks. Except as provided in Section 5.4(b), the Stockholders shall not use and shall not license or permit any third party to use, any name, slogan, logo or trademark which is identical or confusingly similar to any of the names, slogans, logos or trademarks used in connection with the businesses of the AIMCOR Group. 6.5 Third Party Claims. The parties shall cooperate with each other with respect to the defense of any Third Party Claims (as herein defined) subsequent to the Closing Date which are not subject to the indemnification provisions contained in Article 7, provided that the party requesting cooperation shall reimburse the other party for the other party's reasonable out-of-pocket costs and other expenses of furnishing such cooperation. 6.6 Further Assurances. The parties shall execute such further documents, and perform such further acts, as may be necessary to transfer and convey the Purchased Shares to Purchaser, on the terms herein contained, and to otherwise comply with the terms of this Agreement and consummate the transaction contemplated hereby. Without limiting the generality of the foregoing, (x) the Stockholders' Committee shall cooperate with Purchaser in effecting 57 the transfer of any Environmental Permits the transfer of which is required by virtue of the transaction contemplated hereby, and (y) the Stockholders' Committee and Purchaser shall negotiate in good faith with respect to any transition services which the AIMCOR Group may require from the former employees of AIMCOR's Denver, Colorado headquarters or which the Stockholders' Committee may require from AIMCOR. 6.7 Agreement to Defend and Indemnify. Purchaser shall cause AIMCOR to indemnify and hold harmless each of the present and former directors, officers, employees and agents of the members of the AIMCOR Group and each present and former director, officer, employee, agent or trustee of any employee benefit plan for employees of any member of the AIMCOR Group (individually, an "Indemnified Employee", and collectively, the "Indemnified Employees") against any losses, claims, damages, liabilities, costs, expenses (including, without limitation, reasonable attorneys' fees), judgments, fines and amounts paid in settlement in connection with any threatened, pending or completed claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative claim ("Indemnifiable Claim"), arising by reason of the fact that the Indemnified Employee is or was a director, officer, employee or agent of a member of the AIMCOR Group and arising out of or pertaining to any action or omission occurring prior to the Closing Date (including, without limitation, any which arise out of or relate to the transaction contemplated by this Agreement), to the full extent permitted under 58 the Delaware General Corporation Law as in effect on the Closing Date (or as such rights to indemnification may be expanded subsequent to the Closing Date under said law). Purchaser acknowledges and accepts as contract rights (and agrees to cause AIMCOR to honor in accordance with their terms) the provisions of AIMCOR's Certificate of Incorporation and/or by-laws as in effect on the date hereof with respect to indemnification of officers, directors, employees and agents of AIMCOR (including provisions relating to contribution, advancement of expenses and the like), and agrees that for a period of six years after the Closing Date the Certificate of Incorporation and by-laws of AIMCOR shall not be modified or amended in any manner that would adversely affect the rights thereunder of individuals who on the Closing Date were the present or former directors, officers, agents or employees of the AIMCOR Group, except as required by law. Purchaser shall cause AIMCOR to advance reasonable expenses (including reasonable attorneys' fees) to each such Indemnified Employee to the full extent permitted by Delaware General Corporation Law. In the event of any Indemnifiable Claim (whether asserted or commenced before or after the Closing Date), the Indemnified Employees may retain counsel satisfactory to them and the Purchaser, and Purchaser shall cause AIMCOR to pay all fees and reasonable expenses of such counsel for the Indemnified Employees promptly as statements therefor are received; provided that AIMCOR shall not be liable for any settlement effected without its written consent, which consent, however, shall not unreasonably be withheld. Any Indemnified 59 Employee wishing to claim indemnification under this Section 6.7, upon learning of any Indemnifiable Claim, shall notify AIMCOR thereof; provided, however, that the failure of an Indemnified Employee to give such notice shall only relieve Purchaser and AIMCOR of their indemnification obligations to the extent of actual prejudice resulting therefrom. The Indemnified Employees as a group may retain only one law firm to represent them with respect to any such matter unless there is, under applicable standards of professional conduct, a conflict on any significant issue between the positions of any two or more Indemnified Employees, in which case such Indemnified Employees may retain such number of additional counsel as are necessary to eliminate all conflicts of the type referred to above; provided that AIMCOR shall be responsible for the reasonable expenses of only one additional counsel. 6.8 No Solicitation. Each Stockholder, Germany LP and Luxembourg LP agrees that from the Closing Date until the third anniversary of the Closing (or, in the case of each of Gallagher, Kocourek, Ehmer and Burns, the fifth anniversary of the Closing Date), such Stockholder, Germany LP or Luxembourg LP (as the case may be) shall not, and shall not permit any of their respective Affiliates to, directly or indirectly, anywhere in the world, solicit to hire or hire any employee of any member of the AIMCOR Group who is employed by any member of the AIMCOR Group as of the Closing Date; provided, however, that Gallagher and/or Kocourek, or any of their respective Affiliates, may solicit to hire or hire any 60 employee of AIMCOR who is based in AIMCOR's corporate office in Denver, Colorado or any employee who is related to Gallagher, in each case without any cost or expense (including, without limitation, severance costs) to Purchaser or the AIMCOR Group, and Gallagher and/or Kocourek, or any of their respective Affiliates, may hire (but may not solicit to hire) any person (w) who is an employee of the AIMCOR Group as of the Closing Date, (y) who is not a Stockholder, and (z) whose employment is terminated after the Closing Date by a member of the AIMCOR Group for reasons other than cause. The parties agree that the remedy at law for any breach of any obligation under this Section 6.8 will be inadequate and that in addition to any other rights and remedies to which Purchaser may be entitled hereunder, at law or in equity, Purchaser shall be entitled to injunctive relief and reimbursement from the Stockholder breaching this Section 6.8 for all reasonable attorney's fees and other expenses incurred in connection with the enforcement hereof, and each party further agrees to waive any requirement for the securing or posting of any bond in connection with such remedy. In the event this Section 6.8 is held to be in any respect an unreasonable restriction upon the Stockholders, Germany LP or Luxembourg LP or their respective Affiliates by any court having competent jurisdiction, the court so holding may reduce the territory to which this Section 6.8 pertains and/or the period of time for which it operates, or effect any other change to the extent necessary to render this Section 6.8 enforceable by such court. As so modified this Section 6.8 will continue in full force 61 and effect. Such decision by a court of competent jurisdiction shall not invalidate this Agreement, but this Agreement shall be interpreted, construed and enforced as not containing such invalidated provision. 6.9 Non-Competition. Each Stockholder, Germany LP and Luxembourg LP agrees that: (a) during the period ending five years from the Closing Date, without the prior written consent of Purchaser, such Stockholder, Germany LP or Luxembourg LP, as the case may be, will not, directly or indirectly, either alone or in conjunction with any individual, partnership, firm, association, syndicate, company or other entity, whether as principal, manager, agent, consultant, officer, stockholder, partner, investor, lender or employee or in any other capacity, carry on, be engaged in, advise, invest, lend money to, guarantee the debts or obligations of, or have any financial interest in, any business which is in competition with the business of the AIMCOR Group (other than Consumer Products) anywhere throughout the world; (b) for the purposes of this Section 6.9, a business shall be deemed to be in competition with the business of the AIMCOR Group if it is involved in the purchase, sale, lease, management of or other dealing in any property or the rendering of any service purchased, sold, leased, managed, dealt in or rendered by Purchaser or the members of the AIMCOR Group as a part of the business of the AIMCOR Group as conducted as of the Closing Date (other than Consumer Products). Nothing in this Section 6.9 shall be construed so as to preclude a Stockholder, Germany LP or Luxembourg LP from investing in any entity, provided such Stockholder's, Germany LP's or Luxembourg LP's beneficial ownership of any class of such entity's securities does not exceed 3% of the outstanding securities of such class; (c) this Section 6.9 is a reasonable covenant under the circumstances, and if in the opinion of any court of competent jurisdiction this Section 6.9 is not reasonable in any respect, such court shall have the right, power and authority to modify such provision or provisions of this covenant to the extent the court determines such restraint is not reasonable and to enforce the covenant as so amended. Any breach of this Section 6.9 would irreparably injure Purchaser and the AIMCOR Group. Accordingly, Purchaser may, in addition to pursuing any other remedies it may have in law or in equity, obtain an injunction against such Stockholder, Germany LP or Luxembourg 62 LP from any court having jurisdiction over the matter restraining any further violation of this Agreement by such person, without any requirement for the securing or posting of any bond in connection with such remedy. 6.10 Section 338(h) (10) Election; Tax Returns. The Stockholders and Purchaser agree that: (a) AIMCOR and each of the Stockholders will join with Purchaser in making a Section 338(h) (10) Election with respect to the purchase and sale of the Purchased Shares of AIMCOR. Purchaser shall prepare any and all forms necessary to effectuate the Section 338(h) (10) Election (including, without limitation, Internal Revenue Service Form 8023 and any similar forms under applicable state and local income tax laws (the "Section 338 Forms")) and, to the extent possible, the Stockholders and the Purchaser shall execute as of the Closing Date, the Section 338 Forms. In the event, however, any Section 338 Forms are not executed by the Closing Date, the Stockholders and the Purchaser shall complete each such Section 338 Form no later than 15 days prior to the date such Section 338 Form is required to be filed. Each of the Stockholders shall execute the Section 338 Forms and the Purchaser shall cause the Section 338 Forms to be duly executed by an authorized person for the Purchaser and shall duly and timely file the Section 338 Forms in accordance with applicable Tax laws and the terms of this Agreement. The Stockholders will include any income, gain, loss, deduction or other Tax item resulting from the Section 338(h) (10) Election on their Tax returns to the extent permitted by applicable law. (b) Purchaser, AIMCOR and the Stockholders agree that the portion of the Purchase Price attributable pursuant to Exhibit C to the shares of stock of AIMCOR and the liabilities of AIMCOR and its qualified subchapter S subsidiaries (plus other relevant items) will be allocated to the classes of assets of AIMCOR and its qualified subchapter S subsidiaries, as enumerated in section 1060 of the Code, for all Tax purposes as shown on an Allocation Schedule to be prepared by the Stockholders' Committee as soon as practicable after the Closing Date. The Stockholders' Committee shall provide Purchaser with such Allocation Schedule and the Stockholders' Committee shall make such revisions or changes to said Schedule as shall be requested by Purchaser and approved by the Stockholders' Committee, each acting in good faith. In the event the Stockholders' Committee and Purchaser are unable to agree on the allocation of said Purchase Price in such manner, such allocation shall be determined by the Arbitrating Accountant, whose determination shall be final and binding on the Stockholders, AIMCOR and Purchaser. The Stockholders' 63 Committee and Purchaser shall each pay one-half of the fee charged by the Arbitrating Accountant for determining such allocation (including any appraisal fees). Purchaser, all members of the AIMCOR Group, and the Stockholders will file all Tax Returns (including amended returns and claims for refund) and information reports in a manner consistent with such Allocation Schedule, as so revised. (c) The Stockholders' Committee shall prepare or cause to be prepared and signed (through a designee who shall be designated by AIMCOR upon the recommendation of the Stockholders' Committee as an officer of AIMCOR solely for the purpose of preparing, signing and filing income Tax Returns for the AIMCOR Group for periods ending on or prior to the Closing Date) all income Tax Returns for the AIMCOR Group for all periods ending on or prior to the Closing Date (including such income Tax Returns which amend previously filed income Tax Returns) (the "Pre-Closing Tax Returns"). With respect to all Pre-Closing Tax Returns, Purchaser shall have the right to review such Tax Returns and suggest changes thereto. In the event the Stockholders' Committee and Purchaser are unable to agree as to the necessity of any suggested changes to any Pre-Closing Tax Returns which are Tax Returns for Enterprises, AIMCOR Germany, AIMCOR Luxembourg and any state which does not recognize the S election of AIMCOR (the "Specific Returns") to avoid an adverse effect on Purchaser or the AIMCOR Group, such suggested changes shall be referred to the Arbitrating Accountant, whose determination of the necessity of such changes shall be final and binding. Upon the resolution of such suggested changes by the Arbitrating Accountant, such Tax Returns shall be revised to reflect such resolution. The Stockholders' Committee warrants that the filing of all Pre-Closing Tax Returns will not have an adverse effect on Purchaser or the AIMCOR Group; provided, however, that this paragraph (c) shall not apply to the matters set forth in paragraph (b) hereof. To the extent permitted by applicable law, the Stockholders shall include any income, gain, loss, deduction or other tax items for such periods on their Tax Returns in a manner consistent with the Schedule K-1s furnished by AIMCOR to the Stockholders for such periods. Purchaser shall not amend or waive the statute of limitations with respect to any such Pre-Closing Tax Returns without the prior consent of the Stockholders' Committee. The officer designee or other authorized representative designated by the Stockholders' Committee shall be granted a general power of attorney to deal with any taxing authority with respect to 64 Taxes reflected on the Pre-Closing Tax Returns other than Specific Returns. The Stockholders' Committee shall not, and shall cause such designee not to, seek indemnification from AIMCOR or Purchaser by reason of the fact that such person is or was an officer of AIMCOR whether arising by law, contract or otherwise. (d) Purchaser shall and shall cause the AIMCOR Group to, and the Stockholders shall, cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns pursuant to this Section 6.10 and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Such cooperation shall also include, in connection with audits of any of the Pre-Closing Tax Returns (other than Specific Returns), Purchaser's being advised of such audits, Purchaser's being given the opportunity to comment on proposed written submissions and oral arguments to be presented to Tax authorities and being given the opportunity to discuss Tax audit issues with the Stockholders' counsel or other representatives in such audits. The Stockholders' Committee shall consider in good faith all such comments. The Stockholders' Committee warrants that no audit of a Pre-Closing Tax Return (other than Specific Returns) will have an adverse effect on Purchaser or the AIMCOR Group. Purchaser, the Stockholders' Committee, Germany LP and Luxembourg LP agree (A) to retain all books and records with respect to Tax matters pertinent to the AIMCOR Group relating to any taxable period beginning before the Closing Date until the expiration of the applicable statutes of limitations (and, to the extent notified by Purchaser or the Stockholders' Committee, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (B) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, Purchaser or the Stockholders, as the case may be, shall allow the other party to take possession of such books and records. 65 6.11 Pension Plans. With respect to each individual who after the Closing Date is employed by Consumer Products or by an entity formed by or for the benefit of the respective families of either Gallagher or Kocourek and who is a participant in the Applied Industrial Materials Corporation Salaried Employees' Savings & Retirement Plan ("Salaried Plan"), Purchaser, within 60 days after the later of (i) the Closing Date and (ii) the dates Consumer Products and such entities provide written evidence reasonably satisfactory to Purchaser that Consumer Products and/or such entities have each established a qualified plan under Section 401(k) of the Code in order to receive a transfer of such assets and liabilities, shall cause the Salaried Plan to transfer to a plan (or plans) which is (are) intended to qualify under Section 401(a) of the Code and which is (are) designated by Consumer Products and/or such entities as the transferee plan (or plans), in-kind, the investment fund interests of the respective participant on the date immediately preceding the date of transfer or such other assets as Consumer Products or such entities (as the case may be) shall approve, and which represent the entire account balance, including both the vested and nonvested portions thereof, as determined on the date immediately preceding the date of transfer, of each such individual. Upon such transfers of assets and liabilities from the Salaried Plan, the transferee plan(s) shall be liable for the benefits of each such participant for whom assets and liabilities have been transferred. With respect to each individual who after the Closing Date is employed by Consumer 66 Products and who is a participant in the Retirement Plan for Hourly Employees of Applied Industrial Materials Corporation ("Hourly Plan"), Purchaser shall cause all accrued benefits of each such individual under the Hourly Plan to be fully vested and nonforfeitable. Purchaser agrees to cooperate with Consumer Products and the entities referred to above in all respects to accomplish the intent of the foregoing, including, without limitation, promptly providing such information, records and other data reasonably requested. 6.12 Certain Collections. In the event a member of the AIMCOR Group shall receive any payments or instruments of payment on account of the accounts receivable of Consumer Products, Purchaser shall forthwith forward them to Consumer Products. In the case of any checks, such checks shall be endorsed, without recourse, to Consumer Products. ARTICLE 7 Indemnification 7.1 General. From and after the Closing, the parties shall indemnify each other as provided in this Article 7. 7.2 Certain Definitions. As used in this Agreement, the following terms shall have the indicated meanings: (a) "Damages" shall mean all assessments, levies, losses, fines, penalties, damages, Taxes, costs and expenses, including, without limitation, reasonable attorneys', accountants', investigators', and experts' fees and expenses; (b) "Indemnified Party" shall mean, with respect to a particular matter, a party hereto who is entitled to indemnification from another party hereto pursuant to this Article 7; 67 (c) "Indemnifying Party" shall mean, with respect to a particular matter, a party hereto who is required to provide indemnification under this Article 7 to another party hereto; (d) "Claim" shall mean any action, suit, proceeding, investigation, or like matter which is asserted or threatened by any person, their successors and permitted assigns, against any Indemnified Party or to which any Indemnified Party is subject. 7.3 Stockholders' Indemnification Obligations. Subject to the provisions of Sections 7.4 and 7.8: (a) the Stockholders, jointly and severally, shall indemnify, save and keep Purchaser, the members of the AIMCOR Group and their respective directors, officers, employees, representatives, agents and their respective successors and permitted assigns and Affiliates (each a "Purchaser Indemnitee" and collectively, the "Purchaser Indemnitees") harmless against and from all Damages sustained or incurred by any Purchaser Indemnitee, as a result of or arising out of or by virtue of: (i) any inaccuracy in or breach of any representation and warranty made by the Stockholders, Germany LP or Luxembourg LP to Purchaser contained in Section 2.3 (other than representations and warranties contained in Section 2.3(k), which are governed exclusively by Section 7.3(a)(v)) or by Germany LP or Luxembourg LP in Section 2.4 or in any closing document delivered to Purchaser in connection herewith; (ii) the breach by any Stockholder, Germany LP or Luxembourg LP of, or failure of any Stockholder to comply with, any of the covenants or obligations under this Agreement to be performed by the Stockholders, Germany LP or Luxembourg LP (other than Sections 6.3, 6.8 and 6.9); (iii) to the extent such Damages result or arise from (x) violations of or obligations imposed under Environmental Laws, (y) actions required under Environmental Laws, including, without limitation, compliance with orders, decrees or similar directives issued by any court or governmental authority pursuant to Environmental Laws, or (z) contamination by Hazardous Materials in condition, concentration or amount exceeding an applicable remedial standard provided for under Environmental Laws: conditions existing, or events occurring, on or prior to the Closing Date at or relating to the properties located in Gloucester, Ontario, Bridgeport, Alabama or Mannheim, Germany, including 68 without limitation the use of silica breeze disposal ponds by the Bridgeport, Alabama facility and the presence of radioactive materials at, and ground water contamination at or about, the Gloucester, Ontario facility; (iv) all Liabilities related to the Excluded Assets, regardless of whether such Liabilities arose prior to, on the date of or after the transfer of such Excluded Assets; (v) (i) any Taxes of any member of the AIMCOR Group with respect to any Tax year or portion thereof ending on or before the Closing Date (or for any Tax year beginning before and ending after the Closing Date to the extent allocable to the portion of such period beginning before and ending on the Closing Date), (ii) the unpaid Taxes of any person (other than members of the AIMCOR Group) under Treas. Reg. section 1.1502-6 (or any similar provision of state, local or foreign law), or as a transferee or successor, by contract, or otherwise, and (iii) any inaccuracy in or a breach of any representation and warranty contained in Section 2.3(k); (vi) Taxes payable by the AIMCOR Group by virtue of the Section 338(h)(10) Election; (vii) Taxes payable by the AIMCOR Group resulting from the sale or transfer of the Excluded Assets; or (viii) the manufacture, production, sale or distribution of any asbestos or any asbestos-containing product or any silica or any silica-containing product prior to the Closing Date by any member of the AIMCOR Group or any of their respective predecessors or by, from or with respect to any facility or assets which any such member or predecessor owns, leases or operates or in the past has owned, leased or operated; (b) any Stockholder with respect to which (x) any representation or warranty contained in Section 2.4 is inaccurate or was breached, or (y) any of Sections 6.3, 6.8 or 6.9 is breached or violated, shall indemnify, save and keep the Purchaser Indemnitees harmless against and from all Damages resulting therefrom; (c) to the extent that the Stockholders are obligated to make any payment to the Purchaser pursuant to Article 7, (other than pursuant to Section 7.3(a)(vi) or (vii)) the amount of such payment shall be paid by the Stockholders to Purchaser, in the first instance, from the Indemnity Escrow. To the extent that the Stockholders are obligated to make any 69 payment to the Purchaser pursuant to Section 7.3(a)(vi) or (vii) the amount of such payment shall be paid by the Stockholders to Purchaser, in the first instance, from the Tax Indemnity Escrow. If the amount payable to the Purchaser by the Stockholders exceeds the amount in the Indemnity Escrow or the Tax Indemnity Escrow (as the case may be), the amount of such excess will be paid by the Stockholders' as provided in this Article 7. Neither the existence of the Indemnity Escrow, the Tax Indemnity Escrow, nor the amounts thereof, however, shall be deemed to limit Purchaser's right to seek indemnification pursuant to this Article 7. 7.4 Limitation on Stockholders' Indemnification Obligations. The Stockholders' obligations pursuant to the provisions of Section 7.3 are subject to the following limitations: (a) the Purchaser Indemnitees shall not be entitled to recover under Section 7.3(a)(i) (other than for any inaccuracy in or breach of any representation and warranty contained in Section 2.3(t)) until the total amount which the Purchaser Indemnitees would recover under Section 7.3(a)(i), but for this Section 7.4(a), exceeds $4,000,000 (the "General Deductible"), and then the Purchaser Indemnitees shall be entitled to recover only for the excess over the General Deductible. The General Deductible shall be reduced, dollar for dollar, by the amount of all Damages suffered by the Purchaser Indemnitees which would be indemnifiable pursuant to Section 7.3(a)(iii) but for the Environmental Deductible (as herein defined) or pursuant to Section 7.3(a)(viii) but for the Product Deductible (as herein defined). For sole purposes of this paragraph (a) and paragraph (b) below, in determining whether the claims of the Purchaser Indemnitees shall exceed the General Deductible, the Environmental Deductible or the Product Deductible (as the case may be), all references in Section 2.3 to materiality or Material Adverse Effect, or words to that effect, shall be disregarded; (b) the Purchaser Indemnitees shall not be entitled to recover under (x) Section 7.3(a)(i) by virtue of any inaccuracy in or breach of Section 2.3(t), or (y) Section 7.3(a)(iii), until the total amount which the Purchaser Indemnitees would recover under both Section 7.3(a)(i) by virtue of any inaccuracy in or breach of Section 2.3(t) and Section 7.3(a)(iii), but for this Section 7.4(b), exceeds $2,000,000 (the "Environmental Deductible"), and then the Purchaser Indemnitees shall be entitled to recover only for the excess over the Environmental Deductible. The Environmental Deductible shall be reduced, dollar for dollar, by the amount of Damages suffered by the Purchaser Indemnitees in excess of $2,000,000 (in the aggregate) which would be 70 indemnifiable pursuant to Section 7.3(a)(i) but for the General Deductible or pursuant to Section 7.3(a)(viii) but for the Product Deductible; (c) the Purchaser Indemnitees shall not be entitled to recover under Section 7.3(a)(viii) until the total amount which the Purchaser Indemnitees would recover under Section 7.3(a)(viii), but for this Section 7.4(c), would exceed the Product Deductible, and then the Purchaser Indemnitees shall be entitled to recover only for the excess over the Product Deductible. As used herein, the term "Product Deductible" shall mean the sum of (x) $2,000,000 (the "Base Product Deductible") plus (y) the product of $100,000 multiplied by the number of whole years which have elapsed since the Closing Date as of the time the Purchaser Indemnitees shall assert (or would have had the right to assert, but for this paragraph (c)) a claim for indemnification under Section 7.3(a)(viii). The Base Product Deductible shall be reduced, dollar for dollar, by the aggregate amount of Damages suffered by the Purchaser Indemnitees which would be indemnifiable pursuant to (x) Section 7.3(a)(i) (other than by virtue of an inaccuracy in or breach of Section 2.3(t)) but for the General Deductible or (y) Section 7.3(a)(i) (by virtue of an inaccuracy in or breach of Section 2.3(t)), or Section 7.3(a)(iii) but for the Environmental Deductible. (d) the Purchaser Indemnitees shall not be entitled to recover under Section 7.3(a)(i) (other than with respect to the representations and warranties set forth in Section 2.3(k) or 2.3(t)) unless a claim has been asserted by written notice, specifying the details of the alleged misrepresentation or breach of warranty, delivered to the Stockholders' Committee on or prior to the 456th day next following the Closing Date; (e) the Purchaser Indemnitees shall not be entitled to recover under Section 7.3(a)(i) with respect to any inaccuracy in or breach of the representations and warranties contained in Section 2.3(t), unless a claim has been asserted by written notice, specifying the details of the claim for indemnification, delivered to the Stockholders' Committee on or prior to the third anniversary of the Closing Date; (f) the Purchaser Indemnitees shall not be entitled to recover under Section 7.3(a)(viii) unless a claim has been asserted by written notice, specifying the details of the claim for indemnification, delivered to the Stockholders' Committee on or prior to the twentieth anniversary of the Closing Date; (g) the Purchaser Indemnitees shall not be entitled to recover under Section 7.3(a)(iii) unless a claim has been asserted by written notice, specifying the details of the 71 claim for indemnification, delivered to the Stockholders' Committee on or prior to the fifteenth anniversary (in the case of the property located in Gloucester, Ontario), or the sixth anniversary (in the case of the properties located in Bridgeport, Alabama and Mannheim, Germany), of the Closing Date; (h) the Purchaser Indemnitees shall not be entitled to recover under Section 7.3: (i) with respect to consequential damages of any kind, damages consisting of business interruption or lost profits (regardless of the characterization thereof), damages for lost value of the AIMCOR Group, damages computed on a multiple of earnings or similar basis, or, except in the case of recoveries under Section 7.3(a)(viii) where punitive damages have been awarded against a Purchaser Indemnitee, punitive damages; (ii) to the extent the subject matter of the claim is covered by insurance (including title insurance) held by any member of the AIMCOR Group; (iii) to the extent the matter in question, taken together with all similar matters, does not exceed the amount of any reserves with respect to such matters which are reflected in the Closing Balance Sheet; (iv) to the extent the matter in question was taken into account in the computation of the Purchase Price pursuant to Section 1.3; or (v) to the extent of any recovery by AIMCOR with respect to such matter pursuant to the provisions of that certain Stock Purchase Agreement dated October 31, 1986 (the "IMC Agreement") between Industry Holdings, Inc., a Delaware corporation and International Minerals & Chemical Corporation, a Delaware corporation (now known as Mallinckrodt Group, Inc. ("Mallinckrodt")), IMC Industry Group Inc., a Delaware corporation, and IMC Industry Group (Quartz) Inc., a Delaware corporation. Unless Purchaser shall, in good faith, determine, on advice of counsel, that under no reasonable circumstances would AIMCOR be entitled to indemnification from Mallinckrodt under the terms of the IMC Agreement with respect to the matter for which the Purchaser Indemnitees would be entitled to indemnification from the Stockholders pursuant to this Agreement, Purchaser shall use all reasonable diligent efforts to recover indemnification from Mallinckrodt under the IMC Agreement with respect to any matter which is indemnifiable both 72 under the IMC Agreement and this Agreement, including the commencement and diligent prosecution of litigation or arbitration proceedings. In such event, Purchaser shall delay enforcement of any claim for indemnification against the Stockholders under this Agreement until the expiration of the earlier to occur of (i) a judicial or arbitral determination that AIMCOR is not entitled to indemnification from Mallinckrodt under the IMC Agreement and (ii) the second anniversary of the date of commencement of proceedings under, or with respect to, the IMC Agreement. In the event that after such time the Stockholders shall make an indemnity payment to Purchaser with respect to such matter, Purchaser shall cause the Stockholders to be subrogated to AIMCOR's rights under the IMC Agreement to the extent of such indemnity payment. In the event a court or arbitral panel shall award damages to AIMCOR, or AIMCOR shall reach a settlement, with respect to a matter as to which Purchaser has a right to indemnification from the Stockholders under this Agreement which is identical in all respects relevant to such matter with AIMCOR's right to indemnification under the IMC Agreement, Purchaser shall not be entitled to recover any additional sum from the Stockholders with respect to such matter except to the extent that recovery from Mallinckrodt under the IMC Agreement was restricted or prevented by virtue of the application of Section 8.3(d) of the IMC Agreement; (i) the Purchaser Indemnitees shall not be entitled to recover under Section 7.3(a) (other than subparagraphs (ii), (iv), (v), (vi), (vii) and (viii), to the extent the aggregate amount which they would be entitled to recover pursuant to Section 7.3(a) (other than subparagraphs (ii), (iv), (v), (vi), (vii) and (viii)), but for this paragraph (i), would exceed $50,000,000; (j) the Purchaser Indemnitees shall not be entitled to recover under Section 7.3(a)(viii), to the extent the aggregate amount which they would be entitled to recover under Section 7.3(a), but for this paragraph (i), would exceed $125,000,000 (which sum shall be reduced by the amount of all recoveries by the Purchaser Indemnitees pursuant to Sections 7.3(a)(i) and 7.3(a)(iii)); (k) the Purchaser Indemnitees shall not be entitled to recover under Section 7.3(b) to the extent the aggregate amount they would be entitled to recover under Section 7.3(b), but for this paragraph (k), would exceed the Base Purchase Price of the Purchased Shares attributable to the Stockholder having an obligation of indemnification pursuant to Section 7.3(b); and the Purchaser Indemnitees shall not be entitled to recover from any Stockholder under Section 7.3(a) (other than 73 subparagraph 7.3(a)(iv)) in an aggregate amount in excess of the Base Purchase Price of the Purchased Shares attributable to such Stockholder; (l) the amount of any recovery by the Purchaser Indemnitees pursuant to Section 7.3 shall be net of any foreign, federal, state and/or local income tax benefits inuring to the Purchaser Indemnitees as a result of the state of facts which entitled the Purchaser Indemnitees to recover from the Stockholders pursuant to Section 7.3; (m) the Purchaser Indemnitees shall not be entitled to recover under Section 7.3(a)(v), to the extent the aggregate of the reserves (including both specific reserves and general reserves) with respect to Tax matters reflected on the Closing Balance Sheet shall not have been exceeded; (n) if without regard to this paragraph (o) a state of facts could allow a Purchaser Indemnitee to recover under both Section 7.3(a)(i) and Section 7.3(a)(ii), the Purchaser Indemnitee may recover only under Section 7.3(a)(i); (o) if without regard to this paragraph (p) a state of facts could allow a Purchaser Indemnitee to recover under both Section 7.3(a)(iv) and 7.3(a)(vii), the Purchaser Indemnitee may recover only under Section 7.3(a)(vii). 7.5 Purchaser's Indemnification Covenants. Purchaser shall indemnify, save and keep the Stockholders and their respective successors and assigns (the "Stockholder Indemnitees"), harmless against and from all Damages sustained or incurred by any Stockholder Indemnitee, as a result of or arising out of or by virtue of: (a) any inaccuracy in or breach of any representation and warranty made by Purchaser to the Stockholders herein or in any closing document delivered to the Stockholders in connection herewith; or (b) any breach by Purchaser of, or failure by Purchaser to comply with, any of the covenants or obligations under this Agreement to be performed by Purchaser. 7.6 Cooperation. Subject to the provisions of Section 7.7, the Indemnifying Party shall have the right, at its own expense, to 74 participate in the defense of any Claim by a party other than the parties hereto (a "Third Party Claim"), and if said right is exercised, the parties shall cooperate in the investigation and defense of said Third Party Claim. 7.7 Third Party Claims. Except as otherwise provided in Section 7.8, forthwith following the receipt of notice of a Third Party Claim, the party receiving the notice of the Third Party Claim shall (i) notify the other party of its existence, setting forth with reasonable specificity the facts and circumstances of which such party has received notice, and (ii) if the party giving such notice is an Indemnified Party, specifying the basis hereunder upon which the Indemnified Party's claim for indemnification is asserted. The Indemnified Party may, upon reasonable notice, tender the defense of a Third Party Claim to the Indemnifying Party. If: (a) the defense of a Third Party Claim is so tendered and within thirty (30) days thereafter such tender is accepted without qualification by the Indemnifying Party; or (b) within thirty (30) days after the date on which written notice of a Third Party Claim has been given pursuant to this Section 7.7, the Indemnifying Party shall acknowledge without qualification its indemnification obligations as provided in this Article 7 in writing to the Indemnified Party and accept the defense thereof; then, except as hereinafter provided, the Indemnified Party shall not, and the Indemnifying Party shall, have the right to contest, defend, litigate or settle such Third Party Claim. The Indemnified Party shall have the right to be represented by counsel at its own expense in any such contest, defense, litigation or settlement conducted by the Indemnifying Party, provided that the Indemnified 75 Party shall be entitled to reimbursement therefor if the Indemnifying Party shall lose its right to contest, defend, litigate and settle the Third Party Claim as herein provided. The Indemnifying Party shall lose its right to contest, defend, litigate and settle the Third Party Claim if it shall fail to diligently contest the Third Party Claim. So long as the Indemnifying Party has not lost its right and/or obligation to contest, defend, litigate and settle as herein provided, the Indemnifying Party shall have the exclusive right to contest, defend and litigate the Third Party Claim and shall have the exclusive right, in its discretion exercised in good faith, and upon the advice of counsel, to settle any such matter, either before or after the initiation of litigation, at such time and upon such terms as it deems fair and reasonable, provided that at least ten (10) days prior to any such settlement, written notice of its intention to settle shall be given to the Indemnified Party; provided that no such settlement shall be agreed to by the Indemnifying Party without the Indemnified Parties' prior written consent if such settlement provides for injunctive relief against the Indemnified Party or does not include an unconditional release of such Indemnified Party from all liability on any claims that are the subject matter of such action. All expenses (including without limitation attorneys' fees) incurred by the Indemnifying Party in connection with the foregoing shall be paid by the Indemnifying Party. No failure by an Indemnifying Party to acknowledge in writing its indemnification obligations under this Article 7 shall 76 relieve it of such obligations to the extent they exist. If an Indemnified Party is entitled to indemnification against a Third Party Claim, and the Indemnifying Party fails to accept a tender of, or assume, the defense of a Third Party Claim pursuant to this Section 7.7, or if, in accordance with the foregoing, the Indemnifying Party shall lose its right to contest, defend, litigate and settle such a Third Party Claim, the Indemnified Party shall have the right, without prejudice to its right of indemnification hereunder, in its discretion exercised in good faith and upon the advice of counsel, to contest, defend and litigate such Third Party Claim, and may settle such Third Party Claim, either before or after the initiation of litigation, at such time and upon such terms as the Indemnified Party deems fair and reasonable, provided that at least ten (10) days prior to any such settlement, written notice of its intention to settle is given to the Indemnifying Party. If, pursuant to this Section 7.7, the Indemnified Party so contests, defends, litigates or settles a Third Party Claim for which it is entitled to indemnification hereunder as hereinabove provided, the Indemnified Party shall be reimbursed by the Indemnifying Party for the reasonable attorneys' fees and other expenses of contesting, defending, litigating and/or settling the Third Party Claim which are incurred from time to time, forthwith following the presentation to the Indemnifying Party of itemized bills for said attorneys' fees and other expenses. 77 7.8 Environmental Indemnities. Upon any Purchaser Indemnitee becoming aware of the occurrence of any event or the existence of any state of facts in respect of which the Purchaser Indemnitee will seek indemnification with respect to a claim for inaccuracy in or breach of any of the representations and warranties contained in Section 2.3(t) or a claim for indemnification pursuant to Section 7.3(a)(iii) (an "Environmental Claim"), and thereafter: (a) Purchaser will give to the Stockholders' Committee prompt notice specifying in reasonable detail the basis for the Environmental Claim; (b) Purchaser will promptly deliver to the Stockholders' Committee copies of all final environmental reports, studies, surveys, test data and reports, assessments, cost estimates and all other information available to it or AIMCOR relating to or supporting the Environmental Claim; (c) Purchaser will permit and will cause AIMCOR to permit representatives of the Stockholders' Committee (including advisors and consultants) to visit and inspect from time to time any of the properties to which the Environmental Claim relates, and to enter on such properties from time to time for the purpose of conducting such environmental tests as the Stockholders' Committee may reasonably desire with respect to the Environmental Claim, all during normal business hours and at the Stockholders' expense; and (d) When taking remedial action in connection with an Environmental Claim in respect of which a Purchaser Indemnitee will seek indemnification hereunder, the Purchaser Indemnitee will take such action as is cost-effective and otherwise reasonable under the circumstances, in the good faith business judgment of AIMCOR. (e) With respect to Environmental Claims relating to breaches in or inaccuracies of any representation or warranty contained in Section 2.3(t) only, Purchaser shall disclose such Environmental Claims to a governmental authority only to the extent required by Environmental Law or if such disclosure would be consistent with Purchaser's reasonable business practices. Notwithstanding the foregoing, if in order for the AIMCOR Group to obtain indemnification with respect to an Environmental Claim as to 78 which AIMCOR would be entitled to indemnity under the IMC Agreement AIMCOR would be required to comply with Section 6.7 of the IMC Agreement, Purchaser shall cause AIMCOR to comply with such provisions. 7.9 Indemnification Exclusive Remedy. Indemnification pursuant to the provisions of this Article 7 shall be the exclusive remedy of the parties for any misrepresentation or breach of any warranty or covenant contained herein or in any closing document executed and delivered pursuant to the provisions hereof; provided, however, that nothing contained herein shall relieve any party hereto from liability for its fraudulent actions or misrepresentations. Without limiting the generality of the preceding sentence, no legal action sounding in strict liability or tort (other than fraudulent misrepresentation) may be maintained by any party. ARTICLE 8 Effect of Termination/Proceeding 8.1 General. The parties shall have the rights and remedies with respect to the termination and/or enforcement of this Agreement which are set forth in this Article 8. 8.2 Right to Terminate. Anything to the contrary herein notwithstanding, this Agreement and the transaction contemplated hereby may be terminated at any time prior to the Closing: (a) by the mutual written consent of Purchaser and the Stockholders' Committee; or (b) by prompt notice given in accordance with Section 10.3, by either of such parties if the Closing shall not have occurred at or before 11:59 p.m. on November 30, 79 1997; provided, however, that the right to terminate this Agreement under this Section 8.2(b) shall not be available to any party whose failure to fulfill any of its obligations under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or prior to the aforesaid date. 8.3 Certain Effects of Termination. In the event of the termination of this Agreement by either the Stockholders' Committee or Purchaser as provided in Section 8.2: (a) each party, if so requested by the other party, will return promptly every document furnished to it by the other party (or any subsidiary, division, associate or Affiliate of such other party) in connection with the transaction contemplated hereby, whether so obtained before or after the execution of this Agreement, and any copies thereof (except for copies of documents publicly available) which may have been made, and will use reasonable efforts to cause its representatives and any representatives of financial institutions and investors and others to whom such documents were furnished promptly to return such documents and any copies thereof any of them may have made; and (b) the Confidentiality Letter shall remain in effect. This Section 8.3 shall survive any termination of this Agreement. 8.4 Remedies. Notwithstanding any termination right granted in Section 8.2, in the event of the nonfulfillment of any condition to a party's closing obligations, in the alternative, such party may elect to do one of the following: (a) proceed to close despite the nonfulfillment of any closing condition, it being understood that consummation of the Closing shall not be deemed a waiver of a breach of any representation, warranty or covenant and of such party's rights and remedies with respect thereto; (b) decline to close, terminate this Agreement as provided in Section 8.2, and thereafter seek damages to the extent permitted in Section 8.5; or (c) seek specific performance of the obligations of the other party. Each party hereby agrees that in the event of any breach by such party of this Agreement, the remedies available to the other party at law may be inadequate and that 80 such party's obligations under this Agreement may be specifically enforced. 8.5 Right to Damages. If this Agreement is terminated pursuant to Section 8.2, neither party hereto shall have any claim against the other except if the circumstances giving rise to such termination were caused by the other party's willful failure to comply with a material covenant set forth herein, in which event termination shall not be deemed or construed as limiting or denying any legal or equitable right or remedy of said party. ARTICLE 9 Stockholders' Committee 9.1 Appointment of Stockholders' Committee. Each of the Stockholders hereby irrevocably constitutes and appoints Gallagher and Kocourek (collectively, the "Stockholders' Committee"), as such Stockholder's attorneys-in-fact and agents in connection with the execution and performance of this Agreement. This power is irrevocable and coupled with an interest, and shall not be affected by the death, incapacity, illness, dissolution or other inability to act of any of Stockholders. 9.2 Authority. Each of the Stockholders hereby irrevocably grants the Stockholders' Committee full power and authority: (a) to execute and deliver, on behalf of such Stockholder, and to accept delivery of, on behalf of such Stockholder, such documents as may be deemed by the Stockholders' Committee, in their sole discretion, to be appropriate to consummate this Agreement, including without limitation a Contribution Agreement among the Stockholders; (b) to endorse and to deliver on behalf of such Stockholder, certificates representing the shares of stock of 81 AIMCOR or Enterprises to be sold by such Stockholder at the Closing; (c) to acknowledge receipt at the Closing of the Estimated Purchase Price, less the amounts required to fund the Escrows, for each share of stock of AIMCOR or Enterprises sold by such Stockholder at the Closing, as payment in full for such shares, to designate the manner of payment of such amount, and to certify, on behalf of such Stockholder, as to the accuracy of the representations and warranties of such Stockholder under, or pursuant to the terms of, this Agreement; (d) to make disbursements from time to time from the account to which the Purchase Price has been paid pursuant to Section 1.4 (including disbursements to the Stockholders on account of the Purchase Price payable to them and disbursements in respect of expenses payable by the Stockholders pursuant to Sections 10.1 and 10.4), and to retain in such account such sum as the Stockholders' Committee shall deem appropriate to cover contingencies for such period of time as the Stockholders' Committee shall deem appropriate; (e) to (x) dispute or refrain from disputing, on behalf of such Stockholder, any claim made by any Purchaser Indemnitee under this Agreement; (y) negotiate and compromise, on behalf of such Stockholder, any dispute that may arise under, and to exercise or refrain from exercising any remedies available under, this Agreement, and (z) execute, on behalf of such Stockholder, any settlement agreement, release or other document with respect to such dispute or remedy; (f) to waive, on behalf of such Stockholder, any closing condition contained in Article 4 of this Agreement and to give or agree to, on behalf of such Stockholder, any and all consents, waivers, amendments or modifications, deemed by the Stockholders' Committee, in their sole discretion, to be necessary or appropriate, under this Agreement, and, in each case, to execute and deliver any documents that may be necessary or appropriate in connection therewith; (g) to enforce, on behalf of such Stockholder, any claim against Purchaser arising under this Agreement; (h) to engage attorneys, accountants and agents, and to employ personnel for the purpose of winding up the affairs of the Stockholders as they pertain to AIMCOR, at the expense of the Stockholders; (i) to amend this Agreement (other than this Article 9) or any of the instruments to be delivered to Purchaser by such Stockholder pursuant to this Agreement; and 82 (j) to give such instructions and to take such action or refrain from taking such action, on behalf of such Stockholder, as the Stockholders' Committee deems, in their sole discretion, necessary or appropriate to carry out the provisions of this Agreement. 9.3 Reliance. Each Stockholder hereby agrees that: (a) in all matters in which action by the Stockholders' Committee is required or permitted, the members of the Stockholders' Committee, acting jointly, are authorized to act on behalf of such Stockholder, notwithstanding any dispute or disagreement among the Stockholders or between any Stockholder and the Stockholders' Committee. The members of the Stockholders' Committee may, as between them, agree as to particular matters or actions which may be taken by either member, or by one particular member, of the Stockholders' Committee without the necessity for action by both members of the Stockholders' Committee. Purchaser shall be entitled to rely on any and all action taken by the Stockholders' Committee under this Agreement without any liability to, or obligation to inquire of, any of the Stockholders or the other members of the Stockholders' Committee, notwithstanding any knowledge on the part of the Purchaser of any such dispute or disagreement; (b) notice to either member of the Stockholders' Committee, delivered in the manner provided in Section 10.3, shall be deemed to be notice to both of the members of the Stockholders' Committee and to all Stockholders for the purposes of this Agreement; (c) the power and authority of the Stockholders' Committee, as described in this Agreement, shall continue in force until all rights and obligations of the Stockholders under this Agreement shall have terminated, expired or been fully performed; (d) if either member of the Stockholders' Committee resigns or otherwise ceases to function in his capacity as such for any reason whatsoever, the remaining member of the Stockholders' Committee shall act on behalf of the Stockholders as provided in this Article 9. 9.4 Actions by Stockholders. Each Stockholder agrees that, notwithstanding the foregoing, at the request of Purchaser, such Stockholder shall take all actions necessary or appropriate to consummate the transaction contemplated hereby (including, without 83 limitation, delivery of such Stockholder's Purchased Shares and acceptance of the Purchase Price therefor) individually on such Stockholder's own behalf, and delivery of any other documents required of the Stockholders pursuant to the terms hereof. 9.5 Indemnification of Purchaser and Its Affiliates. The Stockholders, jointly and severally, shall indemnify the Purchaser Indemnitees against, and agree to hold the Purchaser Indemnitees harmless from, any and all Damages incurred or suffered by any Purchaser Indemnitee arising out of, with respect to or incident to the operation of, or any breach of any covenant or agreement pursuant to, this Article 9, or the designation, appointment and actions of the Stockholders' Committee pursuant to the provisions hereof, including without limitation, with respect to (x) actions taken by the Stockholders' Committee or any member thereof, and (y) reliance by any Purchaser Indemnitee on, and actions taken by any Purchaser Indemnitee in response to or in reliance on, the instructions of, notice given by or any other action taken by the Stockholders' Committee. 9.6 Indemnification of Stockholders' Committee. Each Stockholder shall severally indemnify each member of the Stockholders' Committee against any Damages (except such Damages as result from such member's gross negligence or willful misconduct) that such member may suffer or incur in connection with any action or omission of such member as a member of the Stockholders' Committee. Each Stockholder shall bear its pro-rata portion of such Damages. No member of the Stockholders' Committee shall be 84 liable to any Stockholder with respect to any action or omission taken or omitted to be taken by the Stockholders' Committee pursuant to this Article 9, except for such member's gross negligence or willful misconduct. ARTICLE 10 Miscellaneous 10.1 Fees. The Stockholders shall pay all fees and expenses charged by Goldman, Sachs & Co. 10.2 Publicity. Except as otherwise required by law or applicable stock exchange rules, press releases and other publicity concerning this transaction shall be made only with the prior agreement of the Stockholders' Committee and Purchaser (and in any event, the Stockholders' Committee shall use all reasonable efforts to consult and agree with each other with respect to the content of any such required press release or other publicity). 10.3 Notices. All notices required or permitted to be given hereunder shall be in writing and may be delivered by hand, by facsimile, by nationally recognized private courier, or by United States mail. Notices delivered by mail shall be deemed given three (3) business days after being deposited in the United States mail, postage prepaid, registered or certified mail, return receipt requested. Notices delivered by hand, by facsimile, or by nationally recognized private courier shall be deemed given on the first business day following receipt; provided, however, that a notice delivered by facsimile shall only be effective if such notice is also delivered by hand, or deposited in the United States 85 mail, postage prepaid, registered or certified mail, on or before two (2) business days after its delivery by facsimile. All notices shall be addressed as follows: If to Stockholders: c/o Applied Industrial Materials Corporation 750 Lake Cook Road Buffalo Grove, Illinois 60089 Attention: Wayne C. Kocourek Fax: (847) 215-3421 with a copy to: Altheimer & Gray 10 South Wacker Drive Suite 4000 Chicago, Illinois 60606 Attention: David W. Schoenberg, Esq. Fax: (312) 715-4800 If to Purchaser: Walter Industries, Inc. 1500 N. Dale Mabry Highway Tampa, FL 33607 Attention: Dean M. Fjelstul Fax: (813) 871-4430 with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Attention: Peter J. Gordon, Esq. Fax: (212) 455-2502 and/or to such other respective addresses and/or addressees as may be designated by notice given in accordance with the provisions of this Section 10.3. 10.4 Expenses; Transfer Taxes. Except as provided in Section 8.5, each party hereto shall bear all fees and expenses incurred by such party in connection with, relating to or arising out of the 86 negotiation, preparation, execution, delivery and performance of this Agreement and the consummation of the transaction contemplated hereby, including, without limitation, financial advisors', attorneys', accountants' and other professional fees and expenses. Purchaser and the Stockholders shall equally split the cost of all sales, use, stamp, documentary, excise and transfer Taxes which may be payable in connection with the transaction contemplated hereby, and the party legally required to file them shall file all necessary Tax Returns and other documentation with respect to all such sales, use, stamp, documentary, excise and transfer Taxes. 10.5 Entire Agreement. This Agreement, the agreements and instruments to be delivered by the parties pursuant to the provisions hereof, and the Confidentiality Letter constitute the entire agreement between the parties and shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns. Each Exhibit, schedule and the Disclosure Schedule, shall be considered incorporated into this Agreement. Any amendments, or alternative or supplementary provisions, to this Agreement, must be made in writing and duly executed by an authorized representative or agent of each of the parties hereto. The inclusion of any item in the Disclosure Schedule is not evidence of the materiality of such item for the purposes of this Agreement. The parties make no representations or warranties to each other, except as contained in this Agreement, and any and all prior representations and warranties made by any party or its representatives, whether 87 verbally or in writing, are deemed to have been merged into this Agreement, it being intended that no such prior representations or warranties shall survive the execution and delivery of this Agreement. Purchaser acknowledges that it has conducted an independent investigation of the financial condition, assets, liabilities, properties and projected operations of the AIMCOR Group in making its determination as to the propriety of the transaction contemplated by this Agreement, and in entering into this Agreement, has relied solely on the results of said investigation and on the representations and warranties of the Stockholders expressly contained in this Agreement. 10.6 Non-Waiver. The failure in any one or more instances of a party to insist upon performance of any of the terms, covenants or conditions of this Agreement, to exercise any right or privilege in this Agreement conferred, or the waiver by said party of any breach of any of the terms, covenants or conditions of this Agreement, shall not be construed as a subsequent waiver of any such terms, covenants, conditions, rights or privileges, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. 10.7 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument. 88 10.8 Severability. The invalidity of any provision of this Agreement or portion of a provision shall not affect the validity of any other provision of this Agreement or the remaining portion of the applicable provision. 10.9 Applicable Law. This Agreement shall be governed and controlled as to validity, enforcement, interpretation, construction, effect and in all other respects by the internal laws of the State of Illinois applicable to contracts made in that State. 10.10 Binding Effect; Benefit. This Agreement shall inure to the benefit of and be binding upon the parties hereto, and their successors and permitted assigns. Nothing in this Agreement, express or implied, shall confer on any person other than the parties hereto, and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, including, without limitation, third party beneficiary rights, except that Consumer Products shall be a third party beneficiary of Section 6.12. 10.11 Assignability. This Agreement shall not be assignable by (x) any Stockholder, Germany LP or Luxembourg LP without the prior written consent of Purchaser, or (y) Purchaser without the prior written consent of the Stockholders' Committee. 10.12 Governmental Reporting. Anything to the contrary in this Agreement notwithstanding, nothing in this Agreement shall be construed to mean that a party hereto or other person must make or file, or cooperate in the making or filing of, any return or report 89 to any governmental authority in any manner that such person or such party reasonably believes or reasonably is advised is not in accordance with law. 10.13 Waiver of Trial by Jury. Each of the parties hereto waives the right to a jury trial in connection with any suit, action or proceeding seeking enforcement of such party's rights under this Agreement. 10.14 Consent to Jurisdiction. This Agreement has been executed and delivered in and shall be deemed to have been made in Chicago, Illinois. The Stockholders, Germany LP, Luxembourg LP and Purchaser each agrees to the exclusive jurisdiction of any state or Federal court within the City of Chicago, with respect to any claim or cause of action arising under or relating to this Agreement, and waives personal service of any and all process upon it, and consents that all services of process be made by registered or certified mail, return receipt requested, directed to it at its address as set forth in Section 10.3, and service so made shall be deemed to be completed when received. The Stockholders Germany LP, Luxembourg LP and Purchaser each waive any objection based on forum non conveniens and waive any objection to venue of any action instituted hereunder. Nothing in this paragraph shall affect the right of the Stockholders or Purchaser to serve legal process in any other manner permitted by law. 10.15 Definitions. The following terms are defined in the following sections of this Agreement: 90 Defined Term Where Found - ------------ ----------- Accountants 1.5 Adjusted Book Value 1.3 Adjusted Earnings Computation 1.4(c) Affiliate 2.2(f) Affiliate Transactions 2.3(l)(xiii) AIMCOR Preamble AIMCOR Entity 1.1 AIMCOR Group 1.1 AIMCOR Germany Recital B AIMCOR Luxembourg Recital B Arbitrating Accountant 1.6(b) Base Purchase Price 1.2(a) Base Product Deductible 7.4(c) Burns 2.6 Carbon Products Group 1.4(c) Carbon Products Group Statement of Earnings 1.4(c) Cash Equivalents 1.2 Closing 1.8 Closing Balance Sheet 1.5(b) Closing Date 1.8 Code 2.3(k)(i)(C) Commitment Letter 2.2(i) Company Plans 2.3(p)(iii) Confidential Information 6.3 Confidentiality Letter 3.3 Consumer Products 3.2(d)(v)a Control 2.2(f) Damages 7.2(a) Disclosure Schedule 2.1 Dispute 1.6(a) Dispute Notice 1.6(a) Dispute Period 1.6(a) Ehmer 2.6 Enterprises Preamble Environmental Claim 7.8 Environmental Action 2.3(t)(iii) Environmental Deductible 7.4(b) Environmental Laws 2.3(t)(i) Environmental Permits 2.3(t)(ii) ERISA 2.3(p)(i) ERISA Affiliate 2.3(p)(iv) Escrow Agent 1.4(b) Escrow Agreement 1.4(b) Escrows 1.4(b) Estimated Cash Payment 1.4 Excluded Assets 3.2(d)(v) Financial Statements 2.3(i) GAAP 1.5 Gallagher 1.1(c) 91 General Deductible 7.4(a) Germany LP Preamble Hazardous Materials 2.3(t)(iv) HSR Act 2.2(c) Holdback Fund 1.4(b) Hourly Plan 6.11 IMC Agreement 7.4(g)(v) Indebtedness 1.2(e) Indemnifiable Claim 6.7 Indemnified Employee(s) 6.7 Indemnified Party 7.2(b) Indemnifying Party 7.2(c) Indemnity Escrow 1.4(b) Intellectual Property 2.3(x) Interim Financial Statements 2.3(i) IRS 2.3(p)(iii) Kocourek 1.1(c) Leased Premises 2.3(v) Liabilities 2.3(l)(iv) Letter of Credit 1.4(b) Luxembourg LP Preamble Mallinckrodt 7.4(h)(v) Material Adverse Effect 2.3(b) Material Consents 3.2(b) 1997 Financial Statements 1.5(a) Non-U.S. Plan 2.3(p)(vi) PBGC 2.3(p)(v) Pension Plans 2.3(p)(i) Permits 2.3(o) Pre-Closing Tax Returns 6.10(c) Product Deductible 7.4(c) Purchased Shares 1.1 Purchase Price 1.2 Purchaser Preamble Purchaser Indemnitees 7.3 Real Estate 2.3(u) Salaried Plan 6.11 Section 338(h)(10) Election 2.3(k)(xi) Section 338 Forms 6.10(a) Securities Act 2.2(h) Specific Returns 6.10(c) Stockholders Preamble Stockholder Preamble Stockholder Entity 2.4(b) Stockholder Indemnitees 7.5 Stockholder Notes and Loans 1.2(c) Stockholders' Committee 9.1 Subsidiaries 2.3(g) TAC 1.5(a) Tax 2.3(k)(i)(A) Tax Indemnity Escrow 1.4(b) Tax Return 2.3(k)(i)(B) 92 Taxes 2.3(k)(i)(A) Third Party Claim 7.2(d) Trademarks 2.3(x) U.S. GAAP 1.5(b)(i) Welfare Plans 2.3(p)(ii) 10.16 Amendments. This Agreement shall not be modified or amended except pursuant to an instrument in writing executed and delivered on behalf of each of the parties hereto. 10.17 Headings. The headings contained in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. 10.18 Trustee Exculpation. Anything to the contrary herein contained notwithstanding, any individual identified on the signature page as signing "as trustee" who signs this Agreement does so, not personally, but solely as trustee, as aforesaid, in the exercise of the power and authority conferred upon and vested in him, as such trustee. It is expressly understood and agreed that nothing herein shall be construed as creating any liability in such trustee, personally, to perform any covenant either express or implied, or by virtue of any representation and warranty, or any other matter herein contained, all such liability, if any, being expressly waived by all other parties to the Agreement, and by every other person now or hereafter claiming any right hereunder. So far as such trustee and his successor(s), personally, are concerned, every other person now or hereafter claiming any right hereunder shall look to the trust assets from time to time held by such trustee and not to the personal assets of the trustee, for the performance of such covenants or with respect to any inaccuracy in 93 or breach of any such representation and warranty or with respect to any such other matter. 94 IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above. WALTER INDUSTRIES, INC., a Delaware corporation By: /s/ Kenneth E. Hyatt -------------------------------------- Its: Chairman, President & CEO ---------------------------------- 95 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. GALLAGHER 1994 FAMILY TRUST, DATED DECEMBER 31, 1994 By: /s/ Myron Lieberman -------------------------------------- MYRON LIEBERMAN, Trustee /s/ Charles P. Gallagher ----------------------------------------- CHARLES P. GALLAGHER KOCOUREK 1994 FAMILY TRUST, DATED DECEMBER 31, 1994 By: /s/ David W. Schoenberg -------------------------------------- DAVID W. SCHOENBERG, Trustee /s/ Wayne C. Kocourek ----------------------------------------- WAYNE C. KOCOUREK SHAUN P. GALLAGHER TRUST By: /s/ Myron Lieberman -------------------------------------- MYRON LIEBERMAN, Trustee 96 KELLY A. GALLAGHER TRUST By: /s/ Myron Lieberman -------------------------------------- MYRON LIEBERMAN, Trustee KEVIN C. GALLAGHER TRUST By: /s/ Myron Lieberman -------------------------------------- MYRON LIEBERMAN, Trustee MICHAEL A. GALLAGHER TRUST By: /s/ Myron Lieberman -------------------------------------- MYRON LIEBERMAN, Trustee PAMELA A. KOCOUREK TRUST By: /s/ David W. Schoenberg -------------------------------------- DAVID W. SCHOENBERG, Trustee MICHAEL A. KOCOUREK TRUST By: /s/ David W. Schoenberg -------------------------------------- DAVID W. SCHOENBERG, Trustee CPG LUX, INC. By: /s/ Charles P. Gallagher -------------------------------------- CHARLES P. GALLAGHER,President 97 WCK LUX, INC. By: /s/ Wayne C. Kocourek -------------------------------------- WAYNE C. KOCOUREK, President CPG FRG, INC. By: /s/ Charles P. Gallagher -------------------------------------- CHARLES P. GALLAGHER,President WCK FRG, INC. By: /s/ Wayne C. Kocourek -------------------------------------- WAYNE C. KOCOUREK, President /s/ Jon M. Burns ----------------------------------------- JON M. BURNS /s/ William H. Ehmer ----------------------------------------- WILLIAM H. EHMER DOUGLAS E. KATT TRUST, DATED OCTOBER 15, 1996 By: /s/ Douglas E. Katt -------------------------------------- DOUGLAS E. KATT, Trustee /s/ Vincent P. Kennedy ----------------------------------------- VINCENT P. KENNEDY /s/ Charles W. Kopec ----------------------------------------- CHARLES W. KOPEC /s/ Alan S. Kornstein ----------------------------------------- ALAN S. KORNSTEIN 98 /s/ Karen E. Lundstrom ----------------------------------------- KAREN E. LUNDSTROM /s/ Kevin P. Marion ----------------------------------------- KEVIN P. MANION /s/ J. Peter Scott-Hansen ----------------------------------------- J. PETER SCOTT-HANSEN /s/ Frank G. Zweerts ----------------------------------------- FRANK G. ZWEERTS 99 EX-20.1 3 CREDIT AGREEMENT ================================================================================ $800,000,000 CREDIT AGREEMENT by and among WALTER INDUSTRIES, INC. as Borrower, NATIONSBANK, NATIONAL ASSOCIATION, as Administrative Agent, Documentation Agent and Syndication Agent and THE LENDERS PARTY HERETO FROM TIME TO TIME October 15, 1997 ================================================================================ TABLE OF CONTENTS ARTICLE I Definitions and Terms 1.1. Definitions............................................................3 1.2. Rules of Interpretation...............................................32 1.3. Accounting Principles.................................................33 ARTICLE II The Term Loan 2.1. Term Loan.............................................................34 2.2. Term Loan Advance.....................................................34 2.3. Payment of Principal..................................................34 2.4. Payment of Interest...................................................35 2.5. Manner of Payment.....................................................35 2.6. Optional Prepayments..................................................36 2.7. Mandatory Prepayments.................................................36 2.8. Term Notes............................................................37 2.9. Use of Proceeds.......................................................37 2.10. Interest Periods......................................................37 2.11. Conversions and Elections of Subsequent Interest Periods..............37 2.12. Non-Conforming Payments...............................................38 2.13. Pro Rata Payments.....................................................38 ARTICLE III The Revolving Credit Facility 3.1. Revolving Loans.......................................................40 3.2. Payment of Interest...................................................42 3.3. Payment of Principal..................................................43 3.4. Non-Conforming Payments...............................................43 3.5. Revolving Notes.......................................................44 3.6. Pro Rata Payments.....................................................44 3.7. Reductions............................................................44 3.8. Conversions and Elections of Subsequent Interest Periods..............44 3.9. Increase and Decrease in Amounts......................................45 3.10. Unused Fee............................................................45 3.11. Deficiency Advances...................................................45 3.12. Use of Proceeds.......................................................46 i 3.13. Swing Line............................................................46 ARTICLE IV Letters of Credit 4.1. Letters of Credit.....................................................48 4.2. Reimbursement.........................................................49 4.3. Letter of Credit Facility Fees........................................53 4.4. Administrative and Other Fees.........................................53 ARTICLE V Security 5.1. Security..............................................................54 5.2. Further Assurances....................................................54 ARTICLE VI Yield Protection and Illegality 6.1. Additional Costs......................................................55 6.2. Suspension of Loans...................................................56 6.3. Illegality............................................................57 6.4. Compensation..........................................................57 6.5. Alternate Loan and Lender.............................................58 6.6. Taxes.................................................................58 6.7. Replacement Banks.....................................................59 ARTICLE VII Conditions to Making Loans and Issuing Letters of Credit 7.1. Conditions of Term Loans and Initial Advance..........................61 7.2. Conditions of Revolving Loans and Letters of Credit...................63 ii ARTICLE VIII Representations and Warranties 8.1. Organization and Authority............................................65 8.2. Loan Documents........................................................65 8.3. Solvency..............................................................66 8.4. Subsidiaries and Stockholders.........................................66 8.5. Investments...........................................................66 8.6. Financial Condition...................................................67 8.7. Title to Properties...................................................67 8.8. Taxes.................................................................67 8.9. Other Agreements......................................................68 8.10. Litigation............................................................68 8.11. Margin Stock..........................................................68 8.12. Investment Company....................................................68 8.13. Patents, Etc..........................................................69 8.14. No Untrue Statement...................................................69 8.15. No Consents, Etc......................................................69 8.16. Employee Benefit Plans................................................69 8.17. No Default............................................................70 8.18. Hazardous Materials...................................................71 8.19. Employment Matters....................................................71 8.20. RICO..................................................................72 8.21. Related Acquisition...................................................72 8.22. Representations and Warranties from the Related Acquisition Transaction Documents...............................................72 ARTICLE IX Affirmative Covenants 9.1. Financial Reports, Etc................................................73 9.2. Maintain Properties...................................................75 9.3. Existence, Qualification, Etc.........................................75 9.4. Regulations and Taxes.................................................75 9.5. Insurance.............................................................75 9.6. True Books............................................................76 9.7. Right of Inspection...................................................76 9.8. Observe all Laws......................................................76 9.9. Governmental Licenses.................................................76 9.10. Covenants Extending to Other Persons..................................76 9.11. Officer's Knowledge of Default........................................76 9.12. Suits or Other Proceedings............................................76 iii 9.13. Notice of Discharge of Hazardous Material or Environmental Complaint..77 9.14. Environmental Compliance..............................................77 9.15. Indemnification.......................................................77 9.16. Further Assurances....................................................78 9.17. Employee Benefit Plans................................................78 9.18. Continued Operations..................................................79 9.19. New Domestic Subsidiaries and Material Foreign Subsidiaries...........79 9.20. Mortgage Warehousing Facility.........................................80 9.21. Transactions with Affiliates..........................................80 9.22. Permitted Receivables Securitization..................................81 ARTICLE X Negative Covenants 10.1. Financial Covenants..................................................82 10.2. Acquisitions.........................................................82 10.3. Liens................................................................83 10.4. Indebtedness.........................................................85 10.5. Transfer of Assets...................................................87 10.6. Investments..........................................................88 10.7. Merger or Consolidation..............................................89 10.8. Restricted Payments..................................................89 10.9. Compliance with ERISA................................................90 10.10. Fiscal Year..........................................................91 10.11. Negative Pledge Clauses..............................................91 10.12. Prepayments, Etc. of Indebtedness....................................91 10.13. Creation of New Subsidiaries.........................................92 10.14. Mid-State Rights in Mortgage Accounts................................92 10.15. Sale of Mid-State....................................................92 10.16. Sales of Mortgage Accounts to Mid-State..............................92 ARTICLE XI Events of Default and Acceleration 11.1. Events of Default....................................................93 11.2. Agent to Act.........................................................96 11.3. Cumulative Rights....................................................96 11.4. No Waiver............................................................96 11.5. Allocation of Proceeds...............................................96 iv ARTICLE XII The Agent 12.1. Appointment..........................................................98 12.2. Attorneys-in-fact....................................................98 12.3. Limitation on Liability..............................................98 12.4. Reliance.............................................................98 12.5. Notice of Default....................................................99 12.6. No Representations...................................................99 12.7. Indemnification......................................................99 12.8. Lender..............................................................100 12.9. Resignation.........................................................100 12.10. Sharing of Payments, etc............................................101 12.11. Fees................................................................101 ARTICLE XIII Miscellaneous 13.1. Assignments and Participations......................................102 13.2. Notices.............................................................104 13.3. Setoff..............................................................105 13.4. Survival............................................................105 13.5. Expenses............................................................106 13.6. Amendments..........................................................106 13.7. Counterparts........................................................108 13.8. Termination.........................................................108 13.9. Indemnification; Limitation of Liability............................108 13.10. Severability........................................................109 13.11. Entire Agreement....................................................109 13.12. Agreement Controls..................................................109 13.13. Usury Savings Clause................................................109 13.14. Governing Law; Waiver of Jury Trial.................................110 EXHIBIT A Applicable Commitment Percentages............................A-1 EXHIBIT B-1 Form of Assignment and Acceptance..........................B-1-1 EXHIBIT B-2 Form of Assignment and Acceptance..........................B-2-1 EXHIBIT C Notice of Appointment (or Revocation) of Authorized Representative ............................................C-1 EXHIBIT D-1 Form of Borrowing Notice...................................D-1-1 EXHIBIT D-2 Form of Borrowing Notice--Swing Line Loans.................D-2-1 EXHIBIT E Form of Interest Rate Selection Notice.......................E-1 EXHIBIT F-1 Form of Revolving Note.......................................F-1 EXHIBIT F-2 Form of Term Note..........................................F-2-1 v EXHIBIT G Form(s) of Opinion(s) of Counsel to Credit Parties...........G-1 EXHIBIT H Compliance Certificate.......................................H-1 EXHIBIT I Form of Facility Guaranty for Subsidiaries...................I-1 Schedule 1.1A Existing Letters of Credit Schedule 1.1B Employee Stock Purchase Plan Schedule 1.1C Excluded Subsidiaries Schedule 8.4 Subsidiaries and Intercompany Advances Schedule 8.5 Investments in Other Persons Schedule 8.6 Indebtedness Schedule 8.8 Tax Matters Schedule 8.10 Disclosed Litigation Schedule 8.16A Employee Benefit Plans Funding Matters Schedule 8.16B Employee Benefit Plans Schedule 8.18A Environmental Matters Schedule 8.18B Environmental Listings on NPL and CERCLIS Schedule 8.19 Collective Bargaining Agreements Schedule 9.5 Insurance Schedule 10.3 Liens vi CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of October 15, 1997 (the "Agreement"), is made by and among WALTER INDUSTRIES, INC., a Delaware corporation having its principal place of business in Tampa, Hillsborough County, Florida (the "Borrower"), NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States, in its capacity as a Lender ("NationsBank"), and each other financial institution executing and delivering a signature page hereto and each other financial institution which may hereafter execute and deliver an instrument of assignment with respect to this Agreement pursuant to Section 13.1 (hereinafter such financial institutions may be referred to individually as a "Lender" or collectively as the "Lenders"), and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States, in its capacity as administrative agent, documentation agent and syndication agent for the Lenders (in such capacity, and together with any successor agent appointed in accordance with the terms of Section 12.9, the "Administrative Agent" or the "Agent"); W I T N E S S E T H: WHEREAS, the Borrower, NationsBank, National Association, as agent and certain lenders (the "Existing Lenders") have entered into a Credit Agreement dated January 22, 1996 (the "Existing Agreement") pursuant to which the Existing Lenders have made available to the Borrower a term loan facility of $185,000,000 and a revolving credit facility of up to $365,000,000 and issued letters of credit for the benefit of the Borrower; and WHEREAS, the Borrower has entered into a Stock Purchase Agreement dated September 19, 1997 to purchase all outstanding stock of Applied Industrial Materials Corporation, AIMCOR Enterprises International, Inc., AIMCOR (Germany) Limited Partnership and AIMCOR (Luxembourg) Limited Partnership (collectively, the "AIMCOR Group") and has requested that the amount of the term loan facility be increased to $450,000,00 and that the revolving credit facility be reduced to $350,000,000 and that this Agreement be entered into in replacement of the Existing Agreement; and WHEREAS, the Lenders are willing to make available to the Borrower a revolving credit facility of up to $350,000,000, including a sublimit for issuance of standby letters of credit in an amount of up to $75,000,000 and a swing line facility in an amount of up to $25,000,000, the proceeds of which are to be used (i) to acquire the AIMCOR Group, (ii) repay the indebtedness arising under the Existing Agreement, (iii) for working capital needs and (iv) for general corporate purposes, including the making of acquisitions permitted hereunder; and WHEREAS, the Lenders are willing to make such term loan facility and revolving credit facility available to the Borrower upon the terms and conditions set forth herein; NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as follows: 2 ARTICLE I Definitions and Terms 1.1. Definitions. For the purposes of this Agreement, in addition to the definitions set forth above, the following terms shall have the respective meanings set forth below: "Acquisition" means the acquisition of (i) a controlling equity interest in another Person (including the purchase of an option, warrant or convertible or similar type security to acquire such a controlling interest at the time it becomes exercisable by the holder thereof), whether by purchase of such equity interest or upon exercise of an option or warrant for, or conversion of securities into, such equity interest, or (ii) assets of another Person which constitute all or substantially all of the assets of such Person or of a business unit of or a line or lines of business conducted by such Person; provided that the term "Acquisition" shall not include Investments by Mid-State in one or more special purpose Subsidiaries in connection with the issuance by such Subsidiaries of securities described in Section 10.4(d)(iii). "Advance" means any of (i) the borrowing under the Term Loan Facility or (ii) a borrowing under the Revolving Credit Facility consisting, in any case, of a Base Rate Loan or a Eurodollar Rate Loan. "Affiliate" means any Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with the Borrower; or (ii) which beneficially owns or holds 5% or more of any class of the outstanding voting stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of the Borrower; or 5% or more of any class of the outstanding voting stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by the Borrower. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting stock, by contract or otherwise. "AIMCOR" means Applied Industrial Materials Corporation, a corporation organized under the laws of Delaware. "Alternative Currency" means, with the prior written consent of the Agent, any lawful currency other than Dollars which is freely transferable and convertible into Dollars in the United States currency market. "Applicable Commitment Percentage" means, as to each Lender at any time (i) with respect to the Revolving Credit Facility and the Participations, a fraction, the numerator of which shall be such Lender's Revolving Credit Commitment and the denominator of which shall be the Total Revolving Credit Commitment, and (ii) with 3 respect to the Term Loan Facility, a fraction, the numerator of which shall be such Lender's Term Loan Commitment and the denominator of which shall be the Total Term Loan Commitment, which Applicable Commitment Percentage in each case for each Lender as of the Closing Date is as set forth in Exhibit A; provided that each Applicable Commitment Percentage of each Lender shall be increased or decreased to reflect any assignments to or by such Lender effected in accordance with Section 13.1. "Applicable Margin" means, with respect to Eurodollar Rate Loans and Eurodollar Rate Segments, for Revolving Loans and for Term Loans, that percent per annum set forth below, which shall be based upon the Consolidated Leverage Ratio for the Four-Quarter Period most recently ended as specified below: Consolidated Applicable Margin for TIER Leverage Ratio Eurodollar Rate Loans ---- -------------- --------------------- 1 Equal to or Greater than 1.25% 3.50 to 1.00 2 Less than 3.5 to 1.00 1.00% and equal to or Greater than 3.25 to 1.00 3 Less than 3.25 to 1.00 .75% and equal to or Greater than 2.75 to 1.00 4 Less than 2.75 to 1.00 .625% and equal to or Greater than 2.25 to 1.00 5 Less than 2.25 to 1.00 .50% The Applicable Margin shall be established at the end of each fiscal quarter of the Borrower (each, a "Determination Date"). Any change in the Applicable Margin following each Determination Date shall be determined based upon the computations set forth in the certificate furnished to the Agent pursuant to Section 9.1(a)(ii) and Section 9.1(b)(ii), and shall be effective commencing on the date following the date such certificate is received (or, if earlier, the date such certificate was required to be delivered), and in each case, until the date following the date on which a new certificate is delivered or is required to be delivered, whichever shall first occur; provided however, if the Borrower shall fail to deliver any such certificate within the time period required by Section 9.1, then the Applicable Margin with respect to Revolving Loans and Segments under the Term Loan shall be 1.25% until the appropriate certificate is so delivered. From the Closing Date to the day following the receipt of certificate described above for the period ending 4 February 28, 1998, the Applicable Margin shall be not less than 1% for Revolving Loans and Segments under the Term Loan. "Applicable Margin (L/C)" means, as of any date, the Applicable Margin then in effect with respect to Eurodollar Rate Loans under the Revolving Credit Facility, minus .125%. "Applicable Unused Fee" means that percent per annum set forth below, which shall be based upon the Consolidated Leverage Ratio for the Four-Quarter Period most recently ended as specified below: Consolidated Applicable TIER Leverage Ratio Unused Fee ---- -------------- ---------- 1 Equal to or Greater than 3.50 to 1.00 .30% 2 Less than 3.50 to 1.00 and equal to or Greater than 3.25 to 1.00 .25% 3 Less than 2.25 to 1.00 and equal to or Greater than 2.75 to 1.00 .25% 4 Less than 2.75 to 1.00 and equal to or Greater than 2.25 to 1.00 .20% 5 Less than 2.25 to 1.00 .175% The Applicable Unused Fee shall be established at the end of each fiscal quarter of the Borrower (the "Determination Date"). Any change in the Applicable Unused Fee following each Determination Date shall be determined based upon the computations set forth in the certificate furnished to the Agent pursuant to Section 9.1(a)(ii) and Section 9.1(b)(ii), and shall be effective commencing on the date following the date such certificate is received (or, if earlier, the date such certificate was required to be delivered) until the date a new certificate is delivered or is required to be delivered, whichever shall first occur, and continuing until the date following the next date on which such certificate is delivered or required to be delivered; provided however, if the Borrower shall fail to deliver any such certificate within the time period required by Section 9.1, then the Applicable Unused Fee shall be .30% until the appropriate certificate is so delivered. From the Closing Date to the day following the receipt of certificate described above for 5 the period ending February 28, 1998, the Applicable Unused Fee shall be not less than .25%. "Applications and Agreements for Letters of Credit" means, collectively, the Applications and Agreements for Letters of Credit, or similar documentation, executed by the Borrower, or by the Borrower and a Restricted Subsidiary, as applicable, from time to time and delivered to the Issuing Bank to support the issuance of Letters of Credit. "Assignment and Acceptance" shall mean (i) with respect to the Revolving Credit Facility and the Participations, an Assignment and Acceptance in the form of Exhibit B-1 (with blanks appropriately filled in) and (ii) with respect to the Term Loan Facility, an Assignment and Acceptance in the form of Exhibit B-2 (with blanks appropriately filled in) in each case delivered to the Agent in connection with an assignment of a Lender's interest under this Agreement pursuant to Section 13.1. "Authorized Representative" means any of the President, any Vice President or any Assistant Treasurer of the Borrower or, with respect to financial matters, the chief financial officer, treasurer, controller or chief accounting officer of the Borrower, or any other Person expressly designated by the Board of Directors of the Borrower (or the appropriate committee thereof) as an Authorized Representative of the Borrower, as set forth from time to time in a certificate in the form of Exhibit C. "Base Rate" means the per annum rate of interest equal to the greater of (i) the Prime Rate or (ii) the Federal Funds Effective Rate plus one-half of one percent (1/2%). Any change in the Base Rate resulting from a change in the Prime Rate or the Federal Funds Effective Rate shall become effective as of 12:01 A.M. of the Business Day on which each such change occurs. The Base Rate is a reference rate used by the Agent in determining interest rates on certain loans and is not intended to be the lowest rate of interest charged on any extension of credit to any debtor. "Base Rate Loan" means a Revolving Loan or a Segment of any Term Loan for which the rate of interest is determined by reference to the Base Rate. "Base Rate Segment" means a Segment bearing interest or to bear interest at the Base Rate. "Base Rate Refunding Loan" means a Base Rate Loan which is a Revolving Loan or Swing Line Loan made either to (i) satisfy Reimbursement Obligations arising from a drawing under a Letter of Credit or (ii) pay NationsBank in respect of Swing Line Outstandings. "Board" means the Board of Governors of the Federal Reserve System (or any successor body). 6 "Borrower's Account" means a demand deposit account number 3750658039 or any successor account with the Agent, which may be maintained at one or more offices of the Agent or an agent of the Agent. "Borrowing Notice" means the notice delivered by an Authorized Representative in connection with an Advance under the Revolving Credit Facility or a Swing Line Loan, in the forms of Exhibits D-1 and D-2, respectively. "Business Day" means, (i) with respect to any Base Rate Loan, any day which is not a Saturday, Sunday or a day on which banks in the States of New York and North Carolina are authorized or obligated by law, executive order or governmental decree to be closed and, (ii) with respect to any Eurodollar Rate Loan, any day which is a Business Day, as described above, and on which the relevant international financial markets are open for the transaction of business contemplated by this Agreement in London, England, New York, New York and Charlotte, North Carolina. "Capital Leases" means all leases which have been or should be capitalized in accordance with GAAP as in effect from time to time including Statement No. 13 of the Financial Accounting Standards Board and any successor thereof. "Cardem" means Cardem Insurance Co., Ltd., a Bermuda corporation and a wholly owned Subsidiary of the Borrower. "Cash Equivalents" means any of the following types of property, to the extent owned by the Borrower or any of its Subsidiaries free and clear of all Liens (other than Liens created under the Security Instruments) and having a maturity of not greater than 12 months from the date of acquisition thereof: (a) cash, denominated in U.S. Dollars or in a currency other than U.S. Dollars that is freely transferable or convertible into U.S. Dollars. (b) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States, or of any state or municipality if such obligations have an investment grade rating; (c) insured certificates of deposit or bankers' acceptances of, or time deposits with any Lender or with any commercial bank that (i) is a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in clause (c) below, (iii) is organized under the laws of the United States or any state thereof and (iv) has combined capital and surplus of at least $250,000,000; (d) commercial paper rated at least "Prime-1" (or the then equivalent grade) by Moody's or "A-1" (or the then equivalent grade) by S&P, or carrying 7 an equivalent rating by a nationally recognized rating agency acceptable to the Agent if both Moody's and S&P cease publishing ratings of investments; or (e) shares of investment companies investing solely in the foregoing. "Cash Income Taxes" means, with respect to the Borrower and its Restricted Subsidiaries for any period, the aggregate amount of all payments in respect of income taxes made in cash by the Borrower and its Restricted Subsidiaries to any applicable Government Authority during such period, after giving effect, to the extent available, to the application of net operating losses available to the Borrower and its Restricted Subsidiaries (and excluding Cash Income Taxes paid on behalf of Unrestricted Subsidiaries). "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time. "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency. "Change of Control" means, at any time: (i) any "person" or "group" (each as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) either (A) becomes the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act ), directly or indirectly, of Voting Stock of the Borrower (or securities convertible into or exchangeable for such Voting Stock) representing 33-1/3% or more of the combined voting power of all Voting Stock of the Borrower (on a fully diluted basis) or (B) otherwise acquires the ability, directly or indirectly, to elect a majority of the board of directors of the Borrower; (ii) during any period of up to 24 consecutive months, commencing on the Closing Date, individuals who at the beginning of such 24-month period were directors of the Borrower shall cease for any reason (other than the death, disability or retirement of an officer of the Borrower that is serving as a director at such time so long as another officer of the Borrower replaces such Person as a director) to constitute a majority of the board of directors of the Borrower (excluding the exercise by the Equity Investors of rights in existence as of the date hereof under the Stockholders Agreement to designate or replace individual members of the board of directors of the Borrower); (iii) any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to 8 exercise, directly or indirectly, a controlling influence on the management or policies of the Borrower; or (iv) with respect to any pledge or other security agreement covering all or any portion of the shares of capital stock of the Borrower that are owned beneficially and of record by any of the Equity Investors or their nominees, any secured party or pledgee thereunder shall become the holder of record of more than fifty percent (50%) of the shares owned by any such Equity Investor or shall receive dividends or other cash or cash equivalent distributions (including, without limitation, stock repurchases) in respect thereof, or shall proceed to exercise voting or other consensual rights in respect thereof (whether by proxy, voting or other similar arrangement or otherwise), or shall otherwise commence to realize upon such shares. "Closing Date" means the date as of which this Agreement is executed by the Borrower, the Lenders, the Agent and the Managing Agents and on which the conditions set forth in Section 7.1 have been satisfied. "Code" means the Internal Revenue Code of 1986, as amended, and any regulations promulgated and rulings issued thereunder. "Collateral" means, collectively, all property of the Borrower, any Subsidiary or any other Person in which the Agent or any Lender is granted a Lien as security for all or any portion of the Obligations under any Security Instrument. "Consistent Basis" in reference to the application of GAAP means the accounting principles observed in the period referred to are comparable in all material respects to those applied in the preparation of the audited financial statements of the Borrower referred to in Section 8.6(a). "Consolidated Capital Expenditures" means, with respect to the Borrower and its Restricted Subsidiaries on a consolidated basis, for any period the sum of (without duplication) (i) all expenditures (whether paid in cash or accrued as liabilities) by the Borrower or any Restricted Subsidiary during such period for items that would be classified as "property, plant or equipment" or comparable items on the consolidated balance sheet of the Borrower and its Restricted Subsidiaries, including without limitation all transactional costs incurred in connection with such expenditures provided the same have been capitalized, excluding, however, (A) the amount of any Consolidated Capital Expenditures paid for with proceeds of casualty insurance as evidenced in writing and submitted to the Agent together with any compliance certificate delivered pursuant to Section 9.1(a) or (b), (B) non-cash capitalized depreciation arising in connection with mining operations, and (ii) with respect to any Capital Lease entered into by the Borrower or its Restricted Subsidiaries during such period, the present value of the lease payments due under such Capital Lease over the term of such Capital Lease applying a discount rate 9 equal to the interest rate provided in such lease (or in the absence of a stated interest rate, that rate used in the preparation of the financial statements described in Section 9.1(a)), and (C) any portion of the purchase price of an Acquisition which is accounted for as a Capital Expenditure, all the foregoing in accordance with GAAP applied on a Consistent Basis. "Consolidated EBITDA" means, with respect to the Borrower and its Restricted Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the sum of, without duplication, (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) taxes on income, (iv) noncash liabilities otherwise deducted in calculating net income resulting from FASB No. 106 Changes, (v) extraordinary and unusual losses deducted in calculating net income less extraordinary and unusual gains added in calculating net income, (vi) amortization, (vii) depreciation and depletion, (viii) non-cash liabilities otherwise deducted in calculating net income resulting from FASB No. 121 Changes, (ix) non-cash charges, (x) non-recurring charges, (xi) transaction expenses and charges incurred in connection with the Related Acquisition net of any income tax effect and not to exceed in any event $1,000,000, and (xii) with respect to any entity acquired by the Borrower or a Subsidiary during any Four-Quarter Period, the pro forma Consolidated EBITDA of such entity for the period from the first day of such period to the date of such Acquisition, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; provided, however that with respect to an Acquisition which is accounted for as a "purchase", the computation of Consolidated EBITDA shall include the results of operations of the Person or assets so acquired which amounts shall be determined on an historical pro forma basis for the Four-Quarter Period preceding or including the date of such Acquisition as if such Acquisition had been consummated as a "pooling of interest". "Consolidated Fixed Charge Coverage Ratio" means, with respect to the Borrower and its Restricted Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the ratio of (i) Consolidated EBITDA for such period less (without duplication) Consolidated Capital Expenditures for such period, to (ii) Consolidated Fixed Charges for such period. "Consolidated Fixed Charges" means, with respect to the Borrower and its Restricted Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the sum of, without duplication, (i) Consolidated Interest Expense, (ii) the aggregate amount of Required Principal Payments made or required to be made during such period, and (iii) all dividends paid during such period (regardless of when declared) on any shares of capital stock of the Borrower then outstanding, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Consolidated Indebtedness" means, with respect to any Person, all Indebtedness for Money Borrowed of such Person and its Subsidiaries, all determined on a consolidated basis, including in the case of the Borrower and its Restricted Subsidiaries amounts 10 outstanding under Permitted Receivables Securitizations but excluding as Indebtedness, any Indebtedness which is secured by Liens on life insurance policies permitted by Section 10.4(n). "Consolidated Interest Expense" means, with respect to any period of computation thereof, the interest expense (net of interest income) of the Borrower and its Restricted Subsidiaries, including without limitation (i) the current amortized portion of debt discounts to the extent included in interest expense, (ii) the current amortized portion of all fees (including fees payable in respect of any Swap Agreement) payable in connection with the incurrence of Indebtedness to the extent included in interest expense, (iii) the portion of any payments made in connection with Capital Leases allocable to interest expense, and (iv) all fees, charges, discounts and other costs incurred in connection with any Permitted Receivables Securitization, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; provided, however, in the case of the occurrence of an Acquisition, there shall be included in Consolidated Interest Expense for the first four consecutive fiscal quarters ending after the date of such Acquisition an amount which shall be determined by multiplying that portion of the cost of Acquisition which represents Indebtedness, whether incurred, assumed or acquired, times the interest rate applicable to such Indebtedness which is in effect on the date of determination (i) for the fiscal quarter during which such Acquisition occurs by four, (ii) for the two full fiscal quarters following the date of such Acquisition by two, and (iii) for the three full fiscal quarters following the date of such Acquisition by 4/3's. "Consolidated Leverage Ratio" means, as of the date of computation thereof, the ratio of (i) Consolidated Indebtedness of the Borrower and its Restricted Subsidiaries (determined as at such date) to (ii) Consolidated EBITDA (for the Four-Quarter Period ending on (or most recently ended prior to) such date). "Consolidated Net Income" means, for any period of computation thereof, the gross revenues from operations of the Borrower and its Restricted Subsidiaries, excluding any minority interest of any Person in any Restricted Subsidiary (including payments received by the Borrower and its Restricted Subsidiaries of (i) interest income, and (ii) dividends and distributions made in the ordinary course of their businesses by Persons in which investment is permitted pursuant to this Agreement and not related to an extraordinary event), less all operating and non-operating expenses of the Borrower and its Restricted Subsidiaries, including taxes on income, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. Consolidated Net Income will not include, in any event, non cash income recognized from Unrestricted Subsidiaries. "Consolidated Total Assets" means, as of any date on which the amount thereof is to be determined, the net book value of all assets of the Borrower and its Restricted Subsidiaries as determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. 11 "Contingent Obligation" of any Person means all contingent liabilities required (or which, upon the creation or incurring thereof, would be required) to be included in the financial statements (including footnotes) of such Person in accordance with GAAP applied on a Consistent Basis, including Statement No. 5 of the Financial Accounting Standards Board, all Rate Hedging Obligations and any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including obligations of such Person however incurred: (1) to purchase such Indebtedness or other obligation or any property or assets constituting security therefor; (2) to advance or supply funds in any manner (i) for the purchase or payment of such Indebtedness or other obligation, or (ii) to maintain a minimum working capital, net worth or other balance sheet condition or any income statement condition of the primary obligor; (3) to grant or convey any lien, security interest, pledge, charge or other encumbrance on any property or assets of such Person to secure payment of such Indebtedness or other obligation; (4) to lease property or to purchase securities or other property or services primarily for the purpose of assuring the owner or holder of such Indebtedness or obligation of the ability of the primary obligor to make payment of such Indebtedness or other obligation; or (5) otherwise to assure the owner of the Indebtedness or such obligation of the primary obligor against loss in respect thereof. "Cost of Acquisition" means, with respect to any Acquisition, as at the date of entering into any agreement therefor, the sum of the following (without duplication): (i) the value of the capital stock, warrants or options to acquire capital stock of Borrower or any Subsidiary to be transferred in connection therewith, (ii) the amount of any cash and fair market value of other property (excluding property described in clause (i) and the unpaid principal amount of any debt instrument) given as consideration, (iii) the amount (determined by using the face amount or the amount payable at maturity, whichever is greater) of any Indebtedness incurred, assumed or acquired by the Borrower or any Subsidiary in connection with such Acquisition, (iv) all additional purchase price amounts in the form of earnouts and other contingent obligations that should be recorded on the financial statements of the Borrower and its Subsidiaries in accordance with GAAP, (v) all amounts paid or payable in respect of covenants not to compete, consulting agreements that should be recorded on financial statements of the Borrower and its Subsidiaries in accordance with GAAP, and other affiliated contracts in connection with such Acquisition which would constitute additional consideration by the Borrower or any Subsidiary, (vi) 12 the aggregate fair market value of all other consideration given by the Borrower or any Subsidiary in connection with such Acquisition, and (vii) out of pocket transaction costs for the services and expenses of attorneys, accountants and other consultants incurred in effecting such transaction, and other similar transaction costs so incurred. For purposes of determining the Cost of Acquisition for any transaction, (A) the capital stock of the Borrower shall be valued (I) in the case of capital stock that is then designated as a national market system security by the National Association of Securities Dealers, Inc. ("NASDAQ") or is listed on a national securities exchange, the average of the last reported bid and ask quotations or the last prices reported thereon, and (II) with respect to shares that are not freely tradeable, as determined by a committee composed of the disinterested members of the Board of Directors of the Borrower and, if requested by the Agent, determined to be a reasonable valuation by the independent public accountants referred to in Section 9.1(a), (B) the capital stock of any Subsidiary shall be valued as determined by a committee composed of the disinterested members of the Board of Directors of the Borrower and, if requested by the Agent, determined to be a reasonable valuation by the independent public accountants referred to in Section 9.1(a), and (C) with respect to any Acquisition accomplished pursuant to the exercise of options or warrants or the conversion of securities, the Cost of Acquisition shall include both the cost of acquiring such option, warrant or convertible security as well as the cost of exercise or conversion. "Credit Parties" means, collectively, the Borrower and the Guarantors. "Default" means any event or condition which, with the giving or receipt of notice or lapse of time or both, would constitute an Event of Default hereunder. "Default Rate" means (i) with respect to each Eurodollar Rate Loan and Eurodollar Rate Segment, until the end of the Interest Period applicable thereto, a rate of two percent (2%) above the Eurodollar Rate applicable to such Loan or Segment, and thereafter at a rate of interest per annum which shall be two percent (2%) above the Base Rate, (ii) with respect to Base Rate Loans and Base Rate Segments, at a rate of interest per annum which shall be two percent (2%) above the Base Rate and (iii) in any case, the maximum rate permitted by applicable law, if lower. "Deficiency Advance" has the meaning specified in Section 3.11. "Depositor Account Transfer Agreement" means the agreement dated as of March 3, 1995 between Jim Walter Homes and Mid-State entered into in connection with the Mortgage Warehousing Facility, as amended, modified or supplemented. "Direct Foreign Subsidiary" means any Foreign Subsidiary of the Borrower a majority of whose outstanding Voting Stock is owned directly by the Borrower or a Subsidiary that is not a Foreign Subsidiary. 13 "Disclosed Litigation" has the meaning provided for such term in Section 8.10. "Disclosure Date" means August 31, 1997. "Documentary Letter of Credit" means a Letter of Credit issued under the Letter of Credit Facility for the benefit of a supplier of inventory to the Borrower or any Restricted Subsidiary to effect payment for such inventory, the conditions to drawing under which include the presentation to the Issuing Bank of negotiable bills of lading, invoices and related documents sufficient, in the judgment of the Issuing Bank, to create a valid and perfected Lien in such inventory and presented documents in favor of the Issuing Bank. "Dollars" and the symbol "$" means dollars constituting legal tender for the payment of public and private debts in the United States of America. "Dollar Value" of a Letter of Credit issued in an Alternative Currency means the equivalent amount in Dollars based upon the Spot Rate of Exchange (i) as of two Business Days prior to the issuance of such a Letter of Credit or (ii) on the date of a drawing under a Letter of Credit issued in an Alternative Currency. "Employee Benefit Plan" means any employee benefit plan within the meaning of Section 3(3) of ERISA which (i) is maintained for employees of the Borrower or any of its ERISA Affiliates or is assumed by the Borrower or any of its ERISA Affiliates in connection with any Acquisition or (ii) has at any time been maintained for the employees of the Borrower or any current or former ERISA Affiliate and, with respect to employee benefit plans of any former ERISA Affiliate, the Borrower or any Restricted Subsidiary has or retains any obligations or liability, absolute or contingent, for funding or other performance obligations imposed by ERISA or other applicable law. "Environmental Action" means any action, suit, demand, demand letter, claim, notice of noncompliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law or any Hazardous Material. "Environmental Laws" means, collectively, CERCLA, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other "Superfund" or "Superlien" law or any other federal, or applicable state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any Hazardous Material. 14 "Equity Investors" means Lehman Brothers, Inc., Kohlberg Kravis Roberts & Co., KKR Associates, KKR Partners II, L.P., JWC Associates, L.P., JWC Associates II, L.P., Channel One Associates, L.P. and their respective Affiliates. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder. "ERISA Affiliate", as applied to the Borrower, means any Person or trade or business which is a member of a group which is under common control with the Borrower, who together with the Borrower, is treated as a single employer within the meaning of Section 414(b) and (c) of the Code. "Eurodollar Rate Loan" means a Loan or Segment for which the rate of interest is determined by reference to the Eurodollar Rate. "Eurodollar Rate" means the interest rate per annum calculated according to the following formula: Eurodollar = Interbank Offered Rate + Applicable Rate 1-Eurodollar Reserve Percentage Margin "Eurodollar Rate Segment" means a Segment bearing interest or to bear interest at the Eurodollar Rate. "Eurodollar Reserve Percentage" means, for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D or any successor regulation, as the reserve requirement (including any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Rate Loans is determined), whether or not the Agent or any Lender has any Eurocurrency liabilities subject to such requirements, without benefits of credits or proration, exceptions or offsets that may be available from time to time to the Agent or any Lender. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. "Event of Default" means any of the occurrences set forth as such in Section 11.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended through the date hereof, and the regulations promulgated and the rulings issued thereunder. "Existing Letters of Credit" means, collectively, the irrevocable letters of credit issued for the benefit of the Borrower or one of its Restricted Subsidiaries under the 15 Existing Agreement prior to the Closing Date and remaining outstanding as of and after the Closing Date, all as more particularly described on Schedule 1.1A. "Existing Agreement" has the meaning set forth in the preamble to this Agreement. "Facility Guaranty" means each Guaranty and Suretyship Agreement between one or more Guarantors and the Agent for the benefit of the Lenders, delivered as of the Closing Date and each Guaranty and Suretyship Agreement otherwise delivered to the Agent pursuant to Section 9.19, as the same may be amended, modified or supplemented. "Facility Termination Date" means the date on which both the Revolving Credit Termination Date and the Term Loan Termination Date shall have occurred, no Letters of Credit shall remain outstanding and the Borrower shall have fully paid and satisfied all Obligations. "FASB No. 106 Changes" means adjustments to income (or loss) less actual cash payments resulting from "retirement benefits other than pensions" (as defined in the Statement of Financial Accounting Standards No. 106). "FASB No. 121 Changes" means adjustments charged to income (or loss) resulting from impairment of long-lived assets (as defined in the Statement of Financial Accounting Standards No. 121). "Federal Funds Effective Rate" means, for any day, the rate per annum (rounded upward to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day, and (b) if no such rate is so published on such next preceding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Agent on such day on such transaction as determined by the Agent. "Fiscal Year" means the twelve month fiscal period of the Borrower and its Subsidiaries commencing on June 1 of each calendar year and ending on May 31 of the next following calendar year. "Foreign Benefit Law" means any applicable statute, law, ordinance, code, rule, regulation, order or decree of any foreign nation or any province, state, territory, protectorate or other political subdivision thereof regulating, relating to, or imposing liability or standards of conduct concerning, any Employee Benefit Plan or similar type plan. 16 "Foreign Subsidiary" means any Subsidiary that is not organized under the laws of the United States of America or a state, province or territory thereof. "Four-Quarter Period" means a period of four full consecutive fiscal quarters (such fiscal quarters to end on the last day of each February, May, August and November of each year) of the Borrower and its Subsidiaries, taken together as one accounting period. "GAAP" or "Generally Accepted Accounting Principles" means generally accepted accounting principles, being those principles of accounting set forth in pronouncements of the Financial Accounting Standards Board, the American Institute of Certified Public Accountants or which have other substantial authoritative support and are applicable in the circumstances as of the date of a report. "Governmental Authority" shall mean any Federal, state, municipal, national or other governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government. "Guaranties" means all obligations of the Borrower or any Subsidiary directly or indirectly guaranteeing, or in effect guaranteeing (including any arrangement described clauses (1) through (5) of the definition of "Contingent Obligation"), any Indebtedness or other obligation of any other Person. "Guarantors" means, at any date, the Restricted Subsidiaries (other than inactive Subsidiaries, Foreign Subsidiaries and Subsidiaries listed on Schedule 1.1(c)). "Hazardous Material" means and includes any hazardous, toxic or dangerous waste, substance or material, the generation, handling, storage, disposal, treatment or emission of which is subject to any Environmental Law. "Holdback Reserve" means, with respect to any Person for any sale, lease, transfer or other disposition of any property or assets, an amount equal to any amount required to be reserved (and properly reserved for) by such Person in accordance with GAAP against any contingent liabilities that (a) are associated with the property and assets of such Person being sold, leased, transferred or otherwise disposed of in such transaction in accordance with the terms of the Loan Documents (including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities resulting from indemnification obligations for other similar contingent liabilities) and (b) are required to be retained or indemnified by such Person under the documentation evidencing the terms and conditions of such transaction; provided that the amount of each Holdback Reserve shall be (i) reduced on each Business Day that the Borrower shall give notice to the Agent that the contingent liabilities giving rise to such Holdback Reserve 17 have been paid, satisfied or extinguished in an amount specified in such notice, by such amount, and (ii) permanently reduced to zero on the earlier to occur of (X) the date that is 24 months after the date on which the Borrower or any of its Subsidiaries received Net Cash Proceeds from the transaction for which the Holdback Reserve was established and (Y) the date on which the contingent liabilities for which such Holdback Reserve was established are no longer required to be reserved against in accordance with GAAP. "Indebtedness" means with respect to any Person, without duplication, all Indebtedness for Money Borrowed, all indebtedness of such Person for the acquisition of property, all indebtedness secured by any Lien on the property of such Person whether or not such indebtedness is assumed, all liability of such Person by way of endorsements (other than for collection or deposit in the ordinary course of business), all Guaranties, that portion of obligations with respect to Capital Leases and other items which in accordance with GAAP is required to be classified as a liability on a balance sheet; but excluding all accounts payable in the ordinary course of business so long as payment therefor is due within one year; provided that in no event shall the term Indebtedness include surplus and retained earnings, lease obligations (other than pursuant to Capital Leases), reserves for deferred income taxes and other taxes not due and payable, and investment credits, other deferred credits or reserves, or deferred compensation obligations. "Indebtedness for Money Borrowed" means with respect to any Person, without duplication, all indebtedness in respect of money borrowed, including without limitation all Capital Leases and the deferred purchase price of any property or asset, evidenced by a promissory note, bond, debenture or similar written obligation for the payment of money (including conditional sales or similar title retention agreements), other than trade payables incurred in the ordinary course of business. "Indirect Foreign Subsidiary" means any Foreign Subsidiary a majority of whose Voting Stock is owned directly by a Foreign Subsidiary. "Interbank Offered Rate" means, for any Eurodollar Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If, for any reason, such rate is not available, the term "Interbank Offered Rate" shall mean, with respect to any Eurodollar Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBOR Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBOR Page, the applicable rate shall be the arithmetic mean of all such rates 18 "Interest Period" means, for each Eurodollar Rate Loan or Eurodollar Rate Segment, a period commencing on the date such Eurodollar Rate Loan or Eurodollar Rate Segment is made or converted and ending, at the Borrower's option, on the date one, two, three or six months thereafter as notified to the Agent by the Authorized Representative three (3) Business Days prior to the beginning of such Interest Period; provided, that, (i) if the Authorized Representative fails to notify the Agent of the length of an Interest Period three (3) Business Days prior to the first day of such Interest Period, the Loan or Segment for which such Interest Period was to be determined shall be deemed to be a Base Rate Loan or Base Rate Segment as of the first day thereof; (ii) if an Interest Period for a Eurodollar Rate Loan or Eurodollar Rate Segment would end on a day which is not a Business Day, such Interest Period shall be extended to the next Business Day (unless such extension would cause the applicable Interest Period to end in the succeeding calendar month, in which case such Interest Period shall end on the next preceding Business Day); (iii) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (iv) no Interest Period shall extend past the Stated Revolving Credit Termination Date for Revolving Credit Loans or past the Term Loan Termination Date for any Segment; and (v) there shall not be more than ten (10) Interest Periods in effect on any day. "Interest Rate Selection Notice" means the written notice delivered by an Authorized Representative in connection with the election of a subsequent Interest Period for any Eurodollar Rate Loan or Eurodollar Rate Segment or the conversion of any Eurodollar Rate Loan or Eurodollar Rate Segment into a Base Rate Loan or Base Rate Segment or the conversion of any Base Rate Loan or Base Rate Segment into a Eurodollar Rate Loan or Eurodollar Rate Segment, in the form of Exhibit E. "Investment" means, with respect to any Person, any loan or advance (including any Intercompany Advance) to such Person, any purchase or other acquisition of any shares of capital stock of or other ownership or profit interest in such Person, any warrants, rights, options, obligations or other securities of such Person, any capital contribution to such Person or any other investment in such Person, including, without limitation, any Guaranty in respect of Indebtedness or other obligations of such Person. 19 "Issuing Bank" means NationsBank as issuer of Existing Letters of Credit and Letters of Credit under Article IV. "Jim Walter Homes" means Jim Walter Homes, Inc., a Florida corporation and a Subsidiary of the Borrower. "LC Account Agreement" means the LC Account Agreement dated as of the date hereof between the Borrower and the Agent, as amended, modified or supplemented from time to time. "Lending Office" means, as to each Lender, the Lending Office of such Lender designated on the signature pages hereof or in an Assignment and Acceptance or such other office of such Lender (or of an affiliate of such Lender) as such Lender may from time to time specify to the Authorized Representative and the Agent as the office by which its Loans are to be made and maintained. "Letters of Credit" means, collectively, (i) the Standby Letters of Credit and (ii) the Documentary Letters of Credit, and shall include the Existing Letters of Credit. "Letter of Credit Commitment" means, with respect to each Lender, the obligation of such Lender to acquire Participations in respect of Letters of Credit and Reimbursement Obligations up to an aggregate amount at any one time outstanding equal to such Lender's Applicable Commitment Percentage of the Total Letter of Credit Commitment as the same may be increased or decreased from time to time pursuant to this Agreement. "Letter of Credit Facility" means the facility described in Article IV hereof providing for the issuance by the Issuing Bank upon application of the Borrower for the account of the Borrower or the Borrower and a Restricted Subsidiary of Letters of Credit in an aggregate stated amount at any time outstanding not exceeding the Total Letter of Credit Commitment. "Letter of Credit Outstandings" means, as of any date of determination, the aggregate amount remaining undrawn under all Letters of Credit (including for this purpose Existing Letters of Credit) plus Reimbursement Obligations then outstanding. "Lien" means any interest in property securing any obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. For the purposes of this Agreement, the Borrower and any Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, financing lease, or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes. 20 "Loan" or "Loans" means any of the Revolving Loans or the Term Loans made under the Revolving Credit Facility or the Term Loan Facility, respectively. "Loan Documents" means this Agreement, the Notes, the Security Instruments, the Facility Guaranties, the LC Account Agreement, the Unrestricted Subsidiary Subordination Agreement, the Applications and Agreements for Letter of Credit, and all other instruments and documents heretofore or hereafter executed or delivered to or in favor of any Lender or the Agent in connection with the Loans made and transactions contemplated under this Agreement, as the same may be amended, supplemented or replaced from the time to time. "Material Adverse Change" means any change in the business, condition (financial or otherwise), operations, performance, properties or prospects of, or actions, suits, proceedings or investigations affecting the Borrower or any of its Subsidiaries which has or could reasonably be expected to have a Material Adverse Effect. "Material Adverse Effect" means a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance, or properties of the Borrower and its Subsidiaries, taken as a whole, (b) the rights and remedies of the Agent or any Lender under any Loan Document or the validity or enforceability thereof, in each case taken as a whole, or (c) the ability of the Borrower or any Subsidiary to pay any amounts owing under or in respect of the Loan Documents when the same shall be due and payable. "Material Foreign Subsidiary" means any Direct Foreign Subsidiary which (i) has total assets equal to or greater than 5% of Consolidated Total Assets (calculated as of the most recent fiscal period with respect to which the Agent shall have received financial statements required to be delivered pursuant to Sections 9.1(a)(ii) or (b)(ii) (or if prior to delivery of any financial statements pursuant to such Sections, then calculated with respect to the Fiscal Year end financial statements referenced in Section 8.6(a) (the "Required Financial Information")) or (ii) has net income equal to or greater than 5% of Consolidated Net Income (calculated for the most recent period for which the Agent has received the Required Financial Information); provided, however, that notwithstanding the foregoing, the term "Material Foreign Subsidiaries" shall mean Direct Foreign Subsidiaries of the Borrower that together have assets equal to not less than 15% of Consolidated Total Assets (calculated as described above) and net income of not less than 85% of Consolidated Net Income (calculated as described above); provided further that if more than one combination of Direct Foreign Subsidiaries satisfies such threshold, then those Direct Foreign Subsidiaries so determined by the Borrower to be "Material Foreign Subsidiaries" shall be specified by the Borrower; "Mid-State" means Mid-State Homes, Inc., a Florida corporation and a wholly owned Subsidiary of the Borrower. 21 "Mid-State Holdings" means Mid-State Holdings Corporation, a Delaware corporation and a wholly-owned Subsidiary of the Borrower. "Moody's" means Moody's Investors Service, Inc. "Mortgage Accounts" means certain building and installment contracts and related mortgages and instruments originated by Jim Walter Homes. "Mortgage-Backed Securities" means, collectively, (i) the Class A3 and Class A4 Mortgage-Backed Notes issued by Mid-State Trust II, a Delaware business trust established by Mid-State, having an aggregate principal amount outstanding as of October 1, 1997 of approximately $366,500,000, (ii) the Asset Backed Notes issued by Mid-State Trust III, a Delaware business trust established by Mid-State, having an aggregate principal amount outstanding as of October 1, 1997 of approximately $102,039,000, (iii) the Asset Backed Notes issued by Mid-State Trust IV, a Delaware business trust established by Mid-State, having an aggregate principal amount outstanding as of October 1, 1997 of approximately $809,078,000 and (iv) the Asset Backed Notes issued by Mid-State Trust VI, a Delaware business trust established by Mid-State, having an aggregate principal amount outstanding as of October 1, 1997 of approximately $424,506,000. "Mortgage Warehousing Facility" means, collectively, (i) the mortgage warehousing facility established on or about March 3, 1995 by Mid-State with Enterprise Funding Corporation, as amended, in an aggregate amount of up to $400,000,000 (subject to certain availability criteria set forth therein), pursuant to which Mid-State obtains limited recourse financing secured by Mortgage Accounts, and (ii) any other mortgage warehousing facility entered into by Mid-State having substantially the same terms as the facility described in clause (i) of this definition. "MSH Trusts" means, collectively, each of the Mid-State Trust II, Mid-State Trust III, Mid-State Trust IV and Mid-State Trust VI entities referred to in the definition of "Mortgage-Backed Securities" and Mid-State Trust V, and any other special purpose entity in which Mid-State shall own the sole equity or residual beneficial interest created and operated solely for the purpose of issuing asset-backed securities permitted by Section 10.4(d)(iii). "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) Fiscal Years. "NMSI" means NationsBanc Montgomery Securities, Inc. and its successors. "Net Cash Advances to Unrestricted Subsidiaries" means, as of any date of determination thereof, (A) the aggregate outstanding principal amount of loans and 22 advances made after the Closing Date by the Borrower or any Restricted Subsidiary to any of the Unrestricted Subsidiaries less (B) the aggregate outstanding principal amount of Subordinated Payables arising after the Closing Date. "Net Cash Proceeds" means, with respect to any sale, lease, transfer or other disposition of any property or assets, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person in connection with such transaction after deducting therefrom only: (a) brokerage commissions, underwriting fees and discounts, legal fees, finder's fees and other similar fees and commissions; (b) the amount of taxes payable in connection with or as a result of such transaction; provided, however, that, in the case of taxes that are deductible under this clause (b) but for the fact that they would not be paid at the time of receipt of such cash, such Person may deduct an amount equal to the necessary Tax Reserve, if any, for such transaction; (c) the amount of the required Holdback Reserve, if any, for such transaction: and (d) the amount of any Indebtedness secured by a Lien on such property or assets that, by the terms of such transaction, is required to be repaid upon such disposition, in each case to the extent, but only to the extent, that the amounts so deducted are, properly attributable to such transaction or to the property and assets that are the subject thereof. "Net Issuance Proceeds" means, with respect to any Permitted Receivables Securitization or the issuance of any permitted Consolidated Indebtedness, cash payments received therefrom as and when received, net of all legal, accounting, printing, rating agency, banking, underwriting, title and recording fees and expenses, commissions, discounts and other issuance expenses incurred in connection therewith and all taxes required to be paid or accrued as a consequence of such transaction. "Notes" means, collectively, the Term Notes and the Revolving Notes. "Obligations" means the obligations, liabilities and Indebtedness of the Borrower with respect to (i) the principal and interest on the Loans as evidenced by the Notes, (ii) the Reimbursement Obligations and otherwise in respect of the Letters of Credit, (iii) all liabilities of Borrower to any Lender which arise under a Swap Agreement, and (iii) the payment and performance of all other monetary obligations, liabilities and Indebtedness of the Borrower to the Lenders, the Agent or NMSI hereunder, under any one or more of the other Loan Documents or with respect to the Loans. 23 "Outstandings" means, collectively, at any date, the Letter of Credit Outstandings, Swing Line Outstandings, Term Loan Outstandings and Revolving Credit Outstandings on such date. "Participation" means, (i) with respect to any Lender with a Revolving Credit Commitment (other than the Issuing Bank) and a Letter of Credit, the extension of credit represented by the participation of such Lender hereunder in the liability of the Issuing Bank in respect of a Letter of Credit issued by the Issuing Bank in accordance with the terms hereof and (ii) with respect to any Lender (other than NationsBank) and a Swing Line Loan, the extension of credit represented by the participation of such Lender hereunder in the liability of NationsBank in respect of a Swing Line Loan made by NationsBank in accordance with the terms hereof. "PBGC" means the Pension Benefit Guaranty Corporation and any successor thereto. "Pension Plan" means any employee pension benefit plan within the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (i) is maintained for employees of the Borrower or any of its ERISA Affiliates or is assumed by the Borrower or any of its ERISA Affiliates in connection with any Acquisition or (ii) has at any time been maintained for the employees of the Borrower or any current or former ERISA Affiliate and, with respect to employee pension benefit plans of any former ERISA Affiliate, the Borrower or any Restricted Subsidiary has or retains any obligations or liability, absolute or contingent, for funding or other performance obligations imposed by ERISA or other applicable law. "Permitted Receivables Securitization" means limited recourse sales and assignments of accounts receivable of the Borrower or its Restricted Subsidiaries to one or more special purpose entities, in connection with the issuance of obligations by such special purpose entities secured by such accounts, the proceeds of the issuance of which obligations shall be made available to the Borrower or its Restricted Subsidiaries at such rates of advance, and the obligations issued by such special purpose entities shall be in such amount or amounts, bear such rate or rates of interest, and be subject to such other terms and conditions, all as shall be acceptable to the Agent and the Required Lenders. "Person" means an individual, partnership, corporation, trust, unincorporated organization, association, joint venture or a government or agency or political subdivision thereof. "Pledged Stock" has the meaning given to such term in the Stock Pledge Agreements. 24 "Pro Forma Financial Statements" means (i) the consolidated balance sheet and income statement as at May 31, 1997 in the case of the Borrower and its Restricted Subsidiaries, and September 30, 1996, in the case of AIMCOR and its subsidiaries as of such date, and (ii) the combined projected balance sheets and income statements of the Borrower and its Restricted Subsidiaries, including AIMCOR and its subsidiaries as of such date, for Fiscal Years ended May 31, 1998 through 2002, which shall be furnished to the Agent and the Lenders prior to the Closing Date. "Prime Rate" means the rate of interest per annum announced publicly by the Agent as its prime rate from time to time. The Prime Rate is not necessarily the best or the lowest rate of interest offered by the Agent. "Principal Office" means the office of the Agent at NationsBank, National Association, Independence Center, 15th Floor, NC1 001-15-04, Charlotte, North Carolina 28255, Attention: Agency Services, or such other office and address as the Agent may from time to time designate. "Ratable Reduction of Term Loan Facility" means the application of amounts to Term Loan Outstandings in respect of the Term Loan pro rata among the Lenders holding such Obligations. "Rate Hedging Obligations" means any and all obligations of the Borrower or any Subsidiary, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, Dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts, warrants, commodity options or future contracts or similar transactions, and those commonly known as interest rate "swap" agreements; and (ii) any and all cancellations, buybacks, reversals, terminations or assignments of any of the foregoing. "Related Acquisition' means the acquisition by the Borrower of AIMCOR in accordance with the terms of the Related Acquisition Agreement. "Related Acquisition Agreement" means that certain Stock Purchase Agreement dated as of September 19, 1997 by the among the stockholders of AIMCOR, certain stockholders of AIMCOR Enterprises International, Inc., AIMCOR (Germany) Limited Partnership, AIMCOR (Luxembourg) Limited Partnership, the Borrower and all schedules, annexes and exhibits thereto, as the same may be amended or supplemented from time to time. 25 "Regulation D" means Regulation D of the Board as the same may be amended or supplemented from time to time. "Regulatory Change" means any change effective after the Closing Date in United States federal or state laws or regulations (including Regulation D and capital adequacy regulations) or foreign laws or regulations or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks, which includes any of the Lenders, under any United States federal or state or foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof or compliance by any Lender with any request or directive regarding capital adequacy, including those relating to "highly leveraged transactions," whether or not having the force of law, and whether or not failure to comply therewith would be unlawful and whether or not published or proposed prior to the date hereof. "Reimbursement Obligation" shall mean at any time, the obligation of the Borrower with respect to any Letter of Credit to reimburse the Issuing Bank and the Lenders to the extent of their respective Participations (including by the receipt by the Issuing Bank of proceeds of Loans pursuant to Section 4.2) for amounts theretofore paid by the Issuing Bank pursuant to a drawing under such Letter of Credit. "Required Lenders" means, as of any date, Lenders on such date having Credit Exposures (as defined below) aggregating in excess of 50% of the aggregate Credit Exposures of all the Lenders on such date. For purposes of the preceding sentence, the amount of the "Credit Exposure" of each Lender shall be equal to the aggregate principal amount of the Revolving Loans owing to such Lender plus the aggregate unutilized amounts of such Lender's Revolving Credit Commitment (without regard to any Swing Line Outstandings) plus the amount of such Lender's Applicable Commitment Percentage of Letter of Credit Outstandings plus the amount of such Lender's Applicable Commitment Percentage of the Term Loan Outstandings; provided that, (i) if any Lender with a Revolving Credit Commitment shall have failed to pay to the Issuing Bank its Applicable Commitment Percentage of any drawing under any Letter of Credit resulting in an outstanding Reimbursement Obligation, such Lender's Credit Exposure attributable to Letters of Credit and Reimbursement Obligations shall be deemed to be held by the Issuing Bank for purposes of this definition and (ii) if any Lender with a Revolving Credit Commitment shall have failed to pay to NationsBank its Applicable Commitment Percentage of any Swing Line Loan, such Lender's Credit Exposure equal to its Applicable Commitment Percentage of all Swing Line Outstandings shall be deemed to be held by NationsBank for purposes of this definition. "Required Principal Payments" means, for any period, any regularly scheduled principal payment or any required prepayment or redemption of Consolidated Indebtedness, excluding Mandatory Prepayments pursuant to Section 2.7, of the Borrower 26 and its Restricted Subsidiaries during such period, but excluding any such payments to the extent refinanced through the incurrence of additional Indebtedness under Section 10.4(m). "Reserve Amount" means, at any date, the aggregate amount of Holdback Reserves and Tax Reserves at such date. "Reserve Reduction Amount" means the amount of each reduction in any Holdback Reserve or any Tax Reserve in accordance with the respective provisos in the definitions of "Holdback Reserve" and "Tax Reserve". "Restricted Payment" means (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Borrower or any of its Subsidiaries (other than those payable or distributable solely to the Borrower or to a Subsidiary of the Borrower by its Subsidiary) now or hereafter outstanding, except a dividend payable solely in shares of a class of stock to the holders of that class; (b) any redemption, conversion, exchange, retirement or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Borrower or any of its Subsidiaries (other than those payable or distributable to the Borrower (or to a Subsidiary by its Subsidiary) pro rata with any other shareholders of the applicable Subsidiary) now or hereafter outstanding; and (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Borrower or any of its Subsidiaries now or hereafter outstanding; provided, however, "Restricted Payments" shall not include (i) amounts contributed (and accounted for as compensation expense) by the Credit Parties for the purchase in the open market for the account of participating employees of capital stock of the Borrower pursuant to an employee stock purchase plan more particularly described on Schedule 1.1B, and (ii) capital stock of the Borrower purchased in the open market for the benefit of directors of the Borrower in payment of directors' fees that the directors elected to have deferred and invested in capital stock of the Borrower in lieu of cash. "Restricted Subsidiaries" means all Subsidiaries of the Borrower other than Mid-State Holdings, Mid-State, Cardem, MSH Trusts and Walter International Sales, Inc. "Revolving Credit Commitment" means, with respect to each Lender, the obligation of such Lender to make Revolving Loans to the Borrower and to purchase Participations up to an aggregate principal amount at any one time outstanding equal to such Lender's Applicable Commitment Percentage of the Total Revolving Credit Commitment. "Revolving Credit Facility" means the facility described in Article III hereof providing for Loans to the Borrower by the Lenders and Swing Line Loans to the Borrower by NationsBank in the aggregate principal amount of the Total Revolving Credit Commitment. 27 "Revolving Credit Outstandings" means, as of any date of determination, the aggregate principal amount of all Revolving Loans then outstanding. "Revolving Credit Termination Date" means (i) the Stated Revolving Credit Termination Date or (ii) such earlier date of termination of Lenders' obligations pursuant to Section 11.1 upon the occurrence of an Event of Default, or (iii) such date as the Borrower may voluntarily and permanently terminate the Revolving Credit Facility by payment in full of all Revolving Credit Outstandings, Swing Line Outstandings and Letter of Credit Outstandings and cancellation of all Letters of Credit. "Revolving Loan" means any borrowing pursuant to an Advance under the Revolving Credit Facility in accordance with Article III. "Revolving Notes" means, collectively, the promissory notes of the Borrower evidencing Revolving Loans executed and delivered to the Lenders as provided in Section 3.4 substantially in the form of Exhibit E-1, with appropriate insertions as to amounts, dates and names of Lenders. "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill Companies, Inc. "Security Instruments" means, collectively, the Stock Pledge Agreements, and all other agreements, instruments and other documents, whether now existing or hereafter in effect, pursuant to which the Borrower or any Subsidiary shall grant or convey to the Agent or the Lenders a Lien in property as security for all or any portion of the Obligations, as any of them may be amended, modified or supplemented. "Segment" means a portion of a Term Loan (or all thereof) with respect to which a particular interest rate is (or is proposed to be) applicable. "Single Employer Plan" means any employee pension benefit plan covered by Title IV of ERISA in respect of which the Borrower or any Subsidiary is an "employer" as described in Section 4001(b) of ERISA and which is not a Multiemployer Plan. "Solvent" means, when used with respect to any Person, that at the time of determination: (i) the fair value of its assets (both at fair valuation and at present fair saleable value on an orderly basis) is in excess of the total amount of its liabilities, including Contingent Obligations; (ii) it is then able and expects to be able to pay its debts as they mature; and 28 (iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. "Spot Rate of Exchange" means, in determining the Dollar Value of a specified Alternative Currency amount as of any date, the spot exchange rate determined by the Agent in accordance with its usual procedures for the purchase by the Agent of Dollars with such Alternative Currency at approximately 10:00 A.M., Charlotte Time on the Business Day that is two (2) Business Days prior to such date. "Standby Letters of Credit" means, collectively, the standby letters of credit issued by the Issuing Bank under the Letter of Credit Facility for the account of the Borrower in favor of a Person advancing credit or securing an obligation on behalf of the Borrower or a Restricted Subsidiary. "Stated Revolving Credit Termination Date" means October 15, 2003. "Stock Pledge Agreement" means, collectively (or individually as the context may indicate), (i) each of the Stock Pledge Agreements dated as of the date hereof between the Borrower and the Agent or between any Restricted Subsidiary and the Agent for the benefit of the Agent and the Lenders, and (ii) any additional Stock Pledge Agreement delivered to the Agent pursuant to Section 9.19, as hereafter amended, modified or supplemented. "Stockholders Agreement" means the Stockholders Agreement dated on or about February 27, 1995 among the Borrower, the Equity Investors and the other holders of the common stock of the Borrower from time to time, as such agreement may be amended, supplemented or otherwise modified hereafter from time to time in accordance with the terms hereof and thereof. "Subordinated Payables" means amounts payable by the Borrower or any Restricted Subsidiary to either of the Unrestricted Subsidiaries representing advances to the Borrower or its Restricted Subsidiaries, the repayment of which is subordinated to the payment of the Obligations pursuant to the Unrestricted Subsidiary Subordination Agreement. "Subsidiary" means any corporation or other entity in which more than 50% of its outstanding voting stock or more than 50% of all equity interests is owned directly or indirectly by the Borrower and/or by one or more of the Borrower's Subsidiaries. "Swap Agreement" means one or more agreements between the Borrower and any Lender with respect to Indebtedness evidenced by any or all of the Notes, on terms mutually acceptable to Borrower and such Lender, which agreements create Rate Hedging Obligations. 29 "Swing Line" means the revolving line of credit established by NationsBank in favor of the Borrower pursuant to Section 3.13. "Swing Line Loans" means loans made by NationsBank to the Borrower pursuant to Section 3.13. "Swing Line Outstandings" means, as of any date of determination, the aggregate principal amount of all Swing Line Loans then outstanding, not to exceed $25,000,000. "Tax Reserve" means, with respect to any Person for any sale, lease, transfer or other disposition of any property or assets, an amount equal to the amount properly reserved by such Person in accordance with GAAP as such Person's reasonable estimate of taxes to be paid by such Person solely as a result of such sale, lease, transfer or disposition (computed on the basis of statutory rates in effect at the time of such sale, lease, transfer or disposition after giving effect to deductions, credit carryforwards, carrybacks and similar items of such Person or such other amount as such Person estimates in good faith and with the concurrence of the Agent) other than any taxes for which such Person or any of its Subsidiaries is indemnified; provided that the amount of each Tax Reserve shall be (i) reduced on each Business Day that the Borrower shall give notice to the Agent that the tax liabilities giving rise to such Tax Reserve have been paid, satisfied or extinguished in an amount specified in such notice, by such amount, and (ii) permanently reduced to zero on the date on which the tax return covering the transaction giving rise to the Tax Reserve is required to be filed. "Term Loan" means the loan made pursuant to the Term Loan Facility in accordance with Section 2.1(a). "Term Loan Commitment" means, with respect to each Lender, the obligation of such Lender to make the Term Loan to the Borrower in a principal amount equal to such Lender's Applicable Commitment Percentage of the Total Term Loan Commitment as set forth on Exhibit A. "Term Loan Facility" means the facility described in Article II providing for the Term Loan to the Borrower by the Lenders in the original principal amount of $450,000,000. "Term Loan Maturity Date" means October 15, 2003. "Term Loan Outstandings" means, as of any date of determination, the aggregate principal amount of the Term Loans then outstanding and all interest accrued thereon. "Term Loan Termination Date" means, with respect to the Term Loan, (i) the Term Loan Maturity Date, or (ii) such earlier date of termination of Lenders' obligations pursuant to Section 11.1 upon the occurrence of an Event of Default, or (iii) such date as 30 the Borrower may voluntarily and permanently terminate the Term Loan Facility by payment in full of all Obligations incurred in connection with such Term Loan. "Term Notes" means, collectively, the promissory notes of the Borrower evidencing Term Loan executed and delivered to the Lenders as provided in Section 2.8 substantially in the form of Exhibit F-2, with appropriate insertions as to amounts, dates and names of Lenders. "Termination Event" means: (i) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder (unless the notice requirement has been waived by applicable regulation); or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or was deemed such under Section 4068(f) of ERISA; or (iii) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA; or (iv) the institution of proceedings to terminate a Pension Plan by the PBGC; or (v) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; or (vi) the partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan; or (vii) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA; or (viii) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Section 4241 or Section 4245 of ERISA, respectively; or (ix) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA. "Total Letter of Credit Commitment" means an amount not to exceed $75,000,000. "Total Revolving Credit Commitment" means a principal amount equal to $350,000,000, as reduced from time to time in accordance with Section 3.7. "Total Term Loan Commitment" means a principal amount equal to $450,000,000. "Unrestricted Subsidiaries" means Cardem, Mid-State Holdings, Mid-State and the MSH Trusts. "Unrestricted Subsidiary Subordination Agreement" means the Subordination Agreement of even date herewith among the Unrestricted Subsidiaries and the Agent, as the same may be amended, modified or supplemented. "Voting Stock" means shares of capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of 31 contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. 1.2. Rules of Interpretation. (a) Each term defined in Article 1 or 9 of the Florida Uniform Commercial Code shall have the meaning given therein unless otherwise defined herein, except to the extent that the Uniform Commercial Code of another jurisdiction is controlling, in which case such terms shall have the meaning given in the Uniform Commercial Code of the applicable jurisdiction. (b) The headings, subheadings and table of contents used herein or in any other Loan Document are solely for convenience of reference and shall not constitute a part of any such document or affect the meaning, construction or effect of any provision thereof. (c) Except as otherwise expressly provided, references herein to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules are references to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules in or to this Agreement. (d) All definitions set forth herein or in any other Loan Document shall apply to the singular as well as the plural form of such defined term, and all references to the masculine gender shall include reference to the feminine or neuter gender, and vice versa, as the context may require. (e) When used herein or in any other Loan Document, words such as "hereunder", "hereto", "hereof" and "herein" and other words of like import shall, unless the context clearly indicates to the contrary, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof. (f) References to "including" means including without limiting the generality of any description preceding such term, and for purposes hereof the rule of ejusdem generis shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned. (g) All dates and times of day specified herein shall refer to such dates and times at Charlotte, North Carolina. (h) Each of the parties to the Loan Documents and their counsel have reviewed and revised, or requested (or had the opportunity to request) revisions to, the Loan Documents, and any rule of construction that ambiguities are to be resolved against the drafting party shall be inapplicable in the construing and interpretation of the Loan Documents and all exhibits, schedules and appendices thereto. 32 (i) All reference to any agreement or document as amended, modified or supplemented, or words of similar effect, shall mean such document or agreement, as the case may be, as amended, modified or supplemented from time to time only as and to the extent permitted therein and in the Loan Documents. 1.3. Accounting Principles. (a) Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters and all financial statements to be delivered pursuant to this Agreement shall be made and prepared in accordance with GAAP (including principles of consolidation where appropriate applied on a Consistent Basis), and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP. (b) If there shall occur any change in GAAP after the Closing Date, the Borrower shall give written notice thereof to the Agent and the Lenders promptly, and in any event within fifteen (15) days after the effective date of any such change in GAAP, which notice shall be effective upon receipt and shall (i) describe in detail the nature of such required change and its impact on (X) the financial statements required to be delivered pursuant to Section 9.1 hereof, and (Y) the effect on calculation of any financial covenants contained herein or determination of compliance with any other terms or conditions hereof insofar as they relate to financial or accounting matters, and (ii) be accompanied by a covenant compliance certificate in the form of Exhibit J signed by an Authorized Representative and showing the computations therein provided, after giving effect to the required change in GAAP, for the same fiscal period of the Borrower and its Subsidiaries for which a compliance certificate required under Section 9.1(a)(ii) or 9.1(b)(ii), as the case may be, has most recently theretofore been delivered. (c) In the event that, in the judgment of the Agent, the change in GAAP shall materially affect the calculation of any financial covenant or other determination of compliance with any term or condition contained herein insofar as it relates to financial or accounting matters so as to distort the intended economic effect of any such covenant, term or condition, then the provisions of GAAP without giving effect to such change shall continue to be utilized for all purposes of such covenants, terms and provisions unless the Required Lenders shall otherwise consent. 33 ARTICLE II The Term Loan 2.1. Term Loan. (a) Subject to the terms and conditions of this Agreement, each Lender severally agrees to make (i) an Advance of the Term Loan to the Borrower on the Closing Date in an amount equal to its Applicable Commitment Percentage of the Total Term Loan Commitment. The principal amount of each Segment of the Term Loans outstanding hereunder from time to time shall bear interest, at the Borrower's election, at an interest rate per annum equal to the Base Rate or the Eurodollar Rate; provided, however, that (x) no Eurodollar Rate Segment shall have an Interest Period that extends beyond the Term Loan Maturity Date, (y) each Eurodollar Rate Segment of each Term Loan shall be in the minimum amount of $5,000,000 and if greater, in an integral multiple of $1,000,000, and (z) each Eurodollar Rate Segment may, subject to the provisions of Sections 2.4, 2.6 and 2.7 and Article XI, be repaid only on the last day of the Interest Period with respect thereto. No amount of any Term Loan repaid or prepaid by the Borrower may be reborrowed hereunder, and no subsequent Advances of Term Loan amounts shall be made by any Lender after the initial such Advance. (b) Interest relating to the Base Rate Loan shall be computed on the basis of a year of 365/6 days and interest for the Eurodollar Rate Loan and all fees shall be computed on the basis of a year of 360 days, all calculated for the actual number of days elapsed. 2.2. Term Loan Advance. Not later than 10:00 A.M. on the Closing Date, each Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of the Term Loan Advances to be made by it on such day available by wire transfer to the Agent in the amount of its Term Loan Commitment. Such wire transfer shall be directed to the Agent at the Principal Office and shall be in the form of immediately available, freely transferable Dollars. The amount so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower by delivery of the proceeds thereof to the Borrower's Account or otherwise as shall be directed by the Authorized Representative and reasonably acceptable to the Agent. 2.3. Payment of Principal. (a) The principal amount of the Term Loan shall be repaid in six (6) consecutive annual installments on the dates and in the amounts (subject to the provisions of Section 2.6 and 2.7) set forth below: Date Amount ---- ------ October 15, 1998 $ 25,000,000 October 15, 1999 $ 50,000,000 October 15, 2000 $ 75,000,000 October 15, 2001 $ 75,000,000 October 15, 2002 $100,000,000 October 15, 2003 $125,000,000 34 (b) Notwithstanding the foregoing, the entire amount of Term Loan Outstandings shall be due and payable in full on the Term Loan Termination Date. 2.4. Payment of Interest. The Borrower shall pay interest on the outstanding and unpaid principal amount of each Segment of the Term Loan commencing on the date of determination of the interest rate applicable to such Segment until such Segment shall be due at the applicable Base Rate or Eurodollar Rate, as the case may be, as designated by the Borrower in the applicable Interest Rate Selection Notice or as otherwise provided hereunder. Interest for the Base Rate Loan shall be computed on the basis of a year of 365/6 days and interest for Eurodollar Rate Loan shall be computed on the basis of a year of 360 days, all calculated for actual days elapsed. Interest on each Segment of the Term Loan shall be paid on the earlier of (a) in the case of any Base Rate Segment, quarterly in arrears on the last Business Day of each April, July, October and January, commencing on October 31, 1997, until the Term Loan Maturity Date, or if earlier the Term Loan Termination Date, on which date the entire principal amount of and all accrued interest on the Term Loan shall be paid in full, (b) in the case of any Eurodollar Rate Segment, on the last day of the applicable Interest Period for such Segment and if such Interest Period extends for more than three (3) months, at intervals of three (3) months after the first day of such Interest Period, and (c) upon payment in full of the Term Loan; provided, however, that if any amount due under this Agreement shall not be paid when due (at maturity, by acceleration or otherwise), all amounts outstanding hereunder shall bear interest thereafter at the Default Rate. 2.5. Manner of Payment. (a) Each payment of principal (including any prepayment) and payment of interest and fees, and any other amount required to be paid to the Lenders with respect to the Term Loan, shall be made to the Agent at the Principal Office for the account of each Lender in Dollars in immediately available funds on or before 3:00 P.M. on the date such payment is due. The Agent may, upon the request of the Borrower, but shall not be obligated to, debit the amount of such payment from any one or more ordinary deposit accounts of the Borrower with the Agent. The Borrower shall give the Agent telefacsimile notice of any intended payment of principal or interest prior to 12:00 Noon on the date of such payment. (b) The Agent shall deem any payment made by or on behalf of the Borrower that is not made both in Dollars in immediately available funds and prior to 3:00 P.M. on the date such payment is to be made to be a non-conforming payment. Any such non-conforming payment shall not be deemed to be received by the Agent until the later of (i) the time such funds become available funds and (ii) the next Business Day. Any non-conforming payment may, at the election of the Agent, constitute or become a Default or Event of Default. Interest shall continue to accrue on any principal as to which a non-conforming payment is made until the later of (i) the date such funds become available funds or (ii) the next Business Day at the Default Rate, from the date such amount was due and payable. (c) In the event that any payment hereunder or under the Term Notes becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day unless provided otherwise under the definition of "Interest Period"; provided, however, that interest shall continue to accrue during the period of any such extension; 35 and provided further, however, that in no event shall any such due date be extended beyond the Term Loan Termination Date. 2.6. Optional Prepayments. The Borrower may prepay the Term Loan, in accordance with a Ratable Reduction of the Term Loan Facility, in whole or in part from time to time on any Business Day, without penalty or premium, upon not less than three (3) Business Days' prior written notice (effective upon receipt) to the Agent, which notice shall be irrevocable. Any prepayment, whether a Base Rate Segment or a Eurodollar Rate Segment, shall be made at a prepayment price equal to (i) the amount of principal to be prepaid, plus (ii) all accrued and unpaid interest on the amount so prepaid, to the date of prepayment. All prepayments under this Section 2.6 shall be made in the minimum principal amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof (or in the entire remaining principal balance of the Term Loan), and all such prepayments of principal shall be applied to installments of principal in such order as the Borrower shall direct. No such prepayment shall result in the payment of any Eurodollar Rate Segment other than on the last day of the Interest Period of such Segment unless such prepayment is accompanied by amounts due, if any, under Section 6.4. No payment under this Section 2.6 shall reduce or excuse any payment required under Section 2.7. 2.7. Mandatory Prepayments. (a) In addition to the required payments of principal of the Term Loan set forth in Section 2.3 and any optional payments of principal of the Loans effected under Section 2.6 or Section 3.7(a), the Borrower shall make the following required prepayments of the Term Loan Facility, each such payment to be made to the Agent for the benefit of the Lenders within the time period specified below: the Borrower shall make prepayments of the Term Loan Facility by application of an amount equal to one hundred percent (100%) of the Net Cash Proceeds (including each Reserve Reduction Amount other than those resulting from the payment in cash or other property by the Borrower or any Restricted Subsidiary to pay or satisfy a liability giving rise to any related Holdback Reserve or Tax Reserve) or Net Issuance Proceeds, as the case may be, in each case to the extent not invested in the business of the Borrower and its Subsidiaries within 270 days after receipt thereof, of (X) all sales, transfers or other dispositions of property or assets of the Borrower or any Restricted Subsidiary in accordance with the provisions of Section 10.5(c) and 10.5(e)(ii) in which the aggregate consideration received in such transactions (on a cumulative basis from the Closing Date) exceeds $20,000,000 and (without limiting the obligation to make prepayments as provided herein) the cumulative amount of such Net Cash Proceeds from such dispositions since the most recent preceding prepayment under this Section 2.7(a)(i), if any, shall equal or exceed $5,000,000, (Y) each Permitted Receivables Securitization, or (Z) each issuance of Consolidated Indebtedness permitted to be issued hereunder (other than Indebtedness described in Section 10.4), each such prepayment to be made within ten (10) Business Days of receipt of such proceeds and upon not less than five (5) Business Days' written notice to the Agent, which notice shall include a certificate of an Authorized Representative setting forth in reasonable detail the calculations utilized in computing the amount of such prepayment. 36 (b) Each mandatory prepayment of the Term Loan pursuant to this Section 2.7 shall be applied to reduce remaining installments of principal otherwise payable hereunder pro rata. Each pro rata application of prepayments to installments of the Term Loan shall give effect to prior optional or mandatory prepayments. (c) The Agent shall give each Lender, within one (1) Business Day, telefacsimile notice of each notice of each prepayment described in this Section 2.7. Any prepayment of a Eurodollar Rate Segment pursuant to this Section 2.7 other than on the last day of an Interest Period shall be accompanied by the additional payment, if any, required by Section 6.4. 2.8. Term Notes. The portion of each of the Term Loan made by each Lender shall be evidenced by the Term Note payable to the order of such Lender in the respective amounts of its Term Loan Commitment, which Term Notes shall be dated the Closing Date or a later date pursuant to an Assignment and Acceptance and shall be duly completed, executed and delivered by the Borrower. 2.9. Use of Proceeds. The proceeds of the additional amount of the Term Loan hereunder shall be used by the Borrower exclusively to fund the Acquisition of AIMCOR. 2.10. Interest Periods. The Term Loan shall be, at the option of the Borrower specified in an Interest Rate Selection Notice, comprised of either Eurodollar Rate Segments or Base Rate Segments. Eurodollar Rate Segments and Base Rate Segments may be outstanding at the same time, provided, however, there shall not be outstanding at any one time Eurodollar Rate Loans (including Revolving Loans) and Eurodollar Rate Segments having more than ten (10) different Interest Periods. If the Agent does not receive an Interest Rate Selection Notice giving notice of election of the duration of an Interest Period or of conversion of any Segment to or continuation of a Segment as a Eurodollar Rate Segment by the time prescribed by Section 2.11, the Borrower shall be deemed to have elected to convert such Segment to (or continue such Segment as) a Base Rate Segment until the Borrower notifies the Agent in accordance with Section 2.11. 2.11. Conversions and Elections of Subsequent Interest Periods. Provided that no Default or Event of Default shall have occurred and be continuing and subject to the limitations set forth below and in Article VI, the Borrower may: (a) upon delivery (effective upon receipt) of a properly completed Interest Rate Selection Notice to the Agent on or before 10:30 A.M. on any Business Day, convert any Eurodollar Rate Segment to a Base Rate Segment on the last day of the Interest Period for such Eurodollar Rate Segment; and (b) upon delivery (effective upon receipt) of a properly completed Interest Rate Selection Notice to the Agent on or before 10:30 A.M. three (3) Business Days' prior to the date of such conversion: 37 (i) elect a subsequent Interest Period for any Eurodollar Rate Segment to begin on the last day of the then current Interest Period for such Eurodollar Rate Segment; and (ii) convert any Base Rate Segment to a Eurodollar Rate Segment on any Business Day. In addition, provided that the Borrower shall have given the Agent notice of its request to obtain Eurodollar Rate Loans and Segments at the Closing Date, by delivery (effective upon receipt) no later than 10:00 A.M. two Business Days prior to the Closing Date of (i) an Interest Rate Selection Notice therefor, together with (ii) the Borrower's written acknowledgment that the provisions of Article VI hereof shall apply to any failure of the Borrower to borrow on the Closing Date any or all of the amounts specified in such Interest Rate Selection Notice, then upon the making of Loans as of the Closing Date such Loans may be effected as Eurodollar Rate Loans or Eurodollar Rate Segments, as the case may be, in accordance with such Interest Rate Selection Notice. Each conversion pursuant to this Section 2.11 shall be subject to the limitations on Eurodollar Rate Loans set forth in the definition of "Interest Period" herein and in Sections 2.1, 2.10 and Article VI. The Agent shall give written notice to each Lender of such notice of conversion prior to 3:00 P.M. on the day such notice of election or conversion is received. 2.12. Non-Conforming Payments. (a) Each payment of principal (including any prepayment) and payment of interest and fees, and any other amount required to be paid to the Lenders with respect to the Term Loan, shall be made to the Agent at the Principal Office, for the account of each Lender, in Dollars and in immediately available funds before 3:00 P.M. on the date such payment is due. The Agent may, but shall not be obligated to, debit the amount of any such payment which is not made by such time to any ordinary deposit account, if any, of the Borrower with the Agent. (b) The Agent shall deem any payment made by or on behalf of the Borrower hereunder that is not made both in Dollars and in immediately available funds and prior to 3:00 P.M. to be a non-conforming payment. Any such payment shall not be deemed to be received by the Agent until the later of (i) the time such funds become available funds and (ii) the next Business Day. Any non-conforming payment may constitute or become a Default or Event of Default. Interest shall continue to accrue on any principal as to which a non-conforming payment is made until the later of (x) the date such funds become available funds or (y) the next Business Day at the respective rates of interest per annum specified in the proviso to Section 2.4 regarding late payments of interest, from the date such amount was due and payable. 2.13. Pro Rata Payments. Except as otherwise provided herein, (a) each payment on account of the principal of and interest on the Term Loan shall be made to the Agent for the account of the Lenders pro rata based on their Applicable Commitment Percentages of the Term Loan, (b) all payments to be made by the Borrower for the account of each of the Lenders on 38 account of principal, interest and fees, shall be made without diminution, set-off, recoupment or counterclaim, and (c) the Agent will promptly distribute to the Lenders in immediately available funds payments received in fully collected, immediately available funds from the Borrower. 39 ARTICLE III The Revolving Credit Facility 3.1. Revolving Loans. (a) Commitment. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make Advances to the Borrower under the Revolving Credit Facility from time to time from the Closing Date until the Revolving Credit Termination Date on a pro rata basis as to the total borrowing requested by the Borrower on any day determined by such Lender's Applicable Commitment Percentage up to but not exceeding the Revolving Credit Commitment of such Lender, provided, however, that the Lenders will not be required and shall have no obligation to make any such Advance (i) so long as a Default or an Event of Default has occurred and is continuing or (ii) if the Agent has accelerated the maturity of any of the Notes as a result of an Event of Default; provided further, however, that immediately after giving effect to each such Advance, the principal amount of Revolving Credit Outstandings plus the sum of Letter of Credit Outstandings, Swing Line Outstandings and Reserve Amount shall not exceed the Total Revolving Credit Commitment. Within such limits, the Borrower may borrow, repay and reborrow under the Revolving Credit Facility on a Business Day from the Closing Date until, but (as to borrowings and reborrowings) not including, the Revolving Credit Termination Date; provided, however, that (y) no Revolving Loan that is a Eurodollar Rate Loan shall be made which has an Interest Period that extends beyond the Stated Revolving Credit Termination Date and (z) each Revolving Loan that is a Eurodollar Rate Loan may, subject to the provisions of Section 3.7, be repaid only on the last day of the Interest Period with respect thereto unless such payment is accompanied by the additional payment, if any, required by Section 6.4. (b) Amounts. Except as otherwise permitted by the Lenders from time to time, the aggregate unpaid principal amount of the Revolving Credit Outstandings plus the sum of Letter of Credit Outstandings, Swing Line Outstandings and Reserve Amount shall not exceed at any time the Total Revolving Credit Commitment, and, in the event there shall be outstanding any such excess, the Borrower shall immediately make such payments and prepayments as shall be necessary to comply with this restriction. Each Revolving Loan hereunder, other than Base Rate Refunding Loans, and each conversion under Section 3.8, shall be in an amount of at least $5,000,000, and, if greater than $5,000,000, an integral multiple of $1,000,000. (c) Advances. (i) An Authorized Representative shall give the Agent (1) at least three (3) Business Days' irrevocable written notice by telefacsimile transmission of a Borrowing Notice or Interest Rate Selection Notice (as applicable) with appropriate insertions, effective upon receipt, of each Revolving Loan that is a Eurodollar Rate Loan (whether representing an additional borrowing hereunder or the conversion of a borrowing hereunder from Base Rate Loans to Eurodollar Rate Loans) prior to 10:30 A.M. and (2) irrevocable written notice by telefacsimile transmission of a Borrowing Notice or Interest Rate Selection Notice (as applicable) with appropriate insertions, effective upon receipt, of each Revolving Loan (other than Base Rate Refunding Loans to the extent the same are effected without notice pursuant to Section 3.1(c)(iv)) 40 that is a Base Rate Loan (whether representing an additional borrowing hereunder or the conversion of borrowing hereunder from Eurodollar Rate Loans to Base Rate Loans) prior to 10:30 A.M. on the day of such proposed Revolving Loan. Each such notice shall specify the amount of the borrowing, the type of Revolving Loan (Base Rate or Eurodollar Rate), the date of borrowing and, if a Eurodollar Rate Loan, the Interest Period to be used in the computation of interest. Notice of receipt of such Borrowing Notice or Interest Rate Selection Notice, as the case may be, together with the amount of each Lender's portion of an Advance requested thereunder, shall be provided by the Agent to each Lender by telefacsimile transmission with reasonable promptness, but (provided the Agent shall have received such notice by 10:30 A.M.) not later than 1:00 P.M. on the same day as the Agent's receipt of such notice. (ii) Not later than 2:00 P.M. on the date specified for each borrowing under this Section 3.1, each Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of the Advance or Advances to be made by it on such day available by wire transfer to the Agent in the amount of its pro rata share, determined according to such Lender's Applicable Commitment Percentage of the Revolving Loan or Revolving Loans to be made on such day. Such wire transfer shall be directed to the Agent at the Principal Office and shall be in the form of Dollars constituting immediately available funds. The amount so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower by delivery of the proceeds thereof to the Borrower's Account or otherwise as shall be directed in the applicable Borrowing Notice by the Authorized Representative and reasonably acceptable to the Agent. (iii) The Borrower shall have the option to elect the duration of the initial and any subsequent Interest Periods and to convert the Revolving Loans in accordance with Section 3.8. Eurodollar Rate Loans and Base Rate Loans may be outstanding at the same time, provided, however, there shall not be outstanding at any one time Eurodollar Rate Loans and Eurodollar Rate Segments having more than ten (10) different Interest Periods. If the Agent does not receive a Borrowing Notice or an Interest Rate Selection Notice giving notice of election of the duration of an Interest Period or of conversion of any Loan to or continuation of a Revolving Loan as a Eurodollar Rate Loan by the time prescribed by Section 3.1(c) or 3.8, the Borrower shall be deemed to have elected to convert such Loan to (or continue such Loan as) a Base Rate Loan until the Borrower notifies the Agent in accordance with Section 3.8. (iv) Notwithstanding the foregoing, if a drawing is made under any Letter of Credit, such drawing is honored by the Issuing Bank prior to the Stated Revolving Credit Termination Date, and the Borrower shall not immediately fully reimburse the Issuing Bank in respect of such drawing, (A) provided that the conditions to making a Revolving Loan as herein provided shall then be satisfied, the Reimbursement Obligation arising from such drawing shall be paid to the Issuing Bank by the Agent without the requirement of notice to or from the Borrower from immediately available funds which shall be advanced as a Base Rate Refunding Loan by each Lender under the Revolving Credit Facility in an amount equal to such Lender's Applicable Commitment Percentage of such Reimbursement Obligation, and (B) if the conditions to making a Revolving Loan as herein provided shall not then be satisfied, each of the Lenders shall fund 41 by payment to the Agent (for the benefit of the Issuing Bank) in immediately available funds the purchase from the Issuing Bank of their respective Participations in the related Reimbursement Obligation based on their respective Applicable Commitment Percentages of the Total Letter of Credit Commitment. If a drawing is presented under any Letter of Credit in accordance with the terms thereof and the Borrower shall not immediately reimburse the Issuing Bank in respect thereof, then notice of such drawing or payment shall be provided promptly by the Issuing Bank to the Agent and the Agent shall provide notice to each Lender by telephone or telefacsimile transmission. If notice to the Lenders of a drawing under any Letter of Credit is given by the Agent at or before 12:00 noon on any Business Day, each Lender shall, pursuant to the conditions specified in this Section 3.1(c)(iv), either make a Base Rate Refunding Loan or fund the purchase of its Participation in the amount of such Lender's Applicable Commitment Percentage of such drawing or payment and shall pay such amount to the Agent for the account of the Issuing Bank at the Principal Office in Dollars and in immediately available funds before 2:30 P.M. on the same Business Day. If notice to the Lenders of a drawing under a Letter of Credit is given by the Agent after 12:00 noon on any Business Day, each Lender shall, pursuant to the conditions specified in this Section 3.1(c)(iv), either make a Base Rate Refunding Loan or fund the purchase of its Participation in the amount of such Lender's Applicable Commitment Percentage of such drawing or payment and shall pay such amount to the Agent for the account of the Issuing Bank at the Principal Office in Dollars and in immediately available funds before 12:00 noon on the next following Business Day. Any such Base Rate Refunding Loan shall be advanced as, and shall continue as, a Base Rate Loan unless and until the Borrower converts such Base Rate Loan in accordance with the terms of Section 3.8. (v) Notwithstanding the foregoing provisions of this Section 3.1, in addition, provided that the Borrower shall have given the Agent notice of its request to obtain Eurodollar Rate Loans under the Revolving Credit Facility at the Closing Date, by delivery (effective upon receipt) no later than 10:00 A.M. two Business Days prior to the Closing Date of (i) a Borrowing Notice, together with (ii) the Borrower's written acknowledgment that the provisions of Article VI hereof shall apply to any failure of the Borrower to borrow on the Closing Date any or all of the amounts specified in such Borrowing Notice, then each Lender shall, subject to the conditions hereof, make or cause to be made available on or before 10:00 A.M. on the Closing Date its Applicable Commitment Percentage of the Revolving Credit Loans requested in such Borrowing Notice. 3.2. Payment of Interest. (a) The Borrower shall pay interest to the Agent for the account of each Lender on the outstanding and unpaid principal amount of each Revolving Loan made by such Lender for the period commencing on the date of such Revolving Loan until such Revolving Loan shall be due at the then applicable Base Rate for Base Rate Loans or applicable Eurodollar Rate for Eurodollar Rate Loans, as designated by the Authorized Representative pursuant to Section 3.1; provided, however, that if any amount shall not be paid when due (at maturity, by acceleration or otherwise), all amounts outstanding hereunder shall bear interest thereafter at the Default Rate. (b) Interest on each Revolving Loan based on the Base Rate shall be computed on the basis of a year of 365/6 days and Interest on each Revolving Loan based on the Eurodollar 42 Rate shall be computed on the basis of a year of 360 days, calculated in each case for the actual number of days elapsed. Interest on each Revolving Loan shall be paid (i) quarterly in arrears on the last Business Day of each April, July, October and January, commencing October 31, 1997 for each Base Rate Loan, (ii) on the last day of the applicable Interest Period for each Eurodollar Rate Loan and, if such Interest Period extends for more than three (3) months, at intervals of three (3) months after the first day of such Interest Period, and (iii) upon payment in full of the principal amount of such Revolving Loan and termination of this Agreement. 3.3. Payment of Principal. The principal amount of each Revolving Loan shall be due and payable to the Agent for the benefit of each Lender in full on the Revolving Credit Termination Date, or earlier as specifically provided herein. The principal amount of any Base Rate Loan under the Revolving Credit Facility may be prepaid in whole or in part at any time. The principal amount of any Eurodollar Rate Loan under the Revolving Credit Facility may be prepaid only at the end of the applicable Interest Period unless the Borrower shall pay to the Agent for the account of the Lenders the additional amount, if any, required under Section 6.4. All prepayments of Revolving Loans made by the Borrower shall be in the amount of $5,000,000 or such greater amount which is an integral multiple of $1,000,000, or the amount equal to all Revolving Credit Outstandings, or such other amount as necessary to comply with Section 3.1(b) or Section 3.8. 3.4. Non-Conforming Payments. (a) Each payment of principal (including any prepayment) and payment of interest and fees, and any other amount required to be paid to the Lenders with respect to the Revolving Loans, shall be made to the Agent at the Principal Office, for the account of each Lender, in Dollars and in immediately available funds before 3:00 P.M. on the date such payment is due. The Agent may, but shall not be obligated to, debit the amount of any such payment which is not made by such time to any ordinary deposit account, if any, of the Borrower with the Agent. (b) The Agent shall deem any payment made by or on behalf of the Borrower hereunder that is not made both in Dollars and in immediately available funds and prior to 3:00 P.M. to be a non-conforming payment. Any such payment shall not be deemed to be received by the Agent until the later of (i) the time such funds become available funds and (ii) the next Business Day. Any non-conforming payment may constitute or become a Default or Event of Default. Interest shall continue to accrue on any principal as to which a non-conforming payment is made until the later of (x) the date such funds become available funds or (y) the next Business Day at the Default Rate from the date such amount was due and payable. (c) In the event that any payment hereunder or under the Revolving Notes becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day unless provided otherwise under clause (ii) of the definition of "Interest Period"; provided that interest shall continue to accrue during the period of any such extension and provided further, that in no event shall any such due date be extended beyond the Revolving Credit Termination Date. 43 3.5. Revolving Notes. Revolving Loans made by each Lender shall be evidenced by the Revolving Note payable to the order of such Lender in the amount of its Revolving Credit Commitment, which Revolving Note shall be dated the Closing Date or a later date pursuant to an Assignment and Acceptance and shall be duly completed, executed and delivered by the Borrower. 3.6. Pro Rata Payments. Except as otherwise provided herein, (a) each payment on account of the principal of and interest on the Revolving Loans and the fees described in Section 3.10 shall be made to the Agent for the account of the Lenders pro rata based on their Applicable Commitment Percentages, (b) all payments to be made by the Borrower for the account of each of the Lenders on account of principal, interest and fees, shall be made without diminution, setoff, recoupment or counterclaim, and (c) the Agent will promptly distribute to the Lenders in immediately available funds payments received in fully collected, immediately available funds from the Borrower. 3.7. Reductions. (a) The Borrower shall, by notice from an Authorized Representative, have the right from time to time but not more frequently than once each calendar month, upon not less than three (3) Business Days' written notice to the Agent, effective upon receipt, to reduce the Total Revolving Credit Commitment. The Agent shall give each Lender, within one (1) Business Day of receipt of such notice, telefacsimile notice, or telephonic notice (confirmed in writing), of such reduction. Each such reduction shall be in the aggregate amount of $5,000,000 or such greater amount which is in an integral multiple of $1,000,000, or the entire remaining Total Revolving Credit Commitment, and shall permanently reduce the Total Revolving Credit Commitment. (b) Each reduction of the Total Revolving Credit Commitment shall be accompanied by payment of the Revolving Loans to the extent that the principal amount of Revolving Credit Outstandings plus the sum of Letter of Credit Outstandings, Swing Line Outstandings and Reserve Amount exceeds the Total Revolving Credit Commitment after giving effect to such reduction, together with accrued and unpaid interest on the amounts prepaid. No such reduction shall result in the payment of any Eurodollar Rate Loan other than on the last day of the Interest Period of such Eurodollar Rate Loan unless such prepayment is accompanied by amounts due, if any, under Section 6.4. 3.8. Conversions and Elections of Subsequent Interest Periods. Provided that no Default or Event of Default shall have occurred and be continuing and subject to the limitations set forth below and in Article VI, the Borrower may: (a) upon delivery, effective upon receipt, of a properly completed Interest Rate Selection Notice to the Agent on or before 10:30 A.M. on any Business Day, convert all or a part of Eurodollar Rate Loans under the Revolving Credit Facility to Base Rate Loans on the last day of the Interest Period for such Eurodollar Rate Loans; and 44 (b) upon delivery, effective upon receipt, of a properly completed Interest Rate Selection Notice to the Agent on or before 10:30 A.M. three (3) Business Days' prior to the date of such election or conversion: (i) elect a subsequent Interest Period for all or a portion of Eurodollar Rate Loans under the Revolving Credit Facility to begin on the last day of the then current Interest Period for such Eurodollar Rate Loans; and (ii) convert Base Rate Loans under the Revolving Credit Facility to Eurodollar Rate Loans on any Business Day. Each election and conversion pursuant to this Section 3.8 shall be subject to the limitations on Eurodollar Rate Loans set forth in the definition of "Interest Period" herein and in Sections 3.1, 3.3 and Article VI. The Agent shall give written notice to each Lender of such notice of election or conversion prior to 3:00 P.M. on the day such notice of election or conversion is received. All such continuations or conversions of Loans shall be effected pro rata based on the Applicable Commitment Percentages of the Lenders. 3.9. Increase and Decrease in Amounts. The amount of the Total Revolving Credit Commitment which shall be available to the Borrower as Advances shall be reduced by the aggregate amount of Revolving Credit Outstandings, Letter of Credit Outstandings, Swing Line Outstandings and the Reserve Amount. 3.10. Unused Fee. For the period beginning on the Closing Date and ending on the Revolving Credit Termination Date, the Borrower agrees to pay to the Agent, for the pro rata benefit of the Lenders based on their Applicable Commitment Percentages, an unused fee equal to the Applicable Unused Fee multiplied by the average daily amount by which the Total Revolving Credit Commitment exceeds the sum of (i) Revolving Credit Outstandings (without giving effect to Swing Line Outstandings in the case of Lenders other than NationsBank) plus (ii) Letter of Credit Outstandings. Such fees shall be due in arrears on the last Business Day of each April, July, October and January, commencing January 31, 1998, to and on the Revolving Credit Termination Date. Notwithstanding the foregoing, so long as any Lender fails to make available any portion of its Revolving Credit Commitment when requested, such Lender shall not be entitled to receive payment of its pro rata share of such fee until such Lender shall make available such portion. Such fee shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. 3.11. Deficiency Advances. No Lender shall be responsible for any default of any other Lender in respect to such other Lender's obligation to make any Loan or fund its purchase of any Participation hereunder nor shall the Revolving Credit Commitment of any Lender hereunder be increased as a result of such default of any other Lender. Without limiting the generality of the foregoing, in the event any Lender shall fail to advance funds to the Borrower under the Revolving Credit Facility as herein provided, the Agent may in its discretion, but shall not be obligated to, advance under the Revolving Note in its favor as a Lender all or any portion of such 45 amount or amounts (each, a "Deficiency Advance") and shall thereafter be entitled to payments of principal of and interest on such Deficiency Advance in the same manner and at the same interest rate or rates to which such other Lender would have been entitled had it made such advance under its Revolving Note; provided that, upon payment to the Agent from such other Lender of the entire outstanding amount of each such Deficiency Advance, together with accrued and unpaid interest thereon, from the most recent date or dates interest was paid to the Agent by the Borrower on each Revolving Loan comprising the Deficiency Advance at the interest rate per annum for overnight borrowing by the Agent from the Federal Reserve Bank, then such payment shall be credited against the applicable Revolving Note of the Agent in full payment of such Deficiency Advance and the Borrower shall be deemed to have borrowed the amount of such Deficiency Advance from such other Lender as of the most recent date or dates, as the case may be, upon which any payments of interest were made by the Borrower thereon. 3.12. Use of Proceeds. The proceeds of the Loans made pursuant to the Revolving Credit Facility hereunder shall be used by the Borrower, (i) together with proceeds of the Term Loan to acquire all of the issued and outstanding stock of the AIMCOR Group and (ii) for general corporate purposes and working capital needs, including the making of Acquisitions permitted hereunder. 3.13. Swing Line. (a) Notwithstanding any other provision of this Agreement to the contrary, in order to administer the Revolving Credit Facility in an efficient manner and to minimize the transfer of funds between the Agent and the Lenders, NationsBank shall make available Swing Line Loans to the Borrower prior to the Revolving Credit Termination Date. NationsBank shall not make any Swing Line Loan pursuant hereto (i) if to the actual knowledge of NationsBank the Borrower is not in compliance with all the conditions to the making of Revolving Loans set forth in this Agreement, (ii) if after giving effect to such Swing Line Loan, the Swing Line Outstandings exceed $25,000,000, or (iii) if after giving effect to such Swing Line Loan, the sum of the principal amount of Swing Line Outstandings, Revolving Credit Outstandings, Letter of Credit Outstandings and Reserve Amount exceeds the Total Revolving Credit Commitment. Swing Line Loans shall be limited to Base Rate Loans. The Company may borrow, repay and reborrow under this Section 3.13. Unless notified to the contrary by NationsBank, borrowings under the Swing Line shall be made in the minimum amount of $500,000 or, if greater, in amounts which are integral multiples of $100,000, or in the amount necessary to effect a Base Rate Refunding Loan, upon written request by telefacsimile transmission, effective upon receipt, by an Authorized Representative of the Borrower made to NationsBank not later than 3:00 P.M. on the Business Day of the requested borrowing. Each such Borrowing Notice shall specify the amount of the borrowing and the date of borrowing, and shall be in the form of Exhibit D-2, with appropriate insertions. Unless notified to the contrary by NationsBank, each repayment of a Swing Line Loan shall be in an amount which is an integral multiple of $100,000 or the aggregate amount of all Swing Line Outstandings. If the Borrower instructs NationsBank to debit any demand deposit account of the Borrower in the amount of any payment with respect to a Swing Line Loan, or NationsBank otherwise receives repayment, after 3:00 P.M. on a Business Day, such payment shall be deemed received on the next Business Day. 46 (b) Swing Line Loans shall bear interest at the Base Rate, the interest payable on Swing Line Loans is solely for the account of NationsBank, and all accrued and unpaid interest on Swing Line Loans shall be payable on the dates and in the manner provided in Sections 3.2(b) and 3.4 with respect to interest on Base Rate Loans. The Swing Line Outstandings shall be evidenced by the Note delivered to NationsBank pursuant to Section 3.5. (c) Upon the making of a Swing Line Loan, each Lender with a Revolving Credit Commitment shall be deemed to have purchased from NationsBank a Participation therein in an amount equal to that Lender's Applicable Commitment Percentage of such Swing Line Loan. Upon demand made by NationsBank, each Lender shall, according to its Applicable Commitment Percentage of such Swing Line Loan, promptly provide to NationsBank its purchase price therefor in an amount equal to its Participation therein. Any Advance made by a Lender pursuant to demand of NationsBank of the purchase price of its Participation shall be deemed (i) provided that the conditions to making Revolving Loans shall be satisfied, a Base Rate Refunding Loan under Section 3.1 until the Borrower converts such Base Rate Loan in accordance with the terms of Section 3.8, and (ii) in all other cases, the funding by each Lender of the purchase price of its Participation in such Swing Line Loan. The obligation of each Lender to so provide its purchase price to NationsBank shall be absolute and unconditional and shall not be affected by the occurrence of a Default or an Event of Default or any other occurrence or event. The Borrower, at its option and subject to the terms hereof, may request an Advance pursuant to Section 3.1 in an amount sufficient to repay Swing Line Outstandings on any date and the Agent shall provide from the proceeds of such Advance to NationsBank the amount necessary to repay such Swing Line Outstandings (which NationsBank shall then apply to such repayment) and credit any balance of the Advance in immediately available funds in the manner directed by the Borrower pursuant to Section 3.1(c)(ii). The proceeds of such Advances shall be paid to NationsBank for application to the Swing Line Outstandings and the Lenders shall then be deemed to have made Loans in the amount of such Advances. The Swing Line shall continue in effect until the Revolving Credit Termination Date, at which time all Swing Line Outstandings and accrued interest thereon shall be due and payable in full. 47 ARTICLE IV Letters of Credit 4.1. Letters of Credit. (a) The Issuing Bank agrees, subject to the terms and conditions of this Agreement, upon request of the Borrower to issue from time to time from the Closing Date to the date 60 days prior to the Stated Revolving Credit Termination Date, for the account of the Borrower or the Borrower and a Restricted Subsidiary Letters of Credit upon delivery to the Issuing Bank of an Application and Agreement for Letter of Credit relating thereto in form and content acceptable to the Issuing Bank; provided, that (i) the Letter of Credit Outstandings shall not exceed the Total Letter of Credit Commitment and (ii) no Letter of Credit shall be issued if, after giving effect thereto, Letter of Credit Outstandings plus the sum of the principal amount of Revolving Credit Outstandings, Swing Line Outstandings and Reserve Amount shall exceed the Total Revolving Credit Commitment. No Documentary Letter of Credit shall have an expiry date later than the earlier of (1) 180 days after the date of issuance thereof and (2) 60 days before the Stated Revolving Credit Termination Date. No Standby Letter of Credit shall have an expiry date (including all rights of the Borrower, any Restricted Subsidiary, or the beneficiary named in such Standby Letter of Credit to require renewal) later than one year after the date of issuance thereof, but any such Standby Letter of Credit may by its terms be renewable annually upon notice (a "Notice of Renewal") given to the Issuing Bank and the Agent at least three Business Days prior to any date for notice of renewal set forth in such Standby Letter of Credit and upon fulfillment of the applicable conditions set forth in Article VII unless the Issuing Bank has notified the Borrower (with a copy to the Agent) at least 30 Business Days prior to the date of automatic renewal of its election not to renew such Standby Letter of Credit (a "Notice of Termination"); provided that the terms of each Standby Letter of Credit that is automatically renewable annually (x) shall require the Issuing Bank to give the beneficiary named in such Standby Letter of Credit notice of any Notice of Termination, (y) shall permit such beneficiary, upon receipt of such notice, to draw under such Standby Letter of Credit prior to the date such Standby Letter of Credit otherwise would have been automatically renewed and (z) shall not permit the expiry date (after giving effect to any renewal) of such Standby Letter of Credit in any event to be extended to a date later than 60 days before the first anniversary of the Stated Revolving Credit Termination Date; and provided further that the Borrower shall deposit or cause to be deposited Collateral (as defined in the LC Account Agreement) with the Agent pursuant to the LC Account Agreement at least five Business Days prior to the Stated Revolving Credit Termination Date an amount equal to 105% of the sum of (I) the aggregate available amount for drawing under all Standby Letters of Credit that have an expiry date (after giving effect to any renewal) that extends beyond the Stated Revolving Credit Termination Date and (II) the aggregate amount of all fees and expenses owing on or in respect of such Standby Letters of Credit. If either a Notice of Renewal is not given by the Borrower or a Notice of Termination is given by the Issuing Bank pursuant to the immediately preceding sentence with respect to any Standby Letter of Credit, such Standby Letter of Credit shall expire on the date on which it otherwise would have been automatically renewed; provided, however, that if a Notice of Renewal is not received by the Issuing Bank, such Issuing Bank may, in its discretion, unless otherwise instructed by the Agent or the Borrower, deem that 48 a Notice of Renewal had been timely delivered and, in such case, a Notice of Renewal shall be deemed to have been so delivered for all purposes under this Agreement. (b) Subject to the approval by the Agent of the making available of an Alternative Currency not otherwise provided for herein, upon completion of a proper Application and Agreement for Letter of Credit, the Issuing Bank shall issue upon request and for the account of Borrower and a Restricted Subsidiary Letters of Credit payable in such Alternative Currency. For purposes of determining Letters of Credit Outstandings, any Letter of Credit issued in an Alternative Currency shall be recorded in the Agent's account in Dollars based on the Dollar Value on the date of issuance of such Letter of Credit. Any draw on a Letter of Credit issued in an Alternative Currency shall be repaid in the same Alternative Currency and in a Dollar amount equivalent to the Dollar Value. To the extent that the Agent shall determine at any time that the sum of (i) the Dollar Value of Letters of Credit Outstanding made or issued in Alternative Currencies and (ii) Outstanding made or issued in Dollars exceeds the Total Revolving Credit Commitment, the Borrower shall immediately repay Revolving Loans so that after giving effect to such payment the Outstandings do not exceed the Total Revolving Credit Commitment. In addition, the Dollar Value of Letters of Credit Outstandings made or issued in Alternative Currencies shall not exceed $5,000,000 as at the date of issuance of any Letter of Credit in an Alternative Currency after giving effect to the issuance of such Letter of Credit. 4.2. Reimbursement. (a) The Borrower hereby unconditionally agrees to pay to the Issuing Bank immediately on demand at the Principal Office all amounts required to pay all drafts drawn or purporting to be drawn under the Letters of Credit and all reasonable expenses incurred by the Issuing Bank in connection with the Letters of Credit, and in any event and without demand to place in possession of the Issuing Bank (which shall include Advances under the Revolving Credit Facility if permitted by Section 3.1 and Swing Line Loans if permitted by Section 3.13) sufficient funds to pay all debts and liabilities arising under any Letter of Credit. The Issuing Bank agrees to give the Borrower prompt notice of any request for a draw under a Letter of Credit. The Issuing Bank may charge any account the Borrower may have with it for any and all amounts the Issuing Bank pays under a Letter of Credit, plus charges and reasonable expenses as from time to time agreed to by the Issuing Bank and the Borrower; provided that to the extent permitted by Section 3.1(c)(iv) and Section 3.13, amounts shall be paid pursuant to Advances under the Revolving Credit Facility or, if the Borrower shall elect, by Swing Line Loans. The Borrower agrees to pay the Issuing Bank interest on any Reimbursement Obligations not paid when due hereunder at the Base Rate plus two percent (2.0%), or the maximum rate permitted by applicable law, if lower, such rate to be calculated on the basis of a year of 360 days for actual days elapsed. (b) In accordance with the provisions of Section 3.1(c), the Issuing Bank shall notify the Agent of any drawing under any Letter of Credit promptly following the receipt by the Issuing Bank of such drawing. 49 (c) Each Lender with a Revolving Credit Commitment (a "Revolving Lender") (other than the Issuing Bank) shall automatically acquire on the date of issuance thereof, a Participation in the liability of the Issuing Bank in respect of each Letter of Credit in an amount equal to such Lender's Applicable Commitment Percentage of such liability, and to the extent that the Borrower is obligated to pay the Issuing Bank under Section 4.2(a), each Revolving Lender (other than the Issuing Bank) thereby shall absolutely, unconditionally and irrevocably assume, and shall be unconditionally obligated to pay to the Issuing Bank as hereinafter described, its Applicable Commitment Percentage of the liability of the Issuing Bank under such Letter of Credit. (i) Each Revolving Lender (including the Issuing Bank in its capacity as a Lender) shall, subject to the terms and conditions of Article III, pay to the Agent for the account of the Issuing Bank at the Principal Office in Dollars (determined in the case of a Letter of Credit issued in an Alternative Currency based on the Dollar Value on the date of payment) and in immediately available funds, an amount equal to its Applicable Commitment Percentage of any drawing under a Letter of Credit, such funds to be provided in the manner described in Section 3.1(c)(iv). (ii) Simultaneously with the making of each payment by a Revolving Lender to the Issuing Bank pursuant to Section 3.1(c)(iv)(B), such Lender shall, automatically and without any further action on the part of the Issuing Bank or such Lender, acquire a Participation in an amount equal to such payment (excluding the portion thereof constituting interest accrued prior to the date the Lender made its payment) in the related Reimbursement Obligation of the Borrower. The Reimbursement Obligations of the Borrower shall be immediately due and payable whether by Advances made in accordance with Section 3.1(c)(iv), Swing Line Loans made in accordance with Section 3.13, or otherwise. (iii) Each Revolving Lender's obligation to make payment to the Agent for the account of the Issuing Bank pursuant to Section 3.1(c)(iv) and this Section 4.2(c), and the right of the Issuing Bank to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and shall be made without any offset, abatement, withholding or reduction whatsoever. If any Revolving Lender is obligated to pay but does not pay amounts to the Agent for the account of the Issuing Bank in full upon such request as required by Section 3.1(c)(iv) or this Section 4.2(c), such Revolving Lender shall, on demand, pay to the Agent for the account of the Issuing Bank interest on the unpaid amount for each day during the period commencing on the date of notice given to such Revolving Lender pursuant to Section 3.1(c) until such Revolving Lender pays such amount to the Agent for the account of the Issuing Bank in full at the interest rate per annum for overnight borrowing by the Agent from the Federal Reserve Bank. (iv) In the event the Revolving Lenders have purchased Participations in any Reimbursement Obligation as set forth in clause (ii) above, then at any time payment (in fully collected, immediately available funds) of such Reimbursement 50 Obligation, in whole or in part, is received by Issuing Bank from the Borrower, Issuing Bank shall promptly pay to each Revolving Lender an amount equal to its Applicable Commitment Percentage of such payment from the Borrower. (d) Not later than ten (10) days prior to the end of each fiscal quarter, the Issuing Bank shall deliver to the Agent a notice describing the aggregate undrawn amount of all Letters of Credit at the end of such quarter. Upon the request of any Revolving Lender from time to time, the Issuing Bank shall deliver to the Agent, and the Agent shall deliver to such Revolving Lender, any other information reasonably requested by such Lender with respect to each Letter of Credit outstanding. (e) The issuance by the Issuing Bank of each Letter of Credit shall, in addition to the conditions precedent set forth in Article VII, be subject to the conditions that such Letter of Credit be in such form and contain such terms as shall be reasonably satisfactory to the Issuing Bank consistent with the then current practices and procedures of the Issuing Bank with respect to similar letters of credit, and the Borrower or if applicable the Borrower and a Restricted Subsidiary, shall have executed and delivered such other instruments and agreements relating to such Letters of Credit as the Issuing Bank shall have reasonably requested consistent with such practices and procedures and shall not be in conflict with any of the express terms herein contained. All Letters of Credit shall be issued pursuant to and subject to the Uniform Customs and Practice for Documentary Credits, 1993 revision, International Chamber of Commerce Publication No. 500 and all subsequent amendments and revisions thereto. (f) The Borrower agrees that the Issuing Bank may, in its sole discretion, accept or pay, as complying with the terms of any Letter of Credit, any drafts or other documents otherwise in order which may be signed or issued by an administrator, executor, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, attorney in fact or other legal representative of a party who is authorized under such Letter of Credit to draw or issue any drafts or other documents. (g) Without limiting the generality of the provisions of Section 13.9, the Borrower hereby agrees to indemnify and hold harmless the Issuing Bank, each other Revolving Lender and the Agent from and against any and all claims and damages, losses, liabilities, reasonable costs and expenses which the Issuing Bank, such other Revolving Lender or the Agent may incur (or which may be claimed against the Issuing Bank, such other Revolving Lender or the Agent) by any Person by reason of or in connection with the issuance or transfer of or payment or failure to pay under any Letter of Credit; provided that the Borrower shall not be required to indemnify the Issuing Bank, any other Revolving Lender or the Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, (i) caused by the willful misconduct or gross negligence of the party to be indemnified or (ii) caused by the failure of the Issuing Bank to pay under any Letter of Credit after the presentation to it of a request for payment strictly complying with the terms and conditions of such Letter of Credit, unless such payment is prohibited by any law, regulation, court order or decree. The 51 indemnification and hold harmless provisions of this Section 4.2(g) shall survive the occurrence of the Facility Termination Date. (h) Without limiting Borrower's rights as set forth in Section 4.2(g), the obligation of the Borrower to immediately reimburse the Issuing Bank for drawings made under Letters of Credit and the Issuing Bank's right to receive such payment shall be absolute, unconditional and irrevocable, and that such obligations of the Borrower shall be performed strictly in accordance with the terms of this Agreement and such Letters of Credit and the related Applications and Agreement for any Letter of Credit, under all circumstances whatsoever, including the following circumstances: (i) any lack of validity or enforceability of the Letter of Credit, the obligation supported by the Letter of Credit or any other agreement or instrument relating thereto (collectively, the "Related LC Documents"); (ii) any amendment or waiver of or any consent to or departure from all or any of the Related LC Documents; (iii) the existence of any claim, setoff, defense (other than the defense of payment in accordance with the terms of this Agreement) or other rights which the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any persons or entities for whom any such beneficiary or any such transferee may be acting), the Agent, the Revolving Lenders or any other Person, whether in connection with the Loan Documents, the Related LC Documents or any unrelated transaction; (iv) any breach of contract or other dispute between the Borrower and any beneficiary or any transferee of a Letter of Credit (or any persons or entities for whom such beneficiary or any such transferee may be acting), the Agent, the Lenders or any other Person; (v) any draft, statement or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; (vi) any delay, extension of time, renewal, compromise or other indulgence or modification granted or agreed to by the Agent, with or without notice to or approval by the Borrower in respect of any of Borrower's Obligations under this Agreement; or (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. 52 4.3. Letter of Credit Facility Fees. (a) The Borrower shall pay to the Agent, for the pro rata benefit of the Revolving Lenders based on their Applicable Commitment Percentages, a fee on the aggregate amount available to be drawn on each outstanding (i) Standby Letter of Credit at a per annum rate equal to the Applicable Margin (L/C) and (ii) Documentary Letter of Credit at a per annum rate equal to .50%. In addition the Borrower shall pay to the Issuing Bank a fronting fee of .125% on the aggregate amount available to be drawn on each outstanding Letter of Credit. Such fees shall be due with respect to each Letter of Credit quarterly in arrears on the last Business day of each April, July, October and January, the first such payment to be made on the first such date occurring after the date of issuance of a Letter of Credit. The fees described in this Section 4.3 shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. 4.4. Administrative and Other Fees. The Borrower shall pay to the Issuing Bank such administrative fee and other fees, if any, in connection with the Letters of Credit in such amounts and at such times as the Issuing Bank and the Borrower shall agree from time to time. 53 ARTICLE V Security 5.1. Security. As security for the full and timely payment and performance of all Obligations, the Credit Parties shall on or before the Closing Date do or cause to be done all things necessary in the opinion of the Agent and its counsel to grant to the Agent for the benefit of the Lenders a duly perfected first priority security interest in all Collateral subject to no prior Lien or other encumbrance or restriction on transfer (other than restrictions on transfer imposed by applicable securities laws). 5.2. Further Assurances. At the request of the Agent, the Borrower will or will cause its Subsidiaries, as the case may be to execute, by its duly authorized officers, alone or with the Agent, any certificate, instrument, statement or document, or to procure any such certificate, instrument, statement or document, or to take such other action (and pay all connected costs) which the Agent reasonably deems necessary from time to time to create, continue or preserve the liens and security interests in Collateral (and the perfection and priority thereof) of the Agent contemplated hereby and by the other Loan Documents. 54 ARTICLE VI Yield Protection and Illegality 6.1. Additional Costs. (a) The Borrower shall promptly pay to the Agent for the account of a Lender from time to time, without duplication, such amounts as such Lender may reasonably determine to be necessary to compensate it for any costs incurred by such Lender which it determines are attributable to its making or maintaining any Loan or its obligation to make any Loans, or the issuance or maintenance by the Issuing Bank of or any other Lender's Participation in any Letter of Credit issued or Swing Line Loan extended hereunder, or any reduction in any amount receivable by such Lender under this Agreement or the Notes in respect of any of such Loans or the Letters of Credit, including reductions in the rate of return on a Lender's capital (such increases in costs and reductions in amounts receivable and returns being herein called "Additional Costs"), in each case resulting from any Regulatory Change which: (i) changes the basis of taxation of any amounts payable to such Lender under this Agreement or the Notes in respect of any of such Loans or the Letters of Credit (other than taxes imposed on or measured by the income, revenues, assets or net worth); or (ii) imposes or modifies any reserve, special deposit, or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Lender (other than any such reserve, deposit or requirement reflected in the Prime Rate, Federal Funds Effective Rate or the Interbank Offered Rate, in each case computed in accordance with the respective definitions of such terms set forth in Section 1.1); or (iii) has or would have the effect of reducing the rate of return on capital of any such Lender or any Person controlling such Lender to a level below that which the Lender or such Person could have achieved but for such Regulatory Change (taking into consideration such Lender's or such Person's policies with respect to capital adequacy); or (iv) imposes any other condition adversely affecting the Agent or any Lender under this Agreement, the Notes or the issuance or maintenance of, or any Lender's Participation in, the Letters of Credit or Swing Line Loans (or any of such extensions of credit or liabilities). Each Lender will notify the Authorized Representative and the Agent of any event occurring after the Closing Date which would entitle it to compensation pursuant to this Section 6.1(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation. (b) Without limiting the effect of the foregoing provisions of this Section 6.1, in the event that, by reason of any Regulatory Change, any Lender either (i) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of the Lender which includes deposits by reference to which the interest rate on Eurodollar Rate Loans or Eurodollar Rate Segments is determined as provided in this Agreement or a category of extensions of credit or other assets of any Lender which includes Eurodollar Rate Loans or Eurodollar Rate Segments or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold, then, if the Lender so elects by notice to the other Lenders, the obligation hereunder of such Lender to make, and to convert Base Rate Loans or Base Rate Segments into, Eurodollar Rate Loans or Eurodollar Rate Segments that are the subject of such restrictions shall be suspended and such Lender reasonably demonstrates that it has not been otherwise compensated under this Article VI for any such 55 Additional Costs, until the date such Regulatory Change ceases to be in effect and the Borrower shall, on the last day(s) of the then current Interest Period(s) for outstanding Eurodollar Rate Loans or Eurodollar Rate Segments convert such Eurodollar Rate Loans or Eurodollar Rate Segments into Base Rate Loans or Base Rate Segments; provided, however, that the suspension of such obligation and the conversion of any Eurodollar Rate Loans or Eurodollar Rate Segments into Base Rate Loans or Base Rate Segments shall apply only to any Lender who is affected by such restrictions and who has provided such notice to the other Lenders, and the obligation of the other Lenders to make, and to convert Base Rate Loans or Base Rate Segments into, Eurodollar Rate Loans or Eurodollar Rate Segments shall not be affected by such restrictions. In the event that the obligation of some, but not all, of the Lenders to make, or to convert Base Rate Loans or Base Rate Segments into, Eurodollar Rate Loans or Eurodollar Rate Segments is suspended, then any request by the Borrower during the pendency of such suspension for a Eurodollar Rate Loan or Eurodollar Rate Segment shall be deemed a request for such Eurodollar Rate Loan or Eurodollar Rate Segment from the Lender(s) not subject to such suspension and for a Base Rate Loan or Base Rate Segments from the Lender(s) who are subject to such suspension, in each case in the respective amounts based on the Lenders' respective Applicable Commitment Percentages. (c) Determinations by any Lender for purposes of this Section 6.1 of the effect of any Regulatory Change on its costs of making or maintaining, or being committed to make Loans, or by NationsBank as issuer of any Letter of Credit of the effect of any Regulatory Change on its costs in connection with the issuance or maintenance of, or any other Lender's Participation in, any Letter of Credit issued or Swing Line Loan extended hereunder, or the effect of any Regulatory Change on amounts receivable by any Lender in respect of Loans or Letters of Credit, and of the additional amounts required to compensate the Lender in respect of any Additional Costs, shall be made taking into account such Lender's policies, or the policies of the parent corporation of such Lender, as to the allocation of capital, costs and other items and shall be conclusive absent manifest error. The Lender requesting such compensation shall furnish to the Authorized Representative and the Agent within one hundred eighty (180) days of the incurrence of any Additional Costs for which compensation is sought an explanation of the Regulatory Change and calculations, in reasonable detail, setting forth such Lender's determination of any such Additional Costs. 6.2. Suspension of Loans. Anything herein to the contrary notwithstanding, if, on or prior to the determination of any interest rate for any Eurodollar Rate Loan or Eurodollar Rate Segment for any Interest Period, the Agent determines (which determination made on a reasonable basis shall be conclusive absent manifest error) that: (a) quotations of interest rates for the relevant deposits referred to in the definition of "Eurodollar Rate" in Section 1.1 are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for such Eurodollar Rate Loan or Eurodollar Rate Segment as provided in this Agreement; or (b) the relevant rates of interest referred to in the definition of "Interbank Offered Rate" in Section 1.1 upon the basis of which the Eurodollar Rate for such Interest 56 Period is to be determined do not adequately reflect the cost to the Lenders of making or maintaining such Eurodollar Rate Loan or Eurodollar Rate Segment for such Interest Period; then the Agent shall give the Authorized Representative prompt notice thereof, and so long as such condition remains in effect, the Lenders shall be under no obligation to make Eurodollar Rate Loans or Eurodollar Rate Segments that are subject to such condition, or to convert Base Rate Loans or Base Rate Segments into Eurodollar Rate Loans or Eurodollar Rate Segments, and the Borrower shall on the last day(s) of the then current Interest Period(s) for outstanding Eurodollar Rate Loans, as applicable, convert such Eurodollar Rate Loans or Eurodollar Rate Segments into another Eurodollar Rate Loan or Eurodollar Rate Segment if such Eurodollar Rate Loan or Eurodollar Rate Segment is not subject to the same or similar condition, or Base Rate Loans or Base Rate Segments, if available hereunder. The Agent shall give the Authorized Representative notice describing in reasonable detail any event or condition described in this Section 6.2 promptly following the determination by the Agent that the availability of Eurodollar Rate Loans or Eurodollar Rate Segments is, or is to be, suspended as a result thereof. 6.3. Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender to honor its obligation to make or maintain Eurodollar Rate Loans or Eurodollar Rate Segments hereunder, then such Lender shall promptly notify the Borrower thereof (with a copy to the Agent) and such Lender's obligation to make or continue Eurodollar Rate Loans or Eurodollar Rate Segments, or to convert Base Rate Loans or Base Rate Segments into Eurodollar Rate Loans or Eurodollar Rate Segments, shall be suspended until such time as such Lender may again make and maintain Eurodollar Rate Loans or Eurodollar Rate Segments, and such Lender's outstanding Eurodollar Rate Loans or Eurodollar Rate Segments shall be converted into Base Rate Loans or Base Rate Segments in accordance with Sections 2.11 and 3.8 or earlier if required by applicable law. The conversion of any Eurodollar Rate Loans or Eurodollar Rate Segments into Base Rate Loans or Base Rate Segments shall apply only to any Lender who is affected by such restrictions and who has provided the notice described above, and the obligation of the other Lenders to make, and to convert Base Rate Loans or Base Rate Segments into, Eurodollar Rate Loans or Eurodollar Rate Segments shall not be affected by such restrictions. In the event that the obligation of some, but not all, of the Lenders to make, or to convert Base Rate Loans or Base Rate Segments into, Eurodollar Rate Loans or Eurodollar Rate Segments is so suspended, then any request by the Borrower during the pendency of such suspension for a Eurodollar Rate Loan or Eurodollar Rate Segment shall be deemed a request for such Eurodollar Rate Loan or Eurodollar Rate Segment from the Lender(s) not subject to such suspension and for a Base Rate Loan or Base Rate Segment from the Lender(s) who are subject to such suspension, in each case in the respective amounts based on the Lenders' respective Applicable Commitment Percentages. 6.4. Compensation. The Borrower shall promptly pay to each Lender, upon the request of such Lender, such amount or amounts as shall be sufficient (in the reasonable determination of Lender) to compensate it for any loss, cost or expense incurred by it as a result of: 57 (a) any payment, prepayment or conversion of a Eurodollar Rate Loan on a date other than the last day of the Interest Period for such Eurodollar Rate Loan or Eurodollar Rate Segment, including without limitation any conversion required pursuant to Sections 6.1, 6.2 or 6.3; or (b) any failure by the Borrower to borrow or convert a Eurodollar Rate Loan or Eurodollar Rate Segment on the date for such borrowing or conversion specified in the relevant Borrowing Notice or Interest Rate Selection Notice under Articles II or III hereof; A determination of a Lender as to the amounts payable pursuant to this Section 6.4 shall be conclusive, provided that such determinations are made on a reasonable basis. The Lender requesting compensation under this Section 6.4 shall promptly furnish to the Authorized Representative and the Agent calculations in reasonable detail setting forth such Lender's determination of the amount of such compensation. For a period of 180 days next following the Closing Date the Borrower will reimburse each Lender for any breakage costs with respect to Eurodollar Rate Segments incurred by reason of the early termination of one or more Interest Periods occurring by reason of an assignment pursuant to Section 13.1. Borrower acknowledges and agrees that during such period it will assist the Agent and Lenders in the syndication of the Revolving Credit Facility and Term Loan Facility and that the incurrence of such costs will not be a basis for withholding consent to such assignment. 6.5. Alternate Loan and Lender. In the event any Lender suspends the making of any Eurodollar Rate Loan or Eurodollar Rate Segment pursuant to this Article VI (herein a "Restricted Lender"), the Restricted Lender's Applicable Commitment Percentage of any Eurodollar Rate Loan or Eurodollar Rate Segment shall bear interest at the Base Rate or the Eurodollar Rate for which the suspension does not apply, as selected by Borrower, until the Restricted Lender once again makes available the applicable Eurodollar Rate Loan or Eurodollar Rate Segment. Notwithstanding the provisions of Sections 2.4 and 3.2(b), interest shall be payable to the Restricted Lender at the time and manner as paid to those Lenders making available Eurodollar Rate Loans or Eurodollar Rate Segments. 6.6. Taxes. (a) All payments by the Borrower of principal of, and interest on, the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future excise, stamp or other taxes, fees, duties, levies, imposts, charges, deductions, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding (i) franchise taxes, (ii) any taxes (other than withholding taxes) that would not be imposed but for a connection between a Lender or the Agent and the jurisdiction imposing such taxes (other than a connection arising solely by virtue of the activities of such Lender or the Agent pursuant to or in respect of this Agreement or any other Loan Document), (iii) any taxes imposed on or measured by any Lender's assets, net income, receipts or branch profits, and (iv) any taxes arising after the Closing Date solely as a result of or attributable to a Lender changing its designated lending office after the date such Lender becomes a party hereto (such non-excluded items being collectively called "Taxes"). In the event that any withholding or 58 deduction from any payment to be made by the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Borrower will (x) pay directly to the relevant authority the full amount required to be so withheld or deducted; (y) promptly forward to the Agent an official receipt or other documentation satisfactory to the Agent evidencing such payment to such authority; and (z) pay to the Agent for the account of each Lender such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction been required. (b) Prior to the date that any Lender or participant organized under the laws of a jurisdiction outside the United States becomes a party hereto, such Person shall deliver to the Borrower and the Agent such certificates, documents or other evidence, as required by the Code or Treasury Regulations issued pursuant thereto, properly completed, currently effective and duly executed by such Lender or participant establishing that payments to it hereunder and under the Notes are (i) not subject to United States Federal backup withholding tax and (ii) not subject to United States Federal withholding tax under the Code because such payment is either effectively connected with the conduct by such Lender or participant of a trade or business in the United States or totally exempt from United States Federal withholding tax by reason of the application of the provisions of a treaty to which the United States is a party or such Lender is otherwise exempt. (c) If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Agent, for the account of the respective Lender, the required receipts or other required documentary evidence, the Borrower shall indemnify the Lenders for any incremental Taxes, interest or penalties that may become payable by any Lender as a result of any such failure. For purposes of this Section 6.6, a distribution hereunder by the Agent or any Lender to or for the account of any Lender shall be deemed a payment by or on behalf of the Borrower. 6.7. Replacement Banks. The Borrower may, in its sole discretion, on 10 Business Days' prior written notice to the agent and a Lender (except in the case of the replacement of a Lender after notice from such Lender to the Borrower pursuant to Section 6.1, in which case no prior notice from the Borrower is required), cause a Lender who has incurred increased costs (including as described in Section 6.1 and 6.6) or is unable to make Eurodollar Rate Loans to (and such Lender shall) assign, pursuant to Section 13.1 all of its rights and obligations under this Agreement to a bank or financial institution designated by the Borrower which is willing to become a Lender for a purchase price equal to the outstanding principal amount of the Loans payable to such Lender plus any accrued but unpaid interest on such Loans, any accrued but unpaid fees with respect to such Lender's Commitment and any other amount payable to such 59 Lender under this Agreement; provided, that any expenses or other amounts which would be owing to such Lender pursuant to any indemnification provision hereof (including, if applicable, Section 6.4) shall be payable by the Borrower as if the Borrower had prepaid the Loans of such Lender rather than such Lender having assigned its interest hereunder. The Borrower or the assignee shall pay the applicable processing fee under Section 13.1. 60 ARTICLE VII Conditions to Making Loans and Issuing Letters of Credit 7.1. Conditions of Term Loans and Initial Advance. The obligations of the Lenders to make the Term Loans and the initial Advance under the Revolving Credit Facility, and of the Issuing Bank to issue any Letter of Credit, and of NationsBank to make any Swing Line Loan, are subject to the conditions precedent that: (a) the Agent shall have received on the Closing Date, in form and substance satisfactory to the Agent and Lenders, the following: (i) executed originals of each of this Agreement, the Notes, the initial Facility Guaranties, the Security Instruments, the LC Account Agreement, the other Loan Documents, together with all schedules and exhibits thereto; (ii) the favorable written opinion or opinions with respect to the Loan Documents and the transactions contemplated thereby of counsel to the Credit Parties dated the Closing Date, addressed to the Agent and the Lenders and satisfactory to Smith Helms Mulliss & Moore, L.L.P., special counsel to the Agent, substantially in the form(s) of Exhibit G; (iii) resolutions of the boards of directors or other appropriate governing body (or of the appropriate committee thereof) of, or actions duly adopted by the shareholders of, each Credit Party certified by its secretary or assistant secretary as of the Closing Date, approving and adopting the Loan Documents to be executed by such Person, and authorizing the execution, delivery and performance thereof; (iv) specimen signatures of officers of each Credit Party executing the Loan Documents on behalf of such Credit Party, certified by the secretary or assistant secretary of such Credit Party; (v) the charter documents of each Credit Party certified by the Secretary or Assistant Secretary of such Credit Party; (vi) the bylaws of each Credit Party certified as of the Closing Date as true and correct by its secretary or assistant secretary; (vii) certificates issued as of a recent date by the Secretaries of State of the respective jurisdictions of formation of each Credit Party as to the due existence and good standing of each Credit Party; (viii) appropriate certificates of qualification to do business, good standing and, where appropriate, authority to conduct business under assumed name, issued 61 in respect of the Borrower of a recent date by the Secretary of State or comparable official of each jurisdiction in which the failure to be qualified to do business or authorized so to conduct business could have a Material Adverse Effect; (ix) notice of appointment of the initial Authorized Representative(s); (x) certificate of an Authorized Representative dated the Closing Date as to the Pro Forma Financial in form acceptable to the Agent; (xi) an initial Borrowing Notice, if any, and, if elected by the Borrower, Interest Rate Selection Notice; (xii) evidence of the filing of Uniform Commercial Code financing statements reflecting the filing in all places required by applicable law to perfect the Liens of the Agent under the Security Instruments as a first priority Lien as to items of Collateral in which a security interest may be perfected by the filing of financing statements, and such other documents and/or evidence of other actions as may be necessary under applicable law to perfect the Liens of the Agent under the Security Instruments as a first priority Lien in and to such other Collateral as the Agent may require, including without limitation the delivery by the Borrower and each Subsidiary of all stock certificates not previously delivered to the Agent evidencing Pledged Stock, accompanied in each case by duly executed stock powers (or other appropriate transfer documents) in blank affixed thereto; (xiii) evidence satisfactory to the Agent that all fees payable by the Borrower on the Closing Date to the Agent, NMSI and for the benefit of the Lenders have been paid in full or made available to the Lenders; (xiv) Uniform Commercial Code search results, to the extent reasonably available, in respect of the Borrower and its Subsidiaries showing only those Liens as are acceptable to the Agent other than those to be terminated substantially concurrently with the Closing Date; (xv) Evidence satisfactory to the Agent that a Mortgage Warehousing Facility for Mid-State will remain in effect following the Closing Date, which Mortgage Warehousing Facility provides not less than $400,000,000 in limited recourse financing; (xvi) Receipt of the Pro Forma Financial Statements; (xvii) Evidence satisfactory to the Agent of consummation of the Related Acquisition in accordance with the Related Acquisition Documents; 62 (xviii) evidence satisfactory to the Agent that no default or event of default exist under the Existing Agreement as at the Closing Date; and (b) In the good faith judgment of the Agent and the Lenders: (i) there shall not have occurred or become known to the Agent or the Lenders any event, condition, situation or status since the Disclosure Date, other than the information theretofore furnished to the Agent and the Lenders, that has had or could reasonably be expected to result in a Material Adverse Effect; (ii) there shall not be pending or threatened any action, suit, investigation, litigation or other arbitral, administrative or judicial proceeding, other than the Disclosed Litigation, which could reasonably be likely to result in a Material Adverse Effect, and there shall not have occurred any adverse change in status of or results in any Disclosed Litigation which could reasonably be expected to have a Materially Adverse Effect; and (iii) the Borrower and its Subsidiaries shall have received all material approvals, consents and waivers, and shall have made or given all necessary filings and notices as shall be required to consummate the transactions contemplated hereby without the occurrence of any default under, conflict with or violation of (A) any applicable law, rule, regulation, order or decree of any Governmental Authority or arbitral authority or (B) any material agreement, document or instrument to which any of the Borrower or any Subsidiary is a party or by which any of them or their properties is bound. 7.2. Conditions of Revolving Loans and Letters of Credit. The obligations of the Lenders to make any Revolving Loans, of the Issuing Bank to issue or renew Letters of Credit, and of NationsBank to make Swing Line Loans, hereunder on or subsequent to the Closing Date are subject to the satisfaction of the following conditions: (a) the Agent or, in the case of Swing Line Loans, NationsBank shall have received a Borrowing Notice if required by Article III; (b) (i) the representations and warranties of the Borrower and the Subsidiaries set forth in Article VIII and in each of the other Loan Documents shall be true and correct in all material respects on and as of the date of and both immediately before and after giving effect to such Advance, Letter of Credit issuance or renewal or Swing Line Loan, with the same effect as though such representations and warranties had been made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date and except that the financial statements referred to in Section 8.6(a) shall be deemed to be those financial statements most recently delivered to the Agent and the Lenders pursuant to Section 9.1 from the date financial statements are delivered to the Agent and the Lenders in accordance with such Section, and (ii) no 63 statement furnished pursuant to Article IX shall disclose, either individually or in the aggregate and cumulatively from the Closing Date, a Material Adverse Change; (c) in the case of the issuance of a Letter of Credit, the Borrower shall have executed and delivered to the Issuing Bank an Application and Agreement for Letter of Credit in form and content acceptable to the Issuing Bank together with such other instruments and documents as it shall request; (d) immediately before and after giving effect to each Advance, Swing Line Loan or the issuance or renewal of a Letter of Credit, no Default or Event of Default specified in Article XI shall have occurred and be continuing; and (e) immediately after giving effect to: (i) a Revolving Loan, the aggregate principal balance of all outstanding Revolving Loans for each Lender shall not exceed such Lender's Revolving Credit Commitment; (ii) a Letter of Credit or renewal thereof, the aggregate principal balance of all outstanding Participations in Letters of Credit and Reimbursement Obligations (or in the case of the Issuing Bank, its remaining interest after deduction of all Participations in Letters of Credit and Reimbursement Obligations of other Lenders) for each Lender and in the aggregate shall not exceed, respectively, (X) such Lender's Letter of Credit Commitment or (Y) the Total Letter of Credit Commitment; (iii) a Swing Line Loan, the Swing Line Outstandings shall not exceed $25,000,000; and (iv) a Revolving Loan, Swing Line Loan or a Letter of Credit (or renewal thereof), the sum of the principal amount of Letter of Credit Outstandings, Revolving Credit Outstandings, Swing Line Outstandings and Reserve Amount shall not exceed the Total Revolving Credit Commitment. 64 ARTICLE VIII Representations and Warranties The Borrower represents and warrants with respect to itself and to its Restricted Subsidiaries, and where indicated its Unrestricted Subsidiaries (which representations and warranties shall survive the delivery of the documents mentioned herein and the making of Loans), that: 8.1. Organization and Authority. (a) The Borrower and each Subsidiary (other than the MSH Trusts) is a corporation duly organized and validly existing under the laws of the jurisdiction of its formation, and each of the MSH Trusts is a validly organized business trust existing under the laws of the State of Delaware; (b) The Borrower and each Subsidiary (x) has the requisite power and authority to own its properties and assets and to carry on its business as now being conducted and as contemplated in the Loan Documents, and (y) is qualified to do business in every jurisdiction in which failure so to qualify would have a Material Adverse Effect; (c) The Borrower has the power and authority to execute, deliver and perform this Agreement and the Notes, and to borrow hereunder, and to execute, deliver and perform each of the other Loan Documents to which it is a party; (d) Each Subsidiary has the power and authority to execute, deliver and perform the Facility Guaranty, Unrestricted Subsidiary Subordination Agreement and each of the other Loan Documents to which it is a party; and (e) When executed and delivered, each of the Loan Documents to which the Borrower or any Subsidiary is a party will be the legal, valid and binding obligation or agreement, as the case may be, of the Borrower or such Subsidiary, enforceable against the Borrower or such Subsidiary in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity (whether considered in a proceeding at law or in equity). 8.2. Loan Documents. The execution, delivery and performance by the Borrower and each Subsidiary of each of the Loan Documents to which it is a party: (a) have been duly authorized by all requisite corporate action (including any required shareholder approval) of the Borrower and each Subsidiary required for the lawful execution, delivery and performance thereof; 65 (b) do not violate any provisions of (i) applicable law, rule or regulation, (ii) any judgment, writ, order, determination, decree or arbitral award of any Governmental Authority or arbitral authority binding on the Borrower or any Subsidiary or its properties, or (iii) the charter documents or bylaws of the Borrower or any Subsidiary; (c) does not and will not be in conflict with, result in a breach of or constitute an event of default, or an event which, with notice or lapse of time or both, would constitute an event of default, under any contract, indenture, agreement or other instrument or document to which Borrower or any Subsidiary is a party, or by which the properties or assets of Borrower or any Subsidiary are bound; and (d) does not and will not result in the creation or imposition of any Lien upon any of the properties or assets of Borrower or any Subsidiary except any Liens in favor of the Agent and the Lenders created by the Security Instruments. 8.3. Solvency. The Borrower and each Subsidiary is Solvent at the Closing Date after giving effect to the transactions contemplated by the Loan Document. 8.4. Subsidiaries and Stockholders. The Borrower has no Subsidiaries other than those Persons listed as Subsidiaries in Schedule 8.4 and additional Subsidiaries created or acquired after the Closing Date in compliance with Section 9.19; Schedule 8.4 states as of the date hereof the organizational form of each entity, the authorized and issued capitalization of each Subsidiary listed thereon, the number of shares or other equity interests of each class of capital stock or interest issued and outstanding of each such Subsidiary and the number and/or percentage of outstanding shares or other equity interest (including options, warrants and other rights to acquire any interest) of each such class of capital stock or other equity interest owned by Borrower or by any such Subsidiary; the outstanding shares or other equity interests of each such Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable; and Borrower and each such Subsidiary owns beneficially and of record all the shares and other interests it is listed as owning in Schedule 8.4, free and clear of any Lien. 8.5. Investments. Set forth on Schedule 8.5 is a complete and accurate list of all material Investments (other than Investments described on Schedule 8.4, Cash Equivalents, and loans and advances to employees otherwise permitted under Section 10.6(k)) held by the Borrower or any of its Restricted Subsidiaries, showing as of the date of delivery of such Schedule or of the most recent amendment or supplement thereto delivered pursuant to Section 9.1(g) the amount, obligor or issuer, obligee and maturity, if any, thereof. Neither the Borrower nor any of its Restricted Subsidiaries owns any interest in any Person other than as listed in Schedules 8.4 and 8.5, Cash Equivalents and advances to employees otherwise permitted under Section 10.6(k). 66 8.6. Financial Condition. (a) The Borrower has heretofore furnished to each Lender an audited consolidated balance sheet of the Borrower and its Subsidiaries (and related consolidating balance sheets of the Borrower and its Restricted Subsidiaries) as at May 31, 1997 and the notes thereto, and the related consolidated statements of operations, retained earnings and cash flows for the Fiscal Year then ended (and related consolidating statements of the Borrower and its Restricted Subsidiaries) as examined and certified by Price Waterhouse, and unaudited consolidated interim financial statements of the Borrower and its Subsidiaries consisting of a consolidated balance sheet and related consolidated statements of operations, retained earnings and cash flows, in each case with related notes, for and as of the end of the three month period ending August 31, 1997 (and related interim consolidating balance sheets and statements of operations, retained earnings and cash flows of the Borrower and its Restricted Subsidiaries as at and for the same interim period). Except as set forth therein, such financial statements (including the notes thereto) present fairly in all material respects the financial condition of the Borrower and its Subsidiaries as of the end of such Fiscal Year and three month period and results of their operations and the changes in its stockholders' equity for the Fiscal Year and interim period then ended, all in conformity with GAAP applied on a Consistent Basis, subject however, in the case of unaudited interim statements to year end audit adjustments; (b) The Borrower has furnished to each Lender the Pro Forma Financial Statements which have been prepared by the Borrower or AIMCOR, as the case may be, and are based on assumptions believed to be reasonable at the time delivered; and (c) since August 31, 1997 there has been no material adverse change in the condition, financial or otherwise, of the Borrower or any of its Subsidiaries or in the businesses, properties, performance, prospects or operations of the Borrower or its Subsidiaries, nor have such businesses or properties, been adversely affected as a result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, drought, storm, hail, flood, embargo or act of God or a public enemy, in any case which act, event, condition or occurrence has had or could reasonably be expected to have a Material Adverse Effect. 8.7. Title to Properties. The Borrower and each of its Restricted Subsidiaries has good and marketable title to all its real and personal properties, except where failure to have such title could not reasonably be expected to have a Material Adverse Effect. 8.8. Taxes. The Borrower and each of its Subsidiaries has filed or caused to be filed all federal, and material state and local tax returns which are required to be filed by it and, except for taxes and assessments described in Schedule 8.8 being contested in good faith by appropriate proceedings diligently conducted and against which reserves, to the extent required by the Borrower's independent certified public accountants, have been established and reflected in the financial statements described in Section 8.6(a) (to the extent available with respect to the 67 applicable period), have paid or caused to be paid all taxes as shown on said returns or on any assessment received by it, to the extent that such taxes have become due. 8.9. Other Agreements. Neither the Borrower nor any Subsidiary is (a) a party to or subject to any judgment, order, decree, agreement, lease or instrument, or subject to other restrictions, which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect; or (b) in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which the Borrower or any Subsidiary is a party, which default has, or if not remedied within any applicable grace period could reasonably be likely to have, a Material Adverse Effect. 8.10. Litigation. Except for those matters set forth on Schedule 8.10 (the "Disclosed Litigation"), each of which matters were disclosed to the Agent prior to the Disclosure Date, there is no action, suit or proceeding at law or in equity or by or before any governmental instrumentality or agency or arbitral body pending, or, to the knowledge of the Borrower, threatened by or against the Borrower or any Subsidiary or affecting the Borrower or any Subsidiary or any properties or rights of the Borrower or any Subsidiary, and since the Disclosure Date there has occurred no change in the status or financial effect of any Disclosed Litigation, in either case which could reasonably be likely to have a Material Adverse Effect. 8.11. Margin Stock. The proceeds of the borrowings made hereunder will be used by the Borrower only for the purposes expressly authorized herein. None of such proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any equity securities registered pursuant to Section 12 of the Exchange Act or any margin stock or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry such equity securities or margin stock, or for any other purpose which might constitute any of the Loans under this Agreement a "purpose credit" within the meaning of said Regulation U, Regulation G or Regulation X (12 C.F.R. Part 224) of the Board. Neither the Borrower nor any agent acting in its behalf has taken or will take any action which might cause this Agreement or any of the documents or instruments delivered pursuant hereto to violate any regulation of the Board or to violate the Exchange Act, or the Securities Act of 1933, as amended, or any state securities laws, in each case as in effect on the date hereof. 8.12. Investment Company. Neither the Borrower nor any Subsidiary is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C. ss. 80a-1, et seq.). The application of the proceeds of the Loans and repayment thereof by the Borrower and the performance by the Borrower and the Guarantors of the transactions contemplated by the Loan Documents will not violate any provision of said Act, or any rule, regulation or order issued by the Securities and Exchange Commission thereunder, in each case as in effect on the date hereof. 68 8.13. Patents, Etc. The Borrower and each Restricted Subsidiary owns or has the right to use, under valid license agreements or otherwise, all material patents, licenses, franchises, trademarks, trademark rights, trade names, trade name rights, trade secrets and copyrights necessary to or used in the conduct of its businesses as now conducted and as contemplated by the Loan Documents, without known conflict with any patent, license, franchise, trademark, trade secret, trade name, copyright, other proprietary right of any other Person, except to the extent that failure to so own or have such right could not reasonably be expected to have a Material Adverse Effect. 8.14. No Untrue Statement. Neither (a) this Agreement nor any other Loan Document or certificate or document executed and delivered by or on behalf of the Borrower or any Subsidiary in accordance with or pursuant to any Loan Document nor (b) the information (other than projections) or any other written statement, representation, or warranty provided to the Agent in connection with the negotiation or preparation of the Loan Documents contains any misrepresentation or untrue statement of material fact or omits to state a material fact necessary, in light of the circumstance under which it was made, in order to make any such warranty, representation or statement contained therein not misleading. 8.15. No Consents, Etc. Neither the respective businesses or properties of the Borrower or any Subsidiary, nor any relationship between the Borrower or any Subsidiary and any other Person, nor any circumstance in connection with the execution, delivery and performance of the Loan Documents and the transactions contemplated thereby, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person on the part of the Borrower or any Subsidiary as a condition to the execution, delivery and performance of, or consummation of the transactions contemplated by the Loan Documents, which, if not obtained or effected, would be reasonably likely to have a Material Adverse Effect or to materially impair or impose burdensome conditions on the performance of any of the Loan Documents, or if so, such consent, approval, authorization, filing, registration or qualification has been duly obtained or effected, as the case may be. 8.16. Employee Benefit Plans. Except to the extent that failure to so comply could not reasonably be expected to have a Material Adverse Effect: (a) The Borrower and each ERISA Affiliate is in compliance with all applicable provisions of ERISA and the regulations and published interpretations thereunder and in compliance with all Foreign Benefit Laws with respect to all Employee Benefit Plans except for any required amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such plan has been determined to be exempt under Section 501(a) of the Code. No material liability has been incurred by the Borrower or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan; 69 (b) Neither the Borrower nor any ERISA Affiliate has (i) engaged in a nonexempt prohibited transaction described in Section 4975 of the Code or Section 406 of ERISA affecting any of the Employee Benefit Plans or the trusts created thereunder which could subject any such Employee Benefit Plan or trust to a material tax or penalty on prohibited transactions imposed under Internal Revenue Code Section 4975 or ERISA, (ii) incurred any accumulated funding deficiency with respect to any Employee Benefit Plan, whether or not waived, or any other liability to the PBGC which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid, (iii) failed to make a required contribution or payment to a Multiemployer Plan, or (iv) failed to make a required installment or other required payment under Section 412 of the Code, Section 302 of ERISA or the terms of such Employee Benefit Plan; (c) No Termination Event has occurred or is reasonably expected to occur with respect to any Pension Plan or Multiemployer Plan, and neither the Borrower nor any ERISA Affiliate has incurred any unpaid withdrawal liability with respect to any Multiemployer Plan; (d) Except as described on Schedule 8.16A, the present value of all vested accrued benefits under each Employee Benefit Plan which is subject to Title IV of ERISA, did not, as of the most recent valuation date for each such plan, exceed the then current value of the assets of such Employee Benefit Plan allocable to such benefits, and since such valuation date there has occurred no material adverse change in the funding of any such Employee Benefit Plan; (e) To the best of the Borrower's knowledge, each Employee Benefit Plan subject to Title IV of ERISA, maintained by the Borrower or any ERISA Affiliate, has been administered in accordance with its terms in all material respects and is in compliance in all material respects with all applicable requirements of ERISA and other applicable laws, regulations and rules; (f) The consummation of the Loans and the issuance of the Letters of Credit provided for herein will not involve any prohibited transaction under ERISA which is not subject to a statutory or administrative exemption; and (g) No material proceeding, claim, lawsuit and/or investigation exists or, to the best knowledge of the Borrower after due inquiry, is threatened concerning or involving any Employee Benefit Plan; (h) Set forth on Schedule 8.16B is a complete and accurate list as of the Closing Date of all Pension Plans and Multiemployer Plans. 8.17. No Default. As of the date hereof, there does not exist any Default or Event of Default hereunder. 70 8.18. Hazardous Materials. (a) Except as set forth on Schedule 8.18A, the operations and properties of the Borrower and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws, except to the extent failure to so comply could not reasonably be expected to have a Material Adverse Effect, and no circumstances exist that could reasonably be expected to (i) form the basis of an Environmental Action against the Borrower or any of its Subsidiaries or any of their properties that could have a Material Adverse Effect or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any applicable Environmental Law that could have a Material Adverse Effect; and (b) Except as set forth on Schedule 8.18B hereto and except to the extent failure to so comply could not reasonably be expected to have a Material Adverse Effect, none of the properties owned or operated by the Borrower or any of its Subsidiaries is listed or proposed for listing on the national priorities list established under CERCLA or on the CERCLIS, or on any analogous state or local list; no underground storage tanks (as defined in 42 U.S.C. ss. 6991) are located on any property owned or operated by the Borrower or any of its Subsidiaries, except in compliance with all applicable Environmental Laws; and Hazardous Materials have not been released or disposed of on, generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by the Borrower or any of its Subsidiaries in violation of any applicable Environmental Laws or in a manner that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The Borrower and each Subsidiary is in compliance with all applicable Environmental Laws in all material respects except to the extent failure to so comply could not reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 8.18A and except as could not reasonably be expected to have a Material Adverse Effect, neither the Borrower nor any Subsidiary has been notified of any action, suit, proceeding or investigation which calls into question compliance by the Borrower or any Subsidiary with any Environmental Laws or which seeks to suspend, revoke or terminate any license, permit or approval necessary for the generation, handling, storage, treatment or disposal of any Hazardous Material, and none of such actions, suits, proceedings or investigations could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. 8.19. Employment Matters. (a) Except as set forth on Schedule 8.19, none of the employees of the Borrower or any Subsidiary is subject to any collective bargaining agreement and there are no strikes, work stoppages, election or decertification petitions or proceedings, unfair labor charges, equal opportunity proceedings, or other material labor/employee related controversies or proceedings pending or, to the best knowledge of the Borrower, threatened against the Borrower or any Subsidiary or between the Borrower or any Subsidiary and any of its employees, other than any of the foregoing which could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; and (b) Except to the extent a failure to maintain compliance would not have a Material Adverse Effect, the Borrower and each Subsidiary is in compliance in all respects with all applicable laws, rules and regulations pertaining to labor or employment matters, including without limitation those pertaining to wages, hours, occupational safety and taxation and there is 71 neither pending or threatened any litigation, administrative proceeding nor, to the knowledge of the Borrower, any investigation, in respect of such matters which, if decided adversely, could reasonably be likely, individually or in the aggregate, to have a Material Adverse Effect. 8.20. RICO. Neither the Borrower nor any Subsidiary is engaged in or has engaged in any course of conduct that could subject any of their respective properties material to the Borrower or its Subsidiaries to any Lien, seizure or other forfeiture under any criminal law, racketeer influenced and corrupt organizations law, civil or criminal, or other similar laws. 8.21. Related Acquisition. The Related Acquisition has been fully consummated in accordance with the Related Acquisition Transaction Documents. 8.22. Representations and Warranties from the Related Acquisition Transaction Documents. As of the Closing Date (and immediately prior to giving effect to the Related Acquisition), each of the representations and warranties made by the Borrower or any Subsidiary in the Related Acquisition Transaction Documents are true and correct in all material respects as of the date hereof, and the Borrower is not aware that any of the representations and warranties of AIMCOR contained in the Related Acquisition Transaction Documents are not true and correct in all material respects as of the date hereof. 72 ARTICLE IX Affirmative Covenants Until the Facility Termination Date, unless the Required Lenders shall otherwise consent in writing, the Borrower will, and where applicable will cause each Subsidiary to: 9.1. Financial Reports, Etc. (a) As soon as practical and in any event within 90 days after the end of each Fiscal Year of the Borrower, deliver or cause to be delivered to the Agent and each Lender (i) a consolidated balance sheet of the Borrower and its Subsidiaries and a consolidating balance sheet of the Borrower and its Restricted Subsidiaries as at the end of such Fiscal Year, and the notes thereto, and the related consolidated statements of operations, retained earnings and cash flows of the Borrower and its Subsidiaries, and the respective notes thereto, and consolidating statement of operations of the Borrower and its Restricted Subsidiaries, and any notes thereto, for such Fiscal Year, setting forth (other than for consolidating statements) comparative financial statements for the preceding Fiscal Year, all prepared in accordance with GAAP applied on a Consistent Basis and containing, with respect to the consolidated financial statements, opinions of Price Waterhouse, or other such independent certified public accountants selected by the Borrower and approved by the Agent, which are unqualified as to the scope of the audit performed and as to the "going concern" status of the Borrower and its Subsidiaries and without any exception not acceptable to the Lenders, and (ii) a certificate of an Authorized Representative (A) demonstrating compliance with Sections 10.1, 10.4(g), 10.4(k), 10.4(l), 10.6(e), 10.6(g), 10.6(k), 10.6(l) and 10.8(b) and (B) showing the net cash investment by the Borrower and Restricted Subsidiaries in the Unrestricted Subsidiaries, which certificate shall be in the form of Exhibit H; (b) (i) as soon as practical and in any event within 45 days after the end of each fiscal quarter (except the last fiscal quarter of the Fiscal Year), deliver to the Agent and each Lender (A) a consolidated balance sheet of the Borrower and its Subsidiaries and the related consolidated statements of operations, retained earnings and cash flows for such fiscal quarter and for the period from the beginning of the then current Fiscal Year through the end of such reporting period, and accompanied by a certificate of an Authorized Representative to the effect that such financial statements present fairly the financial position of the Borrower and its Subsidiaries as of the end of such fiscal period and the results of their operations and the changes in their financial position for such fiscal period, in conformity with the standards set forth in Section 8.6(a) with respect to interim financial statements, and (B) a management discussion and analysis of operating results of the Borrower and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current Fiscal Year, in form and detail reasonably acceptable to the Agent, and (ii) as soon as practical and in any event within 60 days after the end of each fiscal quarter (except the last fiscal quarter of the Fiscal Year), deliver to the Agent and each Lender (A) a consolidating balance sheet of the Borrower and its Restricted Subsidiaries and the related consolidating statement of operations for such fiscal quarter and for the period from the beginning of the then current Fiscal Year through the end of such reporting period, and accompanied by a certificate of an Authorized Representative to the effect that such consolidating 73 financial statements present fairly the financial position of the Borrower and its Restricted Subsidiaries as of the end of such fiscal period and the results of their operations and the changes in their financial position for such fiscal period, in conformity with the standards set forth in Section 8.6(a) with respect to interim financial statements, and (B), beginning with the quarterly period ending February 28, 1998, a certificate of an Authorized Representative containing computations for such quarter comparable to that required pursuant to Section 9.1(a)(ii); (c) together with each delivery of the financial statements required by Section 9.1(a)(i), deliver to the Agent and each Lender a letter from the Borrower's accountants specified in Section 9.1(a)(i) stating that in performing the audit necessary to render an opinion on the financial statements delivered under Section 9.1(a)(i), they obtained no knowledge of any Default or Event of Default by the Borrower in the fulfillment of the terms and provisions of this Agreement insofar as they relate to financial matters (which at the date of such statement remains uncured); or if the accountants have obtained knowledge of such Default or Event of Default, a statement specifying the nature and period of existence thereof; (d) promptly upon their becoming available to the Borrower, the Borrower shall deliver to the Agent and each Lender a copy of (i) all regular or special reports or effective registration statements which Borrower or any Subsidiary shall file with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, (ii) any proxy statement distributed by the Borrower or any Subsidiary to its shareholders, bondholders or the financial community in general, and (iii) any management letter or other report submitted to the Borrower or any Subsidiary by independent accountants in connection with any annual, interim or special audit of the Borrower or any Subsidiary; (e) together with each delivery of the financial statements required by Sections 9.1(a)(i) and 9.1(b)(i), deliver to the Agent and each Lender each of the following items as to the Borrower and its Restricted Subsidiaries in respect of the period covered by the financial statements accompanying such item and, in the case of items accompanying quarterly financial statements, in respect of the period from the beginning of the then current Fiscal Year through the end of such quarterly period, each to be certified as true and correct by the Authorized Representative: (i) a schedule of Consolidated Capital Expenditures and (ii) a statement of the aggregate amount of each of Holdback Reserves and Tax Reserves as at the end of such period; (f) As soon as available and in any event no later than 15 days before the end of each Fiscal Year, a consolidated business plan for the Borrower and its Subsidiaries, a supplemental consolidated business plan for the Borrower and its Restricted Subsidiaries, in each case prepared by management of the Borrower, substantially similar in form and detail to the business plans prepared prior to the Closing Date and furnished to the Agent, of balance sheets, operations and retained earnings statements and cash flow statements (to include separate forecasts for Consolidated Capital Expenditures and Consolidated EBITDA), and a reasonably detailed explanation of any underlying assumptions with respect thereto, on a quarterly basis for the forthcoming Fiscal Year; and 74 (g) promptly, from time to time, deliver or cause to be delivered to the Agent and each Lender such other information regarding Borrower's and any Subsidiary's operations, business affairs and financial condition as the Agent or such Lender may reasonably request. The Agent and the Lenders are hereby authorized to deliver a copy of any such financial or other information delivered hereunder to the Lenders (or any affiliate of any Lender) or to the Agent, to any Governmental Authority having jurisdiction over the Agent or any of the Lenders pursuant to any written request therefor or in the ordinary course of examination of loan files, or to any other Person who shall acquire or consider the assignment of, or acquisition of any participation interest in, any Obligation permitted by this Agreement (subject, in the case of delivery of information to Persons considering the acquisition of a participation interest, to the agreement of such Person to comply with customary confidentiality undertakings with respect to such information then employed by the Agent in such circumstances). 9.2. Maintain Properties. Maintain all properties necessary to its operations in good working order and condition, make all needed repairs, replacements and renewals to such properties, and maintain free from Liens all trademarks, trade names, patents, copyrights, trade secrets, know-how, and other intellectual property and proprietary information (or adequate licenses thereto), in each case as are reasonably necessary to conduct its business as currently conducted or as contemplated hereby, all in accordance with customary and prudent business practices. 9.3. Existence, Qualification, Etc. Except as otherwise expressly permitted under Section 10.7, do or cause to be done all things necessary to preserve and keep in full force and effect its existence and all material rights and franchises, and maintain its license or qualification to do business as a foreign corporation and good standing in each jurisdiction in which its ownership or lease of property or the nature of its business makes such license or qualification necessary, except where the failure to so qualify would not have a Material Adverse Effect. 9.4. Regulations and Taxes. Comply in all material respects with or contest in good faith all statutes and governmental regulations and pay all taxes, assessments, governmental charges, claims for labor, supplies, rent and any other obligation which, if unpaid, would become a Lien against any of its properties the existing of which Lien would have a Material Adverse Effect except where such liabilities are being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves acceptable to the Borrower's independent certified public accountants have been established unless and until any Lien resulting therefrom attaches to its property and assets and becomes enforceable against its creditors. 9.5. Insurance. (a) Keep all of its insurable properties adequately insured at all times with responsible insurance carriers against loss or damage by fire and other hazards to the extent and in the manner substantially similar to that in effect as of the Closing Date, (b) maintain general public liability insurance at all times with responsible insurance carriers against liability on account of damage to persons and property, and (c) maintain insurance under all applicable workers' compensation laws (or in the alternative, maintain required reserves if self-insured for 75 workers' compensation purposes), such policies of insurance to have such limits, deductibles, exclusions, co-insurance and other provisions providing no less coverages than that specified in Schedule 9.5 and to be in form reasonably satisfactory to the Agent. Each of the policies of insurance described in this Section 9.5 shall provide that the insurer shall give the Agent not less than thirty (30) days' prior written notice before any such policy shall be terminated, lapse or be altered in any manner. 9.6. True Books. Keep true books of record and account in which full, true and correct entries will be made of all of its dealings and transactions, and set up on its books such reserves as may be required by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business in general, and include such reserves in interim as well as year-end financial statements. 9.7. Right of Inspection. Permit any Person designated by any Lender or the Agent to visit and inspect any of the properties, corporate books and financial reports of the Borrower or any Subsidiary and to discuss its affairs, finances and accounts with its principal officers and independent certified public accountants, all at reasonable times, at reasonable intervals and with reasonable prior notice. 9.8. Observe all Laws. Conform to and duly observe in all material respects all laws, rules and regulations and all other valid requirements of any Governmental Authority with respect to the conduct of its business, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. 9.9. Governmental Licenses. Obtain and maintain all licenses, permits, certifications and approvals of all applicable Governmental Authorities as are required for the conduct of its business as currently conducted and as contemplated by the Loan Documents, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. 9.10. Covenants Extending to Other Persons. Cause each of its Subsidiaries to do with respect to itself, its business and its assets, each of the things required of the Borrower in Sections 9.2 through 9.9, 9.18 and 9.21 inclusive. 9.11. Officer's Knowledge of Default. Upon the chief financial officer, Vice President-Controller or Vice President-Treasurer (or other officer of different title exercising the same function) of the Borrower obtaining knowledge of any Default or Event of Default hereunder, or any event, development or occurrence which could reasonably be expected to have a Material Adverse Effect, cause any such officer to promptly notify the Agent of the nature thereof, the period of existence thereof, and what action the Borrower or such Subsidiary proposes to take with respect thereto. 9.12. Suits or Other Proceedings. Upon any officer of the Borrower obtaining knowledge (i) of any litigation or other proceedings being instituted against the Borrower or any Subsidiary, or any attachment, levy, execution or other process being instituted against any assets of the 76 Borrower or any Subsidiary, which individually or in the aggregate could reasonably be likely to have a Material Adverse Effect, or (ii) of any Material Adverse Change in Disclosed Litigation, promptly deliver to the Agent written notice thereof stating the nature and status of such litigation, dispute, proceeding, levy, execution or other process. 9.13. Notice of Discharge of Hazardous Material or Environmental Complaint. Promptly provide to the Agent true, accurate and complete copies of any and all notices, complaints, orders, directives, claims, or citations received by the Borrower or any Subsidiary relating to any (a) violation or alleged violation by the Borrower or any Subsidiary of any applicable Environmental Law; (b) release or threatened release by the Borrower or any Subsidiary, or at any facility or property owned or leased or operated by the Borrower or any Subsidiary, of any Hazardous Material, except where occurring legally; or (c) liability or alleged liability of the Borrower or any Subsidiary for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials, in any case which could reasonably be expected to have a Material Adverse Effect. 9.14. Environmental Compliance. If the Borrower or any Subsidiary shall receive any letter, notice, complaint, order, directive, claim or citation from any Governmental Authority or in connection with any pending or threatened litigation alleging that the Borrower or and Subsidiary has violated any Environmental Law or is liable for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials, the Borrower shall, in any case relating to any claim, liability, act, event or occurrence which could reasonably be expected to have a Material Adverse Effect, within the time period permitted by the applicable Environmental Law or the Governmental Authority responsible for enforcing such Environmental Law, remove or remedy, or cause the applicable Subsidiary to remove or remedy, such violation or release or satisfy such liability, unless and only during the period that the applicability of the Environmental Law, the fact of such violation or liability or what is required to remove or remedy such violation is being contested by the Borrower or the applicable Subsidiary by appropriate proceedings diligently conducted, all reserves with respect thereto as may be required under Generally Accepted Accounting Principles, if any, have been made, and no Lien shall have attached to property of the Borrower or the applicable Subsidiary which shall have become enforceable against creditors of such Person. 9.15. Indemnification. Without limiting the generality of Section 13.9, the Borrower hereby agrees to indemnify and hold the Agent, the Lenders and NMSI, and their respective officers, directors, employees and agents, harmless from and against any and all claims, losses, penalties, liabilities, damages and expenses (including assessment and cleanup costs and reasonable attorneys' fees and disbursements) arising directly or indirectly from, out of or by reason of (a) the violation of any Environmental Law by the Borrower or any Subsidiary or with respect to any property owned, operated or leased by the Borrower or any Subsidiary or (b) the handling, storage, treatment, emission or disposal of any Hazardous Materials by or on behalf of the Borrower or any Subsidiary or on or with respect to property owned or leased or operated by the Borrower or any Subsidiary. The provisions of this Section 9.15 shall survive the Facility Termination Date. 77 9.16. Further Assurances. At the Borrower's cost and expense, upon request of the Agent, duly execute and deliver or cause to be duly executed and delivered, to the Agent such further certificates and financing and continuation statements, and do and cause to be done such further acts that may be reasonably necessary or advisable in the reasonable opinion of the Agent to carry out more effectively the provisions and purposes of the Security Instruments. 9.17. Employee Benefit Plans. (a) With reasonable promptness, and in any event within thirty (30) days thereof, give notice to the Agent of (a) any material increase in the benefits of any Employee Benefit Plan, (b) each funding waiver request filed with respect to any Employee Benefit Plan and all communications received or sent by the Borrower or any ERISA Affiliate with respect to such request and (c) the failure of the Borrower or any ERISA Affiliate to make a required installment or payment under Section 302 of ERISA or Section 412 of the Code by the due date; (b) Promptly and in any event within fifteen (15) days of becoming aware of the occurrence or forthcoming occurrence of any (a) Termination Event or (b) nonexempt "prohibited transaction," as such term is defined in Section 406 of ERISA or Section 4975 of the Code, in connection with any Pension Plan or any trust created thereunder, deliver to the Agent a notice specifying the nature thereof, what action the Borrower or any ERISA Affiliate has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; and (c) With reasonable promptness but in any event within fifteen (15) days for purposes of clauses (a), (b) and (c), deliver to the Agent copies of (a) any unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of the Code, (b) all notices received by the Borrower or any ERISA Affiliate of the PBGC's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan, (c) if the Agent shall request, each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Borrower or any ERISA Affiliate with the Internal Revenue Service with respect to each Pension Plan and (d) all notices received by the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition and amount, if any, of withdrawal liability pursuant to Section 4202 of ERISA. The Borrower will notify the Agent in writing within five (5) Business Days of the Borrower or any ERISA Affiliate obtaining knowledge or reason to know that the Borrower or any ERISA Affiliate has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA, to the extent that, in the case of any occurrence or condition described in clauses (a) through (c) above, such occurrence could reasonably be expected to have a Material Adverse Effect. 78 9.18. Continued Operations. Continue at all times to conduct its business and engage principally in the same line or lines of business substantially as heretofore conducted. 9.19. New Domestic Subsidiaries and Material Foreign Subsidiaries. Within thirty (30) days following the acquisition or creation of any Domestic Subsidiary other than an MSH Trust, or the date upon which any previously inactive Domestic Subsidiary ceases to be inactive, or upon any Foreign Subsidiary becoming a Material Foreign Subsidiary cause to be delivered to the Agent for the benefit of the Lenders each of the following: (a) in the case of a Domestic Subsidiary, a Facility Guaranty executed by such Subsidiary substantially in the form of Exhibit I; (b) (A) the Pledged Stock of such Domestic Subsidiary or 65% of the Voting Stock and 100% of the non-voting stock of a Material Foreign Subsidiary, together with duly executed stock powers or powers of assignment in blank affixed thereto, and (B) if such Collateral shall be owned by a Subsidiary who has not then executed and delivered to the Agent a Stock Pledge Agreement granting a Lien to the Agent in such Collateral, a Stock Pledge Agreement substantially similar in form and content to that executed and delivered by the Borrower as of the Closing Date, with appropriate revisions as to the identity of the pledgor and securing the obligations of such pledgor under its Facility Guaranty; (c) a supplement to the appropriate schedule attached to the appropriate Security Instruments listing the additional Collateral, certified as true, correct and complete by the Authorized Representative (provided that the failure to deliver such supplement shall not impair the rights conferred under the Security Instruments in after acquired Collateral); (d) an opinion of counsel (which may include in-house counsel) to the Subsidiary dated as of the date of delivery of the Facility Guaranty and other Loan Documents provided for in this Section 9.19 and addressed to the Agent and the Lenders, in form and substance reasonably acceptable to the Agent (which opinion may include assumptions and qualifications of similar effect to those contained in the opinions of counsel delivered pursuant to Section 7.1(a)), to the effect that: (A) such Subsidiary is duly organized, validly existing and in good standing in the jurisdiction of its formation, has the requisite power and authority to own its properties and conduct its business as then owned and then conducted and proposed to be conducted, and is duly qualified to transact business and is in good standing as a foreign corporation or partnership in each other jurisdiction in which the character of the properties owned or leased, or the business carried on by it, requires such qualification and the failure to be so qualified could reasonably be likely to result in a Material Adverse Effect; 79 (B) the execution, delivery and performance of the Facility Guaranty and other Loan Documents described in this Section 9.19 to which such Subsidiary is a signatory have been duly authorized by all requisite corporate or partnership action (including any required shareholder or partner approval), each of such agreements has been duly executed and delivered and constitutes the valid and binding agreement of such Subsidiary, enforceable against such Subsidiary in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity (whether considered in a proceeding at law or in equity); and (C) to the extent required by applicable law, the Uniform Commercial Code financing statements on Form UCC-1 delivered to the Agent by the Subsidiary in connection with the delivery of the Security Instruments of such Subsidiary have been duly executed by the Subsidiary and are in form, substance and number sufficient for filing in all Uniform Commercial Code filing offices in all jurisdictions in which filing is necessary to perfect in favor of the Agent for the benefit of the Lenders the Lien on Collateral conferred under such Security Instruments to the extent such Lien may be perfected by Uniform Commercial Code filing, and to the extent that possession of the Pledged Stock owned by such Subsidiary is required to perfect the Lien of the Agent therein, the Agent has a duly perfected Lien in such Collateral as in existence as of the date of such opinion; provided, however, that the Agent may waive, in its sole discretion, the furnishing of an opinion if the Agent shall determine that the assets, revenues and operations of such Subsidiary are not material; (e) current copies of the charter documents and bylaws of such Subsidiary, minutes of duly called and conducted meetings (or duly effected consent actions) of the Board of Directors or appropriate committees thereof (and, if required by such charter documents, bylaws or by applicable law, of the shareholders) of such Subsidiary authorizing the actions and the execution and delivery of documents described in this Section 9.19. 9.20. Mortgage Warehousing Facility. Cause Mid-State to maintain a mortgage warehousing program in an aggregate amount of at least $375,000,000 (the availability of which may be subject to substantially the same criteria as those included in the documentation evidencing the Mortgage Warehousing Facility on the Closing Date) and otherwise on substantially the same terms as the terms of the Mortgage Warehousing Facility. 9.21. Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, directly or indirectly, all transactions otherwise permitted under the Loan Documents with any of their Affiliates on terms that are fair and reasonable and no less favorable to such Borrower or 80 such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person that is not an Affiliate, other than: (i) the consummation by the Borrower and its Subsidiaries of the transactions effected by the Loan Documents; (ii) any employment arrangement entered into by such Borrower or any of its Subsidiaries in the ordinary course of business and consistent with the past practices of such Borrower or such Subsidiary, as the case may be; (iii) transactions between or among such Borrower and its Subsidiaries or between or among Subsidiaries of such Borrower, in each case to the extent otherwise permitted under the terms of the Loan Documents; and (iv) the declaration and payment of dividends and the making of distributions to all holders of any class of capital stock of such Borrower or any of its Subsidiaries to the extent otherwise permitted under Section 10.8; 9.22. Permitted Receivables Securitization. In the event that the Borrower shall enter into any Permitted Receivables Securitization, the Borrower shall maintain such Permitted Receivables Securitization (or a replacement Permitted Receivables Securitization on terms no less favorable to the Lenders than the facility so replaced), including without limitation availability of advances thereunder, on the terms and conditions approved by the Agent and the Required Lenders. 81 ARTICLE X Negative Covenants Until the Facility Termination Date, unless the Required Lenders shall otherwise consent in writing, the Borrower will not, nor will it permit any Subsidiary or Restricted Subsidiary, as the case may be, to: 10.1. Financial Covenants. (a) Fixed Charge Coverage. Cause, suffer or permit the Consolidated Fixed Charge Coverage Ratio as at the end of each Four-Quarter Period to be less than 1.25 to 1.00. (b) Leverage. Cause, suffer or permit the Consolidated Leverage Ratio as at the end of each Four-Quarter Period during the respective periods set forth below to be greater than the amount set forth opposite each such period: Ratio Must Period Not Exceed ------ ---------- For the period ending February 28, 1998 3.90 to 1.00 to and including May 30, 1998 From May 31, 1998 to and including May 30, 1999 3.75 to 1.00 From May 31, 1999 and thereafter 3.25 to 1.00 10.2. Acquisitions. Enter into any agreement, contract, binding commitment or other arrangement providing for any Acquisition, or take any action to solicit the tender of securities or proxies in respect thereof in order to effect any Acquisition, unless (i) the board of directors of the Person to be (or whose assets are to be) acquired has not voted to, or recommended to its shareholders to, oppose such Acquisition and the requirements of Section 9.18 would be satisfied upon the consummation thereof, (ii) no Default or Event of Default shall exist and be continuing immediately prior to and immediately after giving effect to such Acquisition and if the Cost of Acquisition is in excess of $10,000,000, the Borrower shall have furnished to the Agent (A) pro forma historical financial statements as of the end of the most recently completed Fiscal Year of the Borrower and most recent interim fiscal quarter, if applicable giving effect to such Acquisition and (B) a certificate in the form of Exhibit J prepared on a historical pro forma basis giving effect to such Acquisition, which certificate shall demonstrate that no Default or Event of Default would exist immediately after giving effect thereto, (iii) the Person acquired shall be a Restricted Subsidiary, or be merged into the Borrower or a Restricted Subsidiary, immediately upon 82 consummation of the Acquisition (or if assets are being acquired, the acquiror shall be the Borrower or a Restricted Subsidiary), and (iv) after giving effect to such Acquisition, the aggregate Costs of Acquisition incurred since the Closing Date, together with the aggregate amount of all other loans, advances and Investments described in Section 10.6(l) do not exceed the amount permitted under such Section 10.6(l). 10.3. Liens. Incur, create or permit to exist any Lien with respect to any property or assets now owned or hereafter acquired by the Borrower or any Subsidiary, including the Borrower's interest in capital stock of each Subsidiary, other than (a) Liens created under the Security Instruments in favor of the Agent and the Lenders; (b) Liens existing as of the date hereof and as set forth in Schedule 10.3; (c) Liens imposed by law for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings diligently conducted, which, except as expressly so specified on Schedule 8.7, are inferior in respect of the Collateral to the Liens conferred under the Security Instruments, and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (d) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law or created in the ordinary course of business and in existence less than 90 days from the date of creation thereof for amounts not yet due or which are being contested in good faith by appropriate proceedings diligently conducted, which, except as expressly so specified on Schedule 8.7, are inferior in respect of the Collateral to the Liens conferred under the Security Instruments, and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (e) Liens incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts; (f) easements (including reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded), which do not interfere materially with the ordinary conduct of the business of the Borrower or any Subsidiary and which do not detract from the value of the property to 83 which they attach or impair the use thereof to the Borrower or any Subsidiary in a manner which could have a Material Adverse Effect; (g) any interest or title of a lessor or sublessor and any restriction or encumbrance to which the interest or title of such lessor or sublessor may be subject that is incurred in the ordinary course of business and, either individually or when aggregated with all other Liens described in clauses (a) through (f) in effect on any date of determination, could not be reasonably expected to have a Material Adverse Effect; (h) Liens on certain property and assets of Jim Walter Homes and Mid-State (i) pursuant to the terms of the documentation evidencing the Mortgage-Backed Securities and the Mortgage Warehousing Facility or (ii) securing Indebtedness incurred under Section 10.4(d)(iii) (including for purposes of this clause (ii) Liens on Mid-State's residual beneficial interest in Mid-State Trust III constituting one of the MSH Trusts provided that such Lien is created in a transaction permitted under Section 10.16(ii)); (i) purchase money Liens upon or in real property or equipment acquired or held by the Borrower or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such real property or equipment or to secure Indebtedness permitted by Section 10.4(g) incurred solely for the purpose of financing the acquisition, construction or improvement of such real property or equipment to be subject to such Liens, or Liens existing on any such real property or equipment at the time of its acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price of such real property or equipment); provided, however, that no such Lien shall extend to or cover any property other than the real property or equipment being acquired, constructed or improved; and provided further that any Indebtedness secured by such Liens shall otherwise be permitted under the terms of the Loan Documents; (j) Liens arising in connection with Capital Leases permitted under Section 10.4(k); provided that no such Lien shall extend to or cover any Collateral or any property or assets other than the assets subject to such Capital Leases; and (k) the replacement, extension or renewal of any Lien permitted under clauses (b), (h), (i) and (j) of this Section 10.3 solely upon or in the same property and assets theretofore subject thereto; provided that any Indebtedness secured by such Liens shall otherwise be permitted under the terms of the Loan Documents; (l) Liens on life insurance policies securing Indebtedness permitted under Section 10.4(n); and (m) Liens securing Indebtedness the amount of which Liens shall not exceed in the aggregate at any time $10,000,000 and the book value of the property securing such Indebtedness shall not exceed $12,500,000. 84 10.4. Indebtedness. Incur, create, assume or permit to exist any Indebtedness of the Borrower or its Subsidiaries, howsoever evidenced, except: (a) Indebtedness existing as of the Closing Date and as set forth in Schedule 8.6; (b) Indebtedness owing to the Agent or any Lender in connection with this Agreement, any Note or other Loan Document; (c) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (d) in the case of Mid-State and each MSH Trust, where applicable, (i) non-recourse Indebtedness evidenced by the Mortgage- Backed Securities, (ii) limited recourse Indebtedness created under the Mortgage Warehousing Facility, and (iii) limited recourse Indebtedness resulting from the issuance of additional securities by one or more special purpose entities owned by Mid-State or in which Mid-State shall have the sole residual or beneficial interest, secured or otherwise supported by Mortgage Accounts, which securities shall not restrict the actions or businesses of any Borrower or any of its Subsidiaries (other than Mid-State) in any manner and shall not include terms requiring any guarantee or other credit support from or recourse to the Borrower or any of its Restricted Subsidiaries that are less favorable to the Borrower and its Restricted Subsidiaries than those contained in the Mortgage-Backed Securities; and (e) in the case of Jim Walter Homes, (A) Indebtedness resulting from the contingent obligations of Jim Walter Homes (1) to repurchase Mortgage Accounts pursuant to Section 3(b) of the Depositor Account Transfer Agreement, (2) to repurchase Foreclosure Accounts (as defined in the Depositor Account Transfer Agreement) pursuant to the terms of Section 4 of the Depositor Account Transfer Agreement and (3) to indemnify certain Indemnitees referred to in the Depositor Account Transfer Agreement for expenses incurred thereby on the terms set forth in Section 6 of the Depositor Account Transfer Agreement; provided that the amount of Indebtedness incurred under subclauses (e)(A)(1) and (e)(A)(3) shall not exceed $10,000,000 at any time, and (B) Indebtedness owed to Mid-State resulting from the receipt of proceeds from the issuance and sale of the Mortgage-Backed Securities or additional securities otherwise permitted under subclauses (d)(i) and (d)(iii) of this Section 10.4; 85 (f) Indebtedness between the Borrower and its Subsidiaries and Indebtedness between Subsidiaries; (g) purchase money Indebtedness secured by Liens described in Section 10.3(i) not to exceed an aggregate outstanding amount at any time of $60,000,000; (h) Subordinated Payables; (i) Indebtedness arising in connection with Permitted Receivables Securitizations not to exceed $75,000,000 at any time; (j) Indebtedness arising from Rate Hedging Obligations (provided that such Indebtedness is incurred to limit risks of currency or interest rate fluctuations to which the Borrower and its Subsidiaries are otherwise subject by virtue of the operations of their businesses, and not for speculative purposes): (i) of Unrestricted Subsidiaries; and (ii) of the Borrower and its Restricted Subsidiaries in aggregate notional amount not to exceed $450,000,000 at any time; (k) Capital Leases in aggregate principal amount not at any time exceeding $20,000,000 in the aggregate; (l) additional Indebtedness for Money Borrowed of the Borrower or its Subsidiaries not otherwise covered by clauses (a) through (k) above, provided that the aggregate outstanding principal amount of all such other Indebtedness permitted under this clause (l) shall in no event exceed $30,000,000 at any time; (m) Indebtedness extending the maturity of, or refunding or refinancing, in whole or in part, any Indebtedness incurred under clauses (a), (f), (g), (k) and (l) of this Section 10.4, provided, however, that the terms of any such extension, refunding or refinancing Indebtedness (and of any agreement entered into and of any instrument issued in connection therewith) are no less favorable to the Agent and the Lenders than the terms of the Indebtedness so extended, refunded or refinanced and are otherwise expressly permitted under the terms of the Loan Documents, and provided further, however, that (1) the aggregate principal amount of such extended, refunding or refinancing Indebtedness shall not be increased above the outstanding principal amount thereof immediately prior to such extension, refunding or refinancing, (2) the direct and contingent obligors therefor shall not be changed as a result of or in connection with such extension, refunding or refinancing and (3) immediately before and immediately after giving effect to any such extension, refunding or refinancing, no Default shall have occurred and be continuing; 86 (n) loans to a Credit Party against and secured by the cash surrender value of life insurance policies owned by such Credit Party, provided that the aggregate principal amount of such loan does not exceed the cash surrender value of the policy constituting security therefor; (o) Guaranties of Indebtedness permitted under this Section 10.4; and (p) surety bonds permitted under Section 10.3. 10.5. Transfer of Assets. Sell, lease, transfer or otherwise dispose of any assets of Borrower or any Restricted Subsidiary except: (a) dispositions of assets (including without limitation inventory, cash and Cash Equivalents) in the ordinary course of business; (b) sales of Mortgage Accounts by Jim Walter Homes and other Subsidiaries of the Borrower; (c) sales for the fair market value thereof (which shall be determined in the good faith judgment of the Borrower) of assets other than the capital stock of any Subsidiary of the Borrower (or any security exchangeable, exercisable or convertible into such capital stock) with the exception of J.W. Window Components, Inc., Southern Precision Corporation, Vestal Manufacturing Company, Walter Land Company, J.W. Walter, Inc., Hamer Properties, Inc., Land Holdings Corporaiton, J.W.I. Holdings Corporation , or Hamer Holdings, Inc., provided that (i) not less than 75% of the aggregate purchase price therefor is paid in cash, (ii) to the extent required hereunder, the proceeds of such sale are applied in accordance with the terms hereof to the Ratable Reduction of Term Loan Facilities, and (iii) immediately prior to and after giving effect to any such sale, no Default or Event of Default shall exist and be continuing hereunder; (d) dispositions for fair market value (which shall be determined in the good faith judgment of the Borrower) of equipment which, in the aggregate during any Fiscal Year, has an aggregate fair market value not in excess of $2,000,000 and 100% of the Net Cash Proceeds of which are used to acquire replacement equipment having at least equivalent value; (e) sales for fair market value (which shall be determined in the good faith judgment of the Borrower) of property, that is (i) substantially worn, damaged, obsolete or (ii), in the judgment of the Borrower, no longer best used or useful in its business or that of any Subsidiary, provided that the aggregate fair market value of such property sold in any Fiscal Year shall not exceed $2,000,000; (f) sales of accounts receivable of Restricted Subsidiaries in connection with Permitted Receivables Securitizations; 87 (g) transfers or utilization of assets necessary to give effect to merger or consolidation transactions permitted by Section 10.7 and loans, advances and investments permitted by Section 10.6; and (h) sales of land by United Land Corporation, Walter Land Company, J.W. Walter, Inc. or Hamer Properties, Inc., the net proceeds of which are included in the computation of Consolidated Net Income. 10.6. Investments. Purchase, own, invest in or otherwise acquire, directly or indirectly, any Investments, except that Borrower and its Subsidiaries may maintain Investments or invest in the following: (a) securities of any Person acquired in an Acquisition permitted hereunder; (b) investments in Cash Equivalents; (c) investments existing as of the date hereof and as set forth in Schedules 8.4 and 8.5; (d) accounts receivable arising and trade credit granted in the ordinary course of business and any securities received in satisfaction or partial satisfaction thereof in connection with accounts of financially troubled Persons to the extent reasonably necessary in order to prevent or limit loss; and (e) Investments in Guarantors, Foreign Subsidiaries and Tennessee Alloy Company; provided that the amount of Investments in Foreign Subsidiaries shall not exceed $10,000,000; (f) Subordinated Payables; (g) Net Cash Advances to Unrestricted Subsidiaries in an amount not to exceed $40,000,000 at any time after the Closing Date, on the condition that all of the proceeds of such Net Cash Advances are used solely to satisfy certain tax obligations and other administrative and operating expenses of the Unrestricted Subsidiaries incurred in the ordinary course of business, provided that immediately before and after giving effect thereto no Default or Event of Default shall have occurred and be continuing; (h) investments in Rate Hedging Obligations permitted to be maintained under Section 10.4(j); (i) investments of Mid-State in special purpose entities created for the purpose of issuing asset-backed securities permitted under Section 10.4(d)(iii); 88 (j) investments of the Borrower or Restricted Subsidiaries in special purpose entities created in connection with Permitted Receivables Securitizations; (k) loans and advances to employees in the ordinary course of the business of the Borrower and its Subsidiaries as presently conducted in an aggregate principal amount not to exceed $1,000,000 at any time outstanding; (l) additional investments (including Acquisitions) in an aggregate amount not to exceed at any time the positive amount, if any, equal to the sum of (i) $60,000,000, (ii) 30% of the net cash proceeds actually received by the Borrower from equity contributions and issuances of its capital stock and (iii) 30% of Consolidated Net Income for each quarterly period ending after the Closing Date, minus any net loss in any quarterly period after the Closing Date; provided that (i) no Default or Event of Default shall exist and be continuing immediately before or immediately after giving effect to such Investment and (ii) to the extent such Investment shall constitute an Acquisition, the provisions of Sections 10.2 and 9.19 shall be complied with; and (m) investments by Cardem and each of the MSH Trusts in the ordinary course of business and in conformity with their respective investment policies in effect from time to time. 10.7. Merger or Consolidation. (a) Consolidate with or merge into any other Person, or (b) permit any other Person to merge into it, or (c) liquidate, wind-up or dissolve or sell, transfer or lease or otherwise dispose of all or substantially all of its assets; provided, however, (i) any Restricted Subsidiary of the Borrower may merge or transfer all or substantially all of its assets into or consolidate with the Borrower or any Restricted Subsidiary of the Borrower, and (ii) any other Person may merge into or consolidate with the Borrower (so long as the Borrower is the survivor) or any Restricted Subsidiary and any Subsidiary may merge into or consolidate with any other Person in order to consummate an Acquisition permitted by Section 10.2; provided further that any resulting or surviving entity shall execute such agreements and other documents, including a Facility Guaranty, and take such other action as the Agent may reasonably require to evidence its express assumption of the obligations and liabilities of its predecessor entities under the Loan Documents; 10.8. Restricted Payments. Make any Restricted Payment or apply or set apart any of their assets therefor or agree to do any of the foregoing; provided, however, the Borrower may make the following Restricted Payments if prior to and immediately after giving effect thereto no Default or Event of Default shall exist and be continuing: (a) the purchase, redemption or other acquisition of capital stock of the Borrower acquired solely with the Net Issuance Proceeds of the issuance of other shares of capital stock of the Borrower having equal or inferior voting rights to the shares so acquired; 89 (b) Restricted Payments in an aggregate amount not to exceed the sum of $10,000,000 plus 50% of Consolidated Net Income for any Fiscal Year; and (c) repurchase shares of its capital stock with options or warrants in respect of any thereof) held by the officers, directors and employees of the Borrower or any Subsidiary, so long as such repurchase is pursuant to, and in accordance with the terms of, management and/or employee stock plans, stock subscription agreements or shareholder agreements; provided that not less than ten days prior to any Restricted Payment described in clauses (a), (b) and (c), the Borrower shall deliver to the Agent a certificate of an Authorized Representative describing such Restricted Payment in reasonable detail and including, in the case of a Restricted Payment described in clause (b), computations on a pro forma basis demonstrating that no Default or Event of Default shall occur as a result of such Restricted Payment. 10.9. Compliance with ERISA. With respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan: (a) permit the occurrence of any Termination Event which would result in a liability on the part of the Borrower or any ERISA Affiliate to the PBGC; or (b) fail to comply with ERISA and other applicable laws with respect to the funding of liabilities arising under any Pension Plan; or (c) permit any accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code) with respect to any Pension Plan, whether or not waived to the extent not permitted under ERISA or other applicable law; or (d) fail to make any contribution or payment to any Multiemployer Plan which the Borrower or any ERISA Affiliate may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto; or (e) engage, or permit any Borrower or any ERISA Affiliate to engage, in any prohibited transaction under Section 406 of ERISA or Sections 4975 of the Code for which a civil penalty pursuant to Section 502(I) of ERISA or a tax pursuant to Section 4975 of the Code may be imposed; or (f) fail, or permit the Borrower or any ERISA Affiliate to fail, to establish, maintain and operate each Employee Benefit Plan in compliance in all material respects with the provisions of ERISA, the Code, all applicable Foreign Benefit Laws and all other applicable laws and the regulations and interpretations thereof; if, in the case of any occurrence described in clauses (a) through (f) above, such occurrence could reasonably be expected to have a Material Adverse Effect. 90 10.10. Fiscal Year. Change its Fiscal Year. 10.11. Negative Pledge Clauses. Enter into or suffer to exist any agreement with any Person other than the Agent and the Lenders pursuant to this Agreement or any other Loan Documents which prohibits or limits the ability of any of the Borrower or any Subsidiary to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than: (a) such provisions as are contained as of the Closing Date in Indebtedness described as of the Closing Date on Schedule 8.6; (b) such provisions as are contained in Indebtedness of any Subsidiary as of the date it becomes a Subsidiary of the Borrower in any transaction otherwise permitted hereunder; (c) such provisions as may be contained in any Indebtedness permitted hereunder to be issued under Section 10.4(m) to refinance or replace other Indebtedness, provided that the terms of such provisions shall be no less favorable to the Agent and the Lenders as were contained in the Indebtedness being refinanced or replaced; and (d) such provisions as are or may be imposed on the MSH Trusts or on other special purpose entities created in connection with the issuance of asset-backed securities permitted by Section 10.4(d)(iii) or in connection with any Permitted Receivables Securitization; (e) such provisions as may be contained in any Indebtedness permitted under Section 10.4(g), (i), (k) and (l) so long as such prohibition applies only to the assets acquired with the proceeds of such Indebtedness (f) provisions limiting Liens on property subject to a prior Lien permitted under Section 10.3(c), (d), (e), (g), (h) and (l). 10.12. Prepayments, Etc. of Indebtedness. (a) Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Subordinated Payables, except that so long as no Default shall have occurred and be continuing or would result therefrom, repayments of advances by the Borrower to Mid-State, and Subordinated Payables; (b) amend, modify or change in any manner any term or condition of (i) the Mortgage-Backed Securities or any Indebtedness described on Schedule 8.6 as of the Closing Date, or (ii) the Mortgage Warehousing Facility, or (iii) any material lease, so that the terms and conditions thereof are less favorable to the Agent and the Lenders than the terms of such facilities or agreements on the Closing Date. 91 10.13. Creation of New Subsidiaries. Create or acquire any new Subsidiary after the Closing Date other than Restricted Subsidiaries created or acquired in accordance with Section 9.19. 10.14. Mid-State Rights in Mortgage Accounts. Except as permitted in Section 10.16(ii), cause, suffer or permit Mid-State to grant any Lien on (i) the residual value of Mortgage Accounts transferred to any special purpose entity in connection with the Mortgage-Backed Securities, the Mortgage Warehousing Facility or the issuance of additional securities secured or supported by Mortgage Accounts, or (ii) its rights as servicer of Mortgage Accounts in any such transaction. 10.15. Sale of Mid-State. Sell, transfer or otherwise dispose of all or any material portion of the assets of Mid-State, other than (i) the transfer by Mid-State of Mortgage Accounts to one or more special purpose entities in connection with the issuance of securities secured or supported by such Mortgage Accounts and otherwise permitted hereunder and (ii) the transfer by Mid-State of its residual beneficial interest in Mid State Trust III and the creation of a Lien thereon constituting one of the MSH Trusts to a new special purpose entity created in connection with the issuance of asset-backed securities permitted under Section 10.4(d)(iii), provided that the portion of the proceeds received by Mid-State in connection with such issuance and allocable to the transfer of such residual beneficial interest (which portion shall be established by the Borrower to the satisfaction of the Agent) shall immediately be advanced to the Borrower or a Restricted Subsidiary upon receipt thereof as a Subordinated Payable. 10.16. Sales of Mortgage Accounts to Mid-State. Sell Mortgage Accounts to Mid-State on terms other than those substantially similar to the terms of sale provided in connection with the Mortgage-Backed Securities and the Mortgage Warehousing Facility. 92 ARTICLE XI Events of Default and Acceleration 11.1. Events of Default. If any one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority) and shall be continuing, that is to say: (a) if default shall be made in the due and punctual payment of the principal of any Loan, Reimbursement Obligation, when and as the same shall be due and payable whether pursuant to any provision of Article II or Article III or Article IV, at maturity, by acceleration or otherwise; or (b) if default shall be made in the due and punctual payment of any amount of any Obligation other than those described in clause (a) above, of interest on any Loan, Reimbursement Obligation or other Obligation or of any fees or other amounts payable to any of the Lenders, any Managing Agent or the Agent on the date on which the same shall be due and payable; or (c) if default shall be made in the performance or observance of any covenant set forth in Section 2.9, 9.7, 9.11, 9.19, 9.20, 9.24 or Article X; or (d) if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in this Agreement or any other Loan Document (other than as described in clauses (a), (b) or (c) above) and such default shall continue for 30 or more days after the earlier of receipt of notice of such default by the Authorized Representative from the Agent or any of the chief financial officer, Vice President-Controller or Vice President-Treasurer (or other officer of different title exercising the same function) becomes aware of such default, or if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in any of the other Loan Documents (beyond a period of 30 days, or such lesser period, if any, specifically provided herein) or in any instrument or document evidencing or creating any obligation, guaranty, or Lien in favor of the Agent or any of the Lenders or delivered to the Agent or any of the Lenders in connection with or pursuant to this Agreement or any of the Obligations, or if any material Lien under the Security Instruments or any material provision of the Facility Guaranties ceases to be in full force and effect (other than by reason of any action by the Agent), or if without the written consent of the Lenders, this Agreement or any other Loan Document shall be disaffirmed in writing or shall terminate, be terminable or be terminated or become void or unenforceable for any reason whatsoever (other than in accordance with its terms in the absence of default or by reason of any action by the Lenders or the Agent); or 93 (e) if a default shall occur, which is not waived, (i) in the payment (after passage of any grace period) of any principal, interest, premium or other amount with respect to any Indebtedness or Rate Hedging Obligation (other than the Loans and other Obligations) of the Borrower or any Subsidiary in an amount in excess of $20,000,000 in the aggregate outstanding or in the case of a Rate Hedging Obligation a termination amount in excess of $20,000,000, or (ii) in the performance, observance or fulfillment of any term or covenant contained in or the occurrence of any other event specified in any agreement or instrument under or pursuant to which any such Indebtedness may have been issued, created, assumed, guaranteed or secured by the Borrower or any Subsidiary, and such default shall continue for more than the period of grace, if any, therein specified, and such default or occurrence shall permit the holder of any such Indebtedness (or any agent or trustee acting on behalf of one or more holders) to accelerate the maturity thereof; or (f) if any representation, warranty or other statement of fact contained in any Loan Document or in any writing, certificate, report or statement at any time furnished to the Agent or any Lender by or on behalf of the Borrower or any Subsidiary pursuant to or in connection with any Loan Document, or otherwise, shall be false or misleading in any material respect when given; or (g) if the Borrower or any Subsidiary shall be unable to pay its debts generally as they become due; file a petition to take advantage of any insolvency statute; make an assignment for the benefit of its creditors; commence a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property; file a petition or answer seeking liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute; or (h) if a court of competent jurisdiction shall enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of the Borrower or any Subsidiary or of the whole or any substantial part of its properties and such order, judgment or decree continues unstayed and in effect for a period of sixty (60) days, or approve a petition filed against the Borrower or any Subsidiary seeking liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state, which petition is not dismissed within sixty (60) days; or if, under the provisions of any other law for the relief or aid of debtors, a court of competent jurisdiction shall assume custody or control of the Borrower or any Subsidiary or of the whole or any substantial part of its properties, which control is not relinquished within sixty (60) days; or if there is commenced against the Borrower or any Subsidiary any proceeding or petition seeking reorganization, arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state which proceeding or petition remains undismissed for a period of sixty (60) days; or if the Borrower or any Subsidiary takes any action to indicate its consent to or approval of any such proceeding or petition; or 94 (i) if one or more judgments or orders where the amount not satisfied or covered by insurance (or the amount as to which the insurer denies liability) is equal to or in excess of $15,000,000 is rendered against the Borrower or any Subsidiary, and either (A) enforcement proceedings shall have been commenced by any creditor upon any such judgment or order and remain unstayed or (B) there shall be any period of 30 consecutive days during which a stay of enforcement of any such judgment or order shall not be in effect; or (j) if there shall occur a Change of Control; or (k) if Mid-State shall cease to be the "servicer" or Jim Walter Homes shall cease to be the "subservicer" on any mortgages securing any of the financings contemplated under Section 10.4(d); then, and in any such event and at any time thereafter, if such Event of Default or any other Event of Default shall have not been waived, either or both of the following actions may be taken: (i) the Agent, with the consent of the Required Lenders, may, and at the direction of the Required Lenders shall, declare any obligation of the Lenders and the Issuing Bank to make further Revolving Loans and Swing Line Loans or to issue additional Letters of Credit terminated, whereupon the obligation of each Lender to make further Revolving Loans, of NationsBank to make further Swing Line Loans, and of the Issuing Bank to issue additional Letters of Credit, hereunder shall terminate immediately, and (ii) the Agent shall at the direction of the Required Lenders, at their option, declare by notice to the Borrower any or all of the Obligations to be immediately due and payable, and the same, including all interest accrued thereon and all other obligations of the Borrower to the Agent and the Lenders, shall forthwith become immediately due and payable without presentment, demand, protest, notice or other formality of any kind, all of which are hereby expressly waived, anything contained herein or in any instrument evidencing the Obligations to the contrary notwithstanding; provided, however, that notwithstanding the above, if there shall occur an Event of Default under clause (g) or (h) above, then the obligation of the Lenders to make Revolving Loans, of NationsBank to make Swing Line Loans, and of the Issuing Bank to issue Letters of Credit hereunder shall automatically terminate and any and all of the Obligations shall be immediately due and payable without the necessity of any action by the Agent or the Required Lenders or notice to the Agent or the Lenders; the Borrower shall, upon demand of the Agent or the Required Lenders, deposit cash with the Agent in an amount equal to the amount of any Letter of Credit Outstandings, as collateral security for the repayment of any future 95 drawings or payments under such Letters of Credit, and such amounts shall be held by the Agent pursuant to the terms of the LC Account Agreement; and the Agent and each of the Lenders shall have all of the rights and remedies available under the Loan Documents or under any applicable law. 11.2. Agent to Act. In case any one or more Events of Default shall occur and not have been waived, the Agent may, and at the direction of the Required Lenders shall, proceed to protect and enforce their rights or remedies either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, agreement or other provision contained herein or in any other Loan Document, or to enforce the payment of the Obligations or any other legal or equitable right or remedy. 11.3. Cumulative Rights. No right or remedy herein conferred upon the Lenders or the Agent is intended to be exclusive of any other rights or remedies contained herein or in any other Loan Document, and every such right or remedy shall be cumulative and shall be in addition to every other such right or remedy contained herein and therein or now or hereafter existing at law or in equity or by statute, or otherwise. 11.4. No Waiver. No course of dealing between the Borrower and any Lender or the Agent or any failure or delay on the part of any Lender or the Agent in exercising any rights or remedies under any Loan Document or otherwise available to it shall operate as a waiver of any rights or remedies and no single or partial exercise of any rights or remedies shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or of the same right or remedy on a future occasion. 11.5. Allocation of Proceeds. If an Event of Default has occurred and not been waived, and the maturity of the Notes has been accelerated pursuant to Article XI hereof, all payments received by the Agent hereunder, in respect of any principal of or interest on the Obligations or any other amounts payable by the Borrower hereunder, shall be applied by the Agent in the following order: (a) amounts due to the Lenders pursuant to Sections 3.10, 4.3, 4.4 and 13.5; (b) amounts due to the Agent pursuant to Section 12.11; (c) payments of interest on Loans, Swing Line Loans and Reimbursement Obligations, to be applied for the ratable benefit of the Lenders based on their respective Applicable Commitment Percentages (with amounts payable in respect of Swing Line Outstandings being included in such calculation and paid to NationsBank); (d) payments of principal of Loans, Swing Line Loans and Reimbursement Obligations, to be applied for the ratable benefit of the Lenders in accordance with their 96 respective Applicable Commitment Percentages (with amounts payable in respect of Swing Line Outstandings being included in such calculation and paid to NationsBank); (e) payments of cash amounts to the Agent in respect of outstanding Letters of Credit pursuant to Section 11.1(B); (f) amounts due to the Lenders pursuant to Sections 4.2(g), 9.15 and 13.9; (g) payments of all other amounts due under any of the Loan Documents, if any, to be applied for the ratable benefit of the Lenders; (h) amounts due to any of the Lenders in respect of Obligations consisting of liabilities under any Swap Agreement with any of the Lenders on a pro rata basis according to the amounts owed; and (i) any surplus remaining after application as provided for herein, to the Borrower or otherwise as may be required by applicable law. 97 ARTICLE XII The Agent 12.1. Appointment. Each Lender hereby irrevocably designates and appoints NationsBank as the Agent for the Lenders under this Agreement, and each of the Lenders hereby irrevocably authorizes NationsBank as the Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers as are expressly delegated to the Agent by the terms of this Agreement and such other Loan Documents, together with such other powers as are reasonably incidental thereto. The Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any of the Lenders, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. 12.2. Attorneys-in-fact. The Agent may execute any of its duties under the Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence, gross negligence or willful misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 12.3. Limitation on Liability. Neither the Agent nor any of its officers, directors, employees, agents or attorneys-in-fact shall be liable to the Lenders for any action lawfully taken or omitted to be taken by it or them under or in connection with the Loan Documents except for its or their own gross negligence or willful misconduct. Neither the Agent nor any of its affiliates shall be responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower, any of its Subsidiaries or any officer or representative thereof contained in any Loan Document, or in any certificate, report, statement or other document referred to or provided for in or received by the Agent under or in connection with any Loan Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of any Loan Document, or for any failure of any Credit Party to perform its obligations under any Loan Document, or for any recitals, statements, representations or warranties made, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of any collateral. The Agent shall not be under any obligation to any of the Lenders to ascertain or to inquire as to the observance or performance of any of the terms, covenants or conditions of any Loan Document on the part of any Credit Party or to inspect the properties, books or records of the Borrower or its Subsidiaries. 12.4. Reliance. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telefacsimile or telex message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Agent. The 98 Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless an Assignment shall have been filed with and accepted by the Agent. The Agent shall be fully justified in failing or refusing to take any action under the Loan Documents unless it shall first receive advice or concurrence of the Lenders or the Required Lenders as provided in this Agreement or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under the Loan Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all present and future holders of the Notes. 12.5. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Lender, the Authorized Representative or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall promptly give notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable in the best interests of the Lenders. 12.6. No Representations. Each Lender expressly acknowledges that neither the Agent, any Managing Agent, NMSI nor any of their affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of the Borrower and its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent, any Managing Agent or NMSI to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent, any Managing Agent, NMSI or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the financial condition, creditworthiness, affairs, status and nature of each Credit Party and made its own decision to enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent, any Managing Agent, NMSI or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under the Loan Documents and to make such investigation as it deems necessary to inform itself as to the status and affairs, financial or otherwise, of each Credit Party. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of any Credit Party which may come into the possession of the Agent or any of its affiliates. 12.7. Indemnification. Each of the Lenders agree to indemnify the Agent in its capacity as such (to the extent required to be but not reimbursed by any Credit Party and without limiting 99 any obligations of any Credit Party), ratably according to the respective principal amount of the Notes held by them (or, if no Notes are outstanding, ratably in accordance with their respective Applicable Commitment Percentages as then in effect) from and against any and all liabilities, obligations, losses (excluding any losses suffered by the Agent as a result of Borrower's failure to pay any fee owing to the Agent), damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time (including without limitation at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of any Loan Document or any other document contemplated by or referred to therein or the transactions contemplated thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the Facility Termination Date. 12.8. Lender. The Agent, each Managing Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Credit Party as though it were not the Agent or Managing Agent hereunder. With respect to its Loans made or renewed by it and any Note issued to it, the Agent and each Managing Agent shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not the Agent or Managing Agent, as the case may be, and the terms "Lender" and "Lenders" shall, unless the context otherwise indicates, include the Agent and each Managing Agent in its individual capacity. 12.9. Resignation. If the Agent shall resign as Agent under this Agreement, then the Required Lenders may appoint, with the consent, so long as there shall not have occurred and be continuing a Default or Event of Default, of the Borrower, which consent shall not be unreasonably withheld, a successor Agent for the Lenders, which successor Agent shall be a commercial bank organized under the laws of the United States or any state thereof, having a combined surplus and capital of not less than $500,000,000, whereupon such successor Agent shall succeed to the rights, powers and duties of the former Agent and the obligations of the former Agent shall be terminated and canceled, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement; provided, however, that the former Agent's resignation shall not become effective until such successor Agent has been appointed and has succeeded of record to all right, title and interest in any collateral held by the Agent; provided, further, that if the Required Lenders and, if applicable, the Borrower cannot agree as to a successor Agent within ninety (90) days after such resignation, the Agent shall appoint a successor Agent which satisfies the criteria set forth above in this Section 12.9 for a successor Agent and the parties hereto agree to execute whatever documents are necessary to effect such action under this Agreement or any other Document executed pursuant to this Agreement; provided, however that in such event all provisions of the Loan Documents, shall remain in full force and effect. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article XII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 100 12.10. Sharing of Payments, etc. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, set-off, counterclaim or otherwise, obtain payment with respect to its Obligations (other than pursuant to Article VI) which results in its receiving more than its pro rata share of the aggregate payments with respect to all of the Obligations (other than any payment expressly provided hereunder to be distributed on other than a pro rata basis and payments pursuant to Article VI), then (a) such Lender shall be deemed to have simultaneously purchased from the other Lenders a share in their Obligations so that the amount of the Obligations held by each of the Lenders shall be pro rata and (b) such other adjustments shall be made from time to time as shall be equitable to insure that the Lenders share such payments ratably; provided, however, that for purposes of this Section 12.10 the term "pro rata" shall be determined with respect to both the Revolving Credit Commitment and Term Loan Commitment of each Lender and to the Total Revolving Credit Commitments and Total Term Loan Commitment after subtraction in each case of amounts, if any, by which any such Lender has not funded its share of the outstanding Loans and Obligations. If all or any portion of any such excess payment is thereafter recovered from the Lender which received the same, the purchase provided in this Section 12.10 shall be rescinded to the extent of such recovery, without interest. The Borrower expressly consents to the foregoing arrangements and agrees that each Lender so purchasing a portion of the other Lenders' Obligations may exercise all rights of payment (including, without limitation, all rights of set-off, banker's lien or counterclaim) with respect to such portion as fully as if such Lender were the direct holder of such portion. 12.11. Fees. The Borrower agrees to pay to the Agent, for its individual account, an annual Agent's fee as heretofore and from time to time hereafter agreed to by the Borrower and Agent in writing. 101 ARTICLE XIII Miscellaneous 13.1. Assignments and Participations. (a) At any time after the Closing Date each Lender may, with the prior consent of the Agent and (so long as no Default or Event of Default has occurred and is continuing) the Borrower, which consents shall not be unreasonably withheld, assign to one or more banks or financial institutions all or a portion of its rights and obligations under the Loan Documents (including, without limitation, all or a portion of any Note payable to its order); provided, that (i) each such assignment with respect to the Revolving Credit Facility shall be of a constant and not a varying percentage of all of the assigning Lender's rights and obligations under the Revolving Credit Facility, Letter of Credit Facility and Swing Line Facility, (ii) for each assignment involving the issuance and transfer of a Note, the assigning Lender shall execute the applicable Assignment and Acceptance and the Borrower hereby agrees to execute a replacement Note or Notes to give effect to the assignment, (iii) in any case the amount of Revolving Credit Commitment and Letter of Credit Commitment, or the amount of Term Loan Commitment, as applicable, which shall be assigned is a minimum of $5,000,000 and, if greater, an amount which is an integral multiple of $1,000,000, (iv) such assignee shall have an office located in the United States, and (v) no consent of the Borrower or the Agent shall be required in connection with any assignment by a Lender to another Lender or to an affiliate of any Lender. Upon such execution, delivery, approval and acceptance, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder or under any such Note have been assigned or negotiated to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and a holder of such Note and (y) the assignor thereunder shall, to the extent that rights and obligations hereunder or under such Note have been assigned or negotiated by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement. Any Lender who makes an assignment shall pay to the Agent a one-time administrative fee of $3,500 which fee shall not be reimbursed by the Borrower. (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) the assignment made under such Assignment and Acceptance is made under such Assignment and Acceptance without recourse; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Credit Party or the performance or observance by any Credit Party of its obligations under any Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements delivered pursuant to Section 8.6(a) or Section 9.1, as the case may be, and such other Loan Documents and other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, NMSI or such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action 102 under any Loan Document; (v) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender and a holder of such Notes. (c) The Agent shall maintain at one of its offices in Charlotte, North Carolina a copy of each Lender Assignment and Acceptance delivered to it in accordance with the terms of Section 13.1(a) above and a register for the recordation of the identity of the principal amount, type and Interest Period of each Loan outstanding hereunder, the names, addresses and the Revolving Credit Commitments, the Term Loan Commitments of the Lenders pursuant to the terms hereof from time to time (the "Register"). The Agent will make reasonable efforts to maintain the accuracy of the Register and to promptly update the Register from time to time, as necessary. The entries in the Register shall be conclusive in the absence of manifest error and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and each Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender, the Agent shall give prompt notice thereof to Borrower. (e) Nothing herein shall prohibit any Lender from pledging or assigning, without notice to or consent of the Borrower and without the payment of the administrative fee referred to in Section 13.1(a), any Note to any Federal Reserve Bank in accordance with applicable law. (f) Each Lender may sell participations at its expense to one or more banks or other entities as to all or a portion of its rights and obligations under this Agreement; provided, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any Note issued to it for the purpose of this Agreement, (iv) such participations shall be in a minimum amount of $5,000,000 and, if greater, an amount which is an integral multiple of $1,000,000, and shall include an allocable portion of such Lender's Participation, (v) Borrower, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and with regard to any and all payments to be made under this Agreement; provided, that the participation agreement between a Lender and its participants may provide that such Lender will obtain the approval of such participant prior to such Lender's agreeing to any amendment or waiver of any provisions of any Loan Document which would (A) extend the maturity of any Note, (B) reduce the interest rates hereunder or (C) increase the Revolving Credit Commitment, either of the Term Loan Commitment or the Letter of Credit Commitment of the Lender granting the participation, and (vi) the sale of any such participations which require 103 Borrower to file a registration statement with the United States Securities and Exchange Commission or under the securities regulations or laws of any state shall not be permitted. (g) The Borrower may not assign, nor shall it permit any other Credit Party to assign, any rights, powers, duties or obligations under this Agreement or the other Loan Documents without the prior written consent of all the Lenders. 13.2. Notices. Any notice shall be conclusively deemed to have been received by any party hereto and be effective (i) on the day on which delivered (including hand delivery by commercial courier service) to such party (against receipt therefor), (ii) on the date of receipt at such address, telefacsimile number or telex number as may from time to time be specified by such party in written notice to the other parties hereto or otherwise received), in the case of notice by telegram, telefacsimile or telex, respectively (where the receipt of such message is verified by return), or (iii) on the fifth Business Day after the day on which mailed, if sent prepaid by certified or registered mail, return receipt requested, in each case delivered, transmitted or mailed, as the case may be, to the address, telex number or telefacsimile number, as appropriate, set forth below or such other address or number as such party shall specify by notice hereunder: (a) if to the Borrower: Walter Industries, Inc. 1500 N. Dale Mabry Highway Tampa, Florida 33607 Attn: Chief Financial Officer Telephone: (813) 871-4811 Telefacsimile: (813) 871-4430 with a copy to: Walter Industries, Inc. 1500 N. Dale Mabry Highway Tampa, Florida 33607 Attn: Chief Financial Officer Telephone: (813) 871-4811 Telefacsimile: (813) 871-4430 Attn: Corporate Secretary Telephone: (813) 871-4811 Telefacsimile: (813) 871-4430 104 (b) if to the Agent: NationsBank, National Association Independence Center, 15th Floor 101 North Tryon Street NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telephone: (704) 388-2374 Telefacsimile: (704) 386-9923 with a copy to: NationsBank, National Association 400 North Ashley Drive Tampa, Florida 33603 Attention: Corporate Finance Department Telephone: (813) 224-5242 Telefacsimile: (813) 224-5948 (c) if to the Lenders: At the addresses set forth on the signature pages hereof and on the signature page of each Assignment and Acceptance; (d) if to any Guarantor, at the address set forth on the signature page of the Facility Guaranty of such Guarantor. 13.3. Setoff. The Borrower hereby authorizes the Agent and each Lender to apply all deposits or deposit accounts, of any kind, or any interest in any deposits or deposit accounts thereof, now or hereafter pledged, mortgaged, transferred or assigned to the Agent or such Lender or otherwise in the possession or control of the Agent or such Lender (other than for safekeeping) for any purpose for the account or benefit of the Borrower and including any balance of any deposit account or of any credit of the Borrower with the Agent or such Lender, whether now existing or hereafter established, at any time or times with or without prior notice, or any part thereof, to such of the Obligations of the Borrower to the Lenders then past due and in such amounts as they may elect, and whether or not the collateral or the responsibility of other Persons primarily, secondarily or otherwise liable may be deemed adequate. For the purposes of this paragraph, all remittances and property shall be deemed to be in the possession of the Agent or such Lender as soon as the same may be put in transit to it by mail or carrier or by other bailee. 13.4. Survival. All covenants, agreements, representations and warranties made herein shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit and the execution and delivery to the Lenders of this Agreement and the Notes and shall continue in 105 full force and effect so long as any of Obligations remain outstanding or any Lender has any commitment hereunder or the Borrower has continuing obligations hereunder unless otherwise provided herein. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party and all covenants, provisions and agreements by or on behalf of the Borrower which are contained in the Loan Documents shall inure to the benefit of the successors and permitted assigns of the Lenders or any of them. 13.5. Expenses. The Borrower agrees (a) to pay or reimburse the Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the preparation, negotiation and execution of, and any amendment, supplement or modification to, any of the Loan Documents (including due diligence expenses and travel expenses relating to closing), and the consummation of the transactions contemplated thereby, including the reasonable fees and disbursements of counsel to the Agent, (b) to pay or reimburse the Agent and the Lenders for all their costs and expenses incurred in connection with the enforcement or preservation of any rights under the Loan Documents, including the reasonable fees and disbursements of their counsel and any payments in indemnification or otherwise payable by the Lenders to the Agent pursuant to the Loan Documents, and (c) to pay, indemnify and hold the Agent and the Lenders harmless from any and all recording and filing fees and any and all liabilities with respect to, or resulting from any failure to pay or delay in paying, documentary, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of any of the Loan Documents, or consummation of any amendment, supplement or modification of, or any waiver or consent under or in respect of, any Loan Document. 13.6. Amendments. No amendment, modification or waiver of any provision of any Loan Document and no consent by the Lenders to any departure therefrom by any Credit Party shall be effective unless such amendment, modification or waiver shall be in writing and signed by the Agent, shall have been approved by the Required Lenders through their written consent, and the same shall then be effective only for the period and on the conditions and for the specific instances and purposes specified in such writing; provided, however, that, no such amendment, modification or waiver (i) which changes, extends or waives any provision of Section 2.13, Section 3.6, Section 12.9 or this Section 13.6, reduces the amount of or the due date of any principal (including any scheduled installment thereof), any fees or any interest (or the rate thereof) payable on any Obligation, which changes the definition of "Required Lenders", which permits an assignment by any Credit Party of its Obligations under any Loan Document, which reduces the required consent of Lenders provided hereunder, which increases, decreases (other than pursuant to the express terms hereof) or extends (other than pursuant to the express terms hereof) the Revolving Credit Commitment, the Term Loan Commitment or Letter of Credit Commitment of any Lender, shall be effective unless in writing and signed by each of the Lenders directly affected thereby; 106 (ii) which waives or excuses any mandatory prepayment of the Revolving Credit Facility or the Term Loan Facility pursuant to Section 2.7 or 3.7(b), shall be effective unless with the written consent of each of the following: (i) the Lenders holding Revolving Loans representing a majority of the Revolving Credit Outstandings; and (ii) the Lenders holding Term Loan representing a majority of the Term Loan Outstandings under Term Loan; (iii) which amends, modifies or waives Section 2.6, 2.7, or 3.7, or the definition of "Ratable Reduction of Term Loan Facilities", or any required application, allocation or priority of application to facilities, in each case in a manner which would cause the holders of the Revolving Loans, Term Loans (each, an "Affected Class") to be treated in a manner less favorable as to ratable distribution of payments provided for therein as in effect immediately before giving effect to any such modification, amendment or waiver, unless with the prior written consent of the Lenders holding a majority of the Revolving Credit Outstandings or Term Loan Outstandings held by such members of such Affected Class; (iv) which releases all or substantially all of the Collateral or all or substantially all of the obligations under the Facility Guaranties shall be effective unless with the written consent of the Lenders having Credit Exposures (as defined in the definition of Required Lenders) aggregating in excess of 66 2/3% of the aggregate Credit Exposures of all Lenders; or (v) which affects the rights, privileges or obligations of NationsBank as provider of Swing Line Loans, shall be effective unless signed in writing by NationsBank; (vi) which affects the rights, privileges or obligations of the Issuing Bank as issuer of Letters of Credit, shall be effective unless signed in writing by the Issuing Bank; or (vii) which affects the rights, privileges, immunities or indemnities of the Agent shall be effective unless in writing and signed by the Agent. Notwithstanding any provision of the other Loan Documents to the contrary, as between the Agent and the Lenders, execution by the Agent shall not be deemed conclusive evidence that the Agent has obtained the written consent of the Required Lenders. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances, except as otherwise expressly provided herein. No delay or omission on any Lender's or the Agent's part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any Default or Event of Default. 107 13.7. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such fully-executed counterpart. 13.8. Termination. The termination of this Agreement shall not affect any rights of the Borrower, the Lenders, the Agent or NMSI or any obligation of the Borrower, the Lenders or the Agent, arising prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into or rights created or obligations incurred prior to such termination have been fully disposed of, concluded or liquidated and the Obligations arising prior to or after such termination have been irrevocably paid in full. The rights granted to the Agent for the benefit of the Lenders under the Loan Documents shall continue in full force and effect, notwithstanding the termination of this Agreement, until all of the Obligations have been paid in full after the termination hereof (other than Obligations in the nature of continuing indemnities or expense reimbursement obligations not yet due and payable, which shall continue) or the Borrower has furnished the Lenders and the Agent with an indemnification satisfactory to the Agent and each Lender with respect thereto. All representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until payment in full of the Obligations unless otherwise provided herein. Notwithstanding the foregoing, if after receipt of any payment of all or any part of the Obligations, the Agent or any Lender is for any reason compelled to surrender such payment to any Person because such payment is determined to be void or voidable as a preference, impermissible setoff, a diversion of trust funds or for any other reason, this Agreement shall continue in full force and the Borrower shall be liable to, and shall indemnify and hold such Lender harmless for, the amount of such payment surrendered until such Lender shall have been finally and irrevocably paid in full. The provisions of the foregoing sentence shall be and remain effective notwithstanding any contrary action which may have been taken by the Agent or the Lenders in reliance upon such payment, and any such contrary action so taken shall be without prejudice to the Lenders' rights under this Agreement and shall be deemed to have been conditioned upon such payment having become final and irrevocable. 13.9. Indemnification; Limitation of Liability. In consideration of the execution and delivery of this Agreement by the Agent and each Lender and the extension of credit under the Loans, the Borrower hereby indemnifies, exonerates and holds the Agent, NMSI and each Lender and each of their respective affiliates, officers, directors, employees, agents and advisors (collectively, the "Indemnified Parties") free and harmless from and against any and all claims, actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (collectively, the "Indemnified Liabilities") that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with (i) any acquisition or proposed acquisition by the Borrower or any of its Subsidiaries or Affiliates of all or a portion of the capital stock or substantially all of the assets of any other Person, (ii) the execution, delivery, enforcement, performance or 108 administration of this Agreement and the other Loan Documents, or any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan (including any Swing Line Loan) or Letter of Credit, or (iii) any case or proceeding involving the Borrower or any Subsidiary or Affiliates pursuant to any bankruptcy, insolvency, reorganization, moratorium or similar law whether or not such action is brought against the Agent, NMSI or any Lender, the shareholders or creditors of any of such Persons or an Indemnified Party or an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated herein are consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. The Borrower agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to it, any of its Subsidiaries, any Guarantor, or any security holders or creditors thereof arising out of, related to or in connection with the transactions contemplated herein, except to the extent that such liability is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct; provided, however, in no event shall any Indemnified Party be liable for consequential, indirect or special, as opposed to direct, damages. 13.10. Severability. If any provision of this Agreement or the other Loan Documents shall be determined to be illegal or invalid as to one or more of the parties hereto, then such provision shall remain in effect with respect to all parties, if any, as to whom such provision is neither illegal nor invalid, and in any event all other provisions hereof shall remain effective and binding on the parties hereto. 13.11. Entire Agreement. This Agreement, together with the other Loan Documents, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all previous proposals, negotiations, representations, commitments and other communications between or among the parties, both oral and written, with respect thereto. 13.12. Agreement Controls. In the event that any term of any of the Loan Documents other than this Agreement conflicts with any express term of this Agreement, the terms and provisions of this Agreement shall control to the extent of such conflict. 13.13. Usury Savings Clause. Notwithstanding any other provision herein, the aggregate interest rate charged under any of the Notes, including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate (as such term is defined below). If the rate of interest (determined without regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate (as defined below), the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been 109 in effect. In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, the Borrower shall pay to the Agent an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of the Lenders and the Borrower to conform strictly to any applicable usury laws. Accordingly, if any Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender's option be applied to the outstanding amount of the Loans made hereunder or be refunded to the Borrower. As used in this paragraph, the term "Highest Lawful Rate" means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. 13.14. Governing Law; Waiver of Jury Trial. (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (b) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF HILLSBOROUGH, STATE OF FLORIDA, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE BORROWER HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (c) THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED IN SECTION 110 13.2, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF FLORIDA. (d) NOTHING CONTAINED IN SUBSECTIONS (a) OR (b) HEREOF SHALL PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE THE BORROWER OR ANY OF THE BORROWER'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW. (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, THE BORROWER, THE AGENT AND THE LENDERS HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING. [Signatures on following pages] 111 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be made, executed and delivered by their duly authorized officers as of the day and year first above written. WALTER INDUSTRIES, INC. WITNESS: By: /s/ F.A. Hult ---------------------------------------- Name: F.A. Hult Title: Vice President NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Lenders By: /s/ Miles C. Dearden III ---------------------------------------- Name: Miles C. Dearden III Title: Senior Vice President NATIONSBANK, NATIONAL ASSOCIATION By: /s/ Miles C. Dearden III ---------------------------------------- Name: Miles C. Dearden III Title: Senior Vice President Lending Office: NationsBank, National Association 101 North Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telephone: (704) 388-2374 Telefacsimile: (704) 386-9923 Wire Transfer Instructions: NationsBank, National Association Tampa, Florida ABA# 063100277 Account No.: 136621-2163 Reference: Walter Industries, Inc. Attention: Corporate Credit Support EXHIBIT A Applicable Commitment Percentages I. Revolving Credit Facility Revolving Applicable Credit Commitment Lender Commitment Percentage - ------ ---------- ---------- NationsBank, National $350,000,000.00 100% Association II. Term Loan Facility Applicable Term Loan Commitment Lender Commitment Percentage - ------ ---------- ---------- NationsBank, National $450,000,000.00 100% Association A-1 EXHIBIT B-1 Form of Assignment and Acceptance DATED ____________, __ Reference is made to the Credit Agreement dated as of October 15, 1997 (the "Agreement") among Walter Industries, Inc., a Delaware corporation (the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank, National Association, as Agent for the Lenders ("Agent"). Unless otherwise defined herein, terms defined in the Agreement are used herein with the same meanings. _______________ (the "Assignor") and ___________________ (the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, WITHOUT RECOURSE, a _______%(1) interest in and to all of the Assignor's rights and obligations under the Agreement in respect of the Revolving Credit Facility and Participations as of the Effective Date (as defined below), including, without limitation, such percentage interest in the Loans owing to the Assignor on the Effective Date, and evidenced by the Revolving Note and each of the Term Notes held by the Assignor. 2. The Assignor (i) represents and warrants that, as of the date hereof, (A) the aggregate principal amount of Revolving Loans owing to it (without giving effect to the assignments thereof which have not yet become effective) is $__________ under a Revolving Note dated ____________, ____ in the principal amount of $_________ and (B) the aggregate principal amount of the Participations purchased by it (without giving effect to the assignments thereof which have not yet become effective) is $_________; (ii) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreement or any of the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Agreement or any of the Loan Documents or any other instrument or document furnished pursuant thereto; (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any Subsidiary or any other Guarantor or the performance or observance by the Borrower or any Guarantor of any of its obligations under any of the Loan Documents or any other instrument or document furnished pursuant thereto and (v) attaches hereto the Revolving Note referred to in paragraph 1 above and requests that the Agent exchange such Note for a replacement Note as follows: a Revolving Note dated _____________, ____ in the principal amount of - ---------- (1) Specify percentage in no more than 4 decimal points. B-1-1 $________________ payable to the order of the Assignor, and a Revolving Note dated _____________, ____ in the principal amount of $________________ payable to the order of the Assignee. 3. The Assignee (i) confirms that it has received a copy of the Agreement, together with copies of the financial statements referred to in Section 9.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, NMSI or the Assignor, or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement; (iii) appoints and authorizes the Agent to take such actions on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (iv) will perform all of the obligations which by the terms of the Agreement are required to be performed by the Lender; and (v) specifies as its address for notices the office set forth beneath its name on the signature pages hereof. 4. The effective date for this Assignment and Acceptance shall be _____________________________ (the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Agent together with the transfer fee payable under Section 13.1(a) of the Agreement in connection therewith for acceptance and recording in the Register by the Agent pursuant to Section 13.1(c) of the Agreement. 5. Upon such acceptance and recording, as of the Effective Date, (i) the Assignee shall be a party to the Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the Loan Documents and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Agreement and the other Loan Documents. 6. Upon such acceptance and recording, from and after the Effective Date, the Agent shall make all payments under the Agreement and Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest, commitment fees and letter of credit fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Agreement and the Notes for periods prior to the Effective Date directly between themselves. B-1-2 7. This Assignment and Acceptance shall be governed by and construed in accordance with, the laws of the State of Florida. [NAME OF ASSIGNOR] By:_________________________________________ Name:____________________________________ Title:___________________________________ Notice Address:_____________________________ _____________________________ _____________________________ After the Effective Date: Outstanding Revolving Loans:$______ Outstanding LC Participations: $___________ Outstanding Swing Line Participations: $___________ [NAME OF ASSIGNEE] By:_________________________________________ Name:____________________________________ Title:___________________________________ Notice Address/Lending Office _____________________________ _____________________________ _____________________________ Wire transfer Instructions: _____________________________ _____________________________ _____________________________ After the Effective Date Outstanding Revolving Loans:$______ Outstanding LC Participations: $___________ Outstanding Swing Line Participations: $___________ B-1-3 Accepted this ____ day of _______, ______ NATIONSBANK, NATIONAL ASSOCIATION, as Agent By:_________________________________________ Name:____________________________________ Title:___________________________________ Consented to: WALTER INDUSTRIES, INC. By:______________________________ Name:_________________________ Title:________________________ B-1-4 EXHIBIT B-2 Form of Assignment and Acceptance DATED ___________________, ____ Reference is made to the Credit Agreement dated as of October 15, 1997 (the "Agreement") among Walter Industries, Inc., a Delaware corporation (the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank, National Association, as Agent for the Lenders ("Agent"). Unless otherwise defined herein, terms defined in the Agreement are used herein with the same meanings. ________________ (the "Assignor") and __________________ (the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, WITHOUT RECOURSE, a _______%(1) interest in and to all of the Assignor's rights and obligations under the Agreement in respect of the Term Loan Facility as of the Effective Date (as defined below), including, without limitation, such percentage interest in the Loans owing to the Assignor on the Effective Date and evidenced by the Term Note. 2. The Assignor (i) represents and warrants that, as of the date hereof, the aggregate outstanding principal amount of the Term Loan owing to it (without giving effect to assignments thereof which have not yet become effective) is $________ under a Term Note dated __________, ____ in the principal amount of $_________; (ii) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreement or any of the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Agreement or any of the Loan Documents or any other instrument or document furnished pursuant thereto; (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any Subsidiary or any other Guarantor or the performance or observance by the Borrower or any Guarantor of any of its obligations under any of the Loan Documents or any other instrument or document furnished pursuant thereto and (v) attaches hereto the Term Note referred to in paragraph 1 above and requests that the Agent exchange such Note for replacement Notes as follows: a Term Note dated _____________, ____ in the principal amount of $______________, payable to the order of the Assignor, and a Term Note dated _____________, ____ in the principal amount of $______________, payable to the order of the Assignee. - ---------- (1) Specify percentage in no more than 4 decimal points. B-2-1 3. The Assignee (i) confirms that it has received a copy of the Agreement, together with copies of the financial statements referred to in Section 9.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, NMSI or the Assignor, or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement; (iii) appoints and authorizes the Agent to take such actions on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (iv) will perform all of the obligations which by the terms of the Agreement are required to be performed by the Lender; and (v) specifies as its address for notices the office set forth beneath its name on the signature pages hereof. 4. The effective date for this Assignment and Acceptance shall be _____________________________ (the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Agent together with the transfer fee payable under Section 13.1(a) of the Agreement in connection therewith for acceptance and recording in the Register by the Agent pursuant to Section 13.1(c) of the Agreement. 5. Upon such acceptance and recording, as of the Effective Date, (i) the Assignee shall be a party to the Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the Loan Documents and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Agreement and the other Loan Documents. 6. Upon such acceptance and recording, from and after the Effective Date, the Agent shall make all payments under the Agreement and Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest, commitment fees and letter of credit fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Agreement and the Notes for periods prior to the Effective Date directly between themselves. 7. This Assignment and Acceptance shall be governed by and construed in accordance with, the laws of the State of Florida. [NAME OF ASSIGNOR] By:_________________________________________ Name:____________________________________ Title:___________________________________ Notice Address:_____________________________ _____________________________ _____________________________ After the Effective Date: B-2-2 Outstanding Term Loan: $_________ [NAME OF ASSIGNEE] By:_________________________________________ Name:____________________________________ Title:___________________________________ Notice Address/Lending Office _____________________________ _____________________________ _____________________________ Wire transfer Instructions: _____________________________ _____________________________ _____________________________ After the Effective Date Outstanding Term Loan: $_________ B-2-3 Accepted this ____ day of _______, ___ NATIONSBANK, NATIONAL ASSOCIATION, as Agent By:_________________________________________ Name:____________________________________ Title:___________________________________ Consented to: WALTER INDUSTRIES, INC. By:______________________________ Name:_________________________ Title:________________________ B-2-4 EXHIBIT C Notice of Appointment (or Revocation) of Authorized Representative Reference is hereby made to the Credit Agreement dated as of October 15, 1997 (the "Agreement") among Walter Industries, Inc., a Delaware corporation (the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank, National Association, as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower hereby nominates, constitutes and appoints each individual named below as an Authorized Representative under the Loan Documents, and hereby represents and warrants that (i) set forth opposite each such individual's name is a true and correct statement of such individual's office (to which such individual has been duly elected or appointed), a genuine specimen signature of such individual and an address for the giving of notice, and (ii) each such individual has been duly authorized by the Borrower to act as Authorized Representative under the Loan Documents: Name and Address Office Specimen Signature _________________ _______________________ __________________________ _________________ _________________ _________________ _______________________ __________________________ _________________ _________________ Borrower hereby revokes (effective upon receipt hereof by the Agent) the prior appointment of ________________ as an Authorized Representative. This the ___ day of __________________, ____. WALTER INDUSTRIES. INC. By:___________________________________ Name:_________________________________ Title:________________________________ C-1 EXHIBIT D-1 Form of Borrowing Notice To: NationsBank, National Association, as Agent Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: (704) 386-9923 Reference is hereby made to the Credit Agreement dated as of October 15, 1997 (the "Agreement") among Walter Industries, Inc. (the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank, National Association, as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower through its Authorized Representative hereby gives notice to the Agent that Loans of the type and amount set forth below be made on the date indicated: Type of Loan Interest Aggregate (check one) Period(1) Amount(2) Date of Loan(3) - ----------- ------ ------ ------------ Revolving Loan Base Rate Loan ______ _________ ____________ Eurodollar Rate Loan ______ _________ ____________ - ---------- (1) For any Eurodollar Rate Loan, one, two, three or six months. (2) Must be $5,000,000 or if greater an integral multiple of $1,000,000, unless a Base Rate Refunding Loan. (3) At least three (3) Business Days later if a Eurodollar Rate Loan; The Borrower hereby requests that the proceeds of Loans described in this Borrowing Notice be made available to the Borrower as follows: [insert transmittal instructions] . The undersigned hereby certifies that: 1. No Default or Event of Default exists either now or after giving effect to the borrowing described herein; and D-1-1 2. All the representations and warranties set forth in Article VIII of the Agreement and in the Loan Documents (other than those expressly stated to refer to a particular date) are true and correct as of the date hereof except that the reference to the financial statements in Section 8.6(a) of the Agreement are to those financial statements most recently delivered to you pursuant to Section 9.1 of the Agreement (it being understood that any financial statements delivered pursuant to Section 9.1(b) have not been certified by independent public accountants) and attached hereto are any changes to the Schedules referred to in connection with such representations and warranties; and 3. All conditions contained in the Agreement to the making of any Loan requested hereby have been met or satisfied in full . WALTER INDUSTRIES, INC. BY: ___________________________________ Authorized Representative DATE: _________________________________ D-1-2 EXHIBIT D-2 Form of Borrowing Notice--Swing Line Loans To: NationsBank, National Association, Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: (704)386-9923 Reference is hereby made to the Credit Agreement dated as of October 15, 1997 (the "Agreement") among Walter Industries, Inc. (the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank, National Association, as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower through its Authorized Representative hereby gives notice to NationsBank that a Swing Line Loan of the amount set forth below be made on the date indicated: Amount(1) Date of Loan --------- ------------ --------- ----------, ---- - ---------- (1) Must be $500,000 or if greater an integral multiple of $100,000, unless a Base Rate Refunding Loan. The Borrower hereby requests that the proceeds of Swing Line Loans described in this Borrowing Notice be made available to the Borrower as follows: [insert transmittal instructions] ________. The undersigned hereby certifies that: 1. No Default or Event of Default exists either now or after giving effect to the borrowing described herein; and 2. All the representations and warranties set forth in Article VIII of the Agreement and in the Loan Documents (other than those expressly stated to refer to a particular date) are true and correct as of the date hereof except that the reference to the financial statements in Section 8.6(a) of the Agreement are to those financial statements most recently delivered to you pursuant to Section 9.1 of the Agreement (it being understood that any financial statements delivered D-2-1 pursuant to Section 9.1(b) have not been certified by independent public accountants) and attached hereto are any changes to the Schedules referred to in connection with such representations and warranties; and 3. All conditions contained in the Agreement to the making of any Loan requested hereby have been met or satisfied in full . WALTER INDUSTRIES, INC. BY: ___________________________________ Authorized Representative DATE: _________________________________ D-2-2 EXHIBIT E Form of Interest Rate Selection Notice To: NationsBank, National Association, as Agent Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: (704) 386-9923 Reference is hereby made to the Credit Agreement dated as of October 15, 1997 (the "Agreement") among Walter Industries, Inc. (the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank, National Association, as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower through its Authorized Representative hereby gives notice to the Agent of the following selection of a type of Loan or Segment and Interest Period: Type of Loan Interest Aggregate (check one) Period(1) Amount(2) Date of Loan(3) - ----------- ------ ------ ------------ Revolving Loan Base Rate Loan ______ _________ ____________ Eurodollar Rate Loan ______ _________ ____________ Term Loan Segment Base Rate Segment ______ _________ ____________ Eurodollar Rate Segment ______ _________ ____________ - ---------- (1) For any Eurodollar Rate Loan or Segment, one, two, three or six months. (2) Must be $5,000,000 or if greater an integral multiple of $1,000,000, unless a Base Rate Refunding Loan. (3) At least three (3) Business Days later if a Eurodollar Rate Loan or Eurodollar Rate Segment; E-1 WALTER INDUSTRIES, INC. BY: ________________________________ Authorized Representative DATE: ______________________________ E-2 EXHIBIT F-1 Form of Revolving Note Promissory Note (Revolving Loan) $-------------- ---------, -------------- ------ --, ---- FOR VALUE RECEIVED, WALTER INDUSTRIES, INC., a Delaware corporation having its principal place of business located in Tampa, Florida (the "Borrower"), hereby promises to pay to the order of ________________________________________, its successors and registered assigns (the "Lender"), in its individual capacity, at the office of NATIONSBANK, NATIONAL ASSOCIATION, as agent for the Lenders (the "Agent"), located at One Independence Center, 101 North Tryon Street, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the Agent may designate in writing) at the times set forth in the Credit Agreement dated as of October 15, 1997 among the Borrower, the financial institutions party thereto as lenders (collectively, the "Lenders"), the Agent and certain financial institutions as managing agents (the "Agreement" -- all capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Agreement), in lawful money of the United States of America, in immediately available funds, the principal amount of ___________ DOLLARS ($__________) or, if less than such principal amount, the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to the Agreement on the Revolving Credit Termination Date or such earlier date as may be required pursuant to the terms of the Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates provided in Article III of the Agreement. All or any portion of the principal amount of Loans may be prepaid or required to be prepaid as provided in the Agreement. If payment of all sums due hereunder is accelerated under the terms of the Agreement or under the terms of the other Loan Documents executed in connection with the Agreement, the then remaining principal amount and accrued but unpaid interest shall bear interest which shall be payable on demand at the rates per annum set forth in the proviso to Section 3.2 (a) of the Agreement. Further, in the event of such acceleration, this Revolving Note shall become immediately due and payable, without presentation, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Revolving Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees, and interest due hereunder thereon at the rates set forth above. F-1 Interest hereunder shall be computed as provided in the Agreement. This Revolving Note is one of the Revolving Notes referred to in the Agreement and is issued pursuant to and entitled to the benefits and security of the Agreement to which reference is hereby made for a more complete statement of the terms and conditions upon which the Revolving Loans evidenced hereby were or are made and are to be repaid. This Revolving Note is subject to certain restrictions on transfer or assignment as provided in the Agreement. This Note and the Loans evidenced hereby may be transferred in whole or in part only by registration of such transfer on the Register maintained by or on behalf of the Borrower as provided in Section 13.1(c) of the Agreement. All Persons bound on this obligation, whether primarily or secondarily liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive to the full extent permitted by law the benefits of all provisions of law for stay or delay of execution or sale of property or other satisfaction of judgment against any of them on account of liability hereon until judgment be obtained and execution issues against any other of them and returned satisfied or until it can be shown that the maker or any other party hereto had no property available for the satisfaction of the debt evidenced by this instrument, or until any other proceedings can be had against any of them, also their right, if any, to require the holder hereof to hold as security for this Revolving Note any collateral deposited by any of said Persons as security. Protest, notice of protest, notice of dishonor, diligence or any other formality are hereby waived by all parties bound hereon. F-2 IN WITNESS WHEREOF, the Borrower has caused this Revolving Note to be made, executed and delivered by its duly authorized representative as of the date and year first above written, all pursuant to authority duly granted. WALTER INDUSTRIES, INC. WITNESS: ______________________ By: _______________________________ Name: _____________________________ Title: ____________________________ F-3 EXHIBIT F-2 Form of Term Note Promissory Note (Term Loan) $---------------- --------, -------- ------ --, ---- FOR VALUE RECEIVED, WALTER INDUSTRIES, INC., a Delaware corporation having its principal place of business located in Tampa, Florida (the "Borrower"), hereby promises to pay to the order of ___________________________________ , its successors and registered assigns (the "Lender"), in its individual capacity, at the office of NATIONSBANK, NATIONAL ASSOCIATION, as agent for the Lenders (the "Agent"), located at One Independence Center, 101 North Tryon Street, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the Agent may designate in writing) at the times set forth in the Credit Agreement dated as of October 15, 1997 among the Borrower, the financial institutions party thereto as lenders (collectively, the "Lenders"), the Agent and certain financial institutions as managing agents (the "Agreement" -- all capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Agreement), in lawful money of the United States of America, in immediately available funds, the principal amount of _____________________ DOLLARS ($______________), such amount of principal to be payable on the respective dates and in the respective amounts provided for in Sections 2.3(a) and 2.13 of the Agreement or such earlier date as may be required pursuant to the terms of the Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates provided in Article II of the Agreement. All or any portion of the principal amount of Loans may be prepaid or required to be prepaid as provided in the Agreement. If payment of all sums due hereunder is accelerated under the terms of the Agreement or under the terms of the other Loan Documents executed in connection with the Agreement, the then remaining principal amount hereof and accrued but unpaid interest thereon shall bear interest which shall be payable on demand at the rates per annum set forth in the proviso to Section 2.4 of the Agreement. Further, in the event of such acceleration, this Term Note shall become immediately due and payable, without presentation, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Term Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest due hereunder, all costs of collection, including reasonable attorneys' fees, and interest thereon at the rates set forth above. Interest hereunder shall be computed as provided in the Agreement. F-2-1 This Term Note is one of the Term Notes referred to in the Agreement and is issued pursuant to and entitled to the benefits and security of the Agreement to which reference is hereby made for a more complete statement of the terms and conditions upon which the Term Loan evidenced hereby was made and is to be repaid. This Term Note is subject to certain restrictions on transfer or assignment as provided in the Agreement. This Note and the Loans evidenced hereby may be transferred in whole or in part only by registration of such transfer on the Register maintained by or on behalf of the Borrower as provided in Section 13.1(c) of the Agreement. All Persons bound on this obligation, whether primarily or secondarily liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive to the full extent permitted by law the benefits of all provisions of law for stay or delay of execution or sale of property or other satisfaction of judgment against any of them on account of liability hereon until judgment be obtained and execution issues against any other of them and returned satisfied or until it can be shown that the maker or any other party hereto had no property available for the satisfaction of the debt evidenced by this instrument, or until any other proceedings can be had against any of them, also their right, if any, to require the holder hereof to hold as security for this Term Note any collateral deposited by any of said Persons as security. Protest, notice of protest, notice of dishonor, diligence or any other formality are hereby waived by all parties bound hereon. F-2-2 IN WITNESS WHEREOF, the Borrower has caused this Term Note to be made, executed and delivered by its duly authorized representative as of the date and year first above written, all pursuant to authority duly granted. WALTER INDUSTRIES, INC. WITNESS: ______________________ By: _________________________________ ______________________ Name: _______________________________ Title: ______________________________ F-2-3 EXHIBIT G Form(s) of Opinion(s) of Counsel to Credit Parties See attached. G-1 EXHIBIT H Compliance Certificate NationsBank, National Association, as Agent Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: (704) 386-9923 NationsBank, National Association, as Agent 400 North Ashley Drive Tampa, Florida 33603 Attention: Corporate Banking Department Telefacsimile: (813) 224-5948 Reference is hereby made to the Credit Agreement dated as of October 15, 1997 (the "Agreement") among Walter Industries, Inc., a Delaware corporation (the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank, National Association, as Agent for the Lenders ("Agent"). Capitalized terms used but not otherwise defined herein shall have the respective meanings therefor set forth in the Agreement. The undersigned, a duly authorized and acting Authorized Representative, hereby certifies to you as of __________ (the "Determination Date") as follows: 1. Calculations: [Insert as Appropriate] 2. No Default A. Since __________ (the date of the last similar certification), (a) the Borrower has not defaulted in the keeping, observance, performance or fulfillment of its obligations pursuant to any of the Loan Documents; and (b) no Default or Event of Default specified in Article XI of the Agreement has occurred and is continuing. B. If a Default or Event of Default has occurred since __________ (the date of the last similar certification), the Borrower proposes to take the following action with respect to such Default or Event of Default:__________________________ H-1 ____________________________________________________________________ ___________________________________________________. (Note, if no Default or Event of Default has occurred, insert "Not Applicable"). The Determination Date is the date of the last required financial statements submitted to the Lenders in accordance with Section 9.1 of the Agreement. IN WITNESS WHEREOF, I have executed this Certificate this _____ day of __________, ____. By:________________________________ Authorized Representative Name:______________________________ Title:_____________________________ H-2 EXHIBIT I Form of Facility Guaranty for Subsidiaries THIS GUARANTY AND SURETYSHIP AGREEMENT (the "Guaranty Agreement" or the "Guaranty"), dated as of __________ __, ____, is made by each of the undersigned (each a "Guarantor" and collectively the "Guarantors") to NATIONSBANK, NATIONAL ASSOCIATION, a national banking association, as Administrative Agent, Documentation Agent and Syndication Agent (the "Agent") for each of the lenders now or hereafter party to the Credit Agreement (as defined below) (each a "Lender" and collectively the "Lenders"). W I T N E S S E T H: WHEREAS, the Agent and the Lenders have agreed to provide to Walter Industries, Inc., a Delaware corporation (the "Borrower") two term loan facilities, a revolving credit facility and letter of credit and swing line subfacilities pursuant to the terms of that certain Credit Agreement dated as of October 15, 1997 among the Borrower, the Agent and the Lenders (as from time to time amended, modified or supplemented, the "Credit Agreement"); and WHEREAS, each Guarantor is a direct or indirect Subsidiary of the Borrower; and WHEREAS, as a condition to entering into the Credit Agreement and continuing to make any loans or advances or to issue letters of credit thereunder, each Guarantor is required to guarantee to the Agent and the Lenders payment of the Borrower's Liabilities (as hereinafter defined) in accordance with the terms of this Agreement; and WHEREAS, each Guarantor will materially benefit from the loans and advances to be made, and the letters of credit to be issued, under the Credit Agreement, and each Guarantor is willing to enter into this Guaranty to provide an inducement for the Lenders and the Agent to continue to make loans and advances, and to issue letters of credit, under the Credit Agreement. NOW, THEREFORE, in order to induce the Lenders and the Agent to make loans and advances to the Borrower, and to issue letters of credit for the account of the Borrower, under the Credit Agreement, each Guarantor agrees as follows: 1. Definitions. All capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement. 2. Guaranty. Each Guarantor hereby jointly and severally, unconditionally, absolutely, continually and irrevocably guarantees to the Agent and the Lenders the payment and performance in full of the Borrower's Liabilities (as defined below). For all purposes of this Guaranty Agreement, "Borrower's Liabilities" means: (a) the Borrower's prompt payment in full, when due or declared due and at all such times, of all Obligations and all other amounts I-1 pursuant to the terms of the Credit Agreement, the Notes, and all other Loan Documents executed in connection with the Credit Agreement heretofore, now or at any time or times hereafter owing, arising, due or payable from the Borrower to the Lenders, including without limitation principal, interest, premium or fee (including, but not limited to, loan fees and attorneys' fees and expenses); and (b) the Borrower's prompt, full and faithful performance, observance and discharge of each and every agreement, undertaking, covenant and provision to be performed, observed or discharged by the Borrower under the Credit Agreement and all other Loan Documents executed in connection therewith. Each Guarantor's obligations to the Agent and the Lenders under this Guaranty Agreement are hereinafter collectively referred to as the "Guarantors' Obligations"; provided, however, that the liability of each Guarantor with respect to the Guarantors' Obligations shall not exceed at any time the Maximum Amount (as hereinafter defined). The "Maximum Amount" means the greater of (X) the aggregate amount of all Advances to such Guarantor made directly or indirectly with the proceeds of Loans and not theretofore repaid by such Guarantor or (Y) 95% of (i) the fair salable value of the assets of such Guarantor as of the date hereof minus (ii) the total liabilities of such Guarantor (including contingent liabilities, but excluding liabilities of such Guarantor under this Guaranty and any other Loan Documents executed by such Guarantor) as of the date hereof; provided further, however, that if the calculation of the Maximum Amount in the manner provided above as of the date payment is required of such Guarantor pursuant to this Guaranty would result in a greater positive number, then the Maximum Amount shall be deemed to be such greater positive number. Each Guarantor agrees that it is jointly and severally, directly and primarily liable for the Borrower's Liabilities. 3. Payment. If the Borrower shall default in payment or performance of any Borrower's Liabilities, whether principal, interest, premium, fee (including, but not limited to, loan fees and attorneys' fees and expenses), or otherwise, when and as the same shall become due, whether according to the terms of the Credit Agreement, by acceleration, or otherwise, or upon the occurrence of any other Event of Default under the Credit Agreement that has not been cured or waived, then each Guarantor, upon demand thereof by the Agent or its successors or assigns, will AS OF THE DATE OF THE AGENT'S DEMAND fully pay to the Agent, for the benefit of the Lenders, subject to any restriction set forth in Section 2 hereof, an amount equal to all Guarantor's Obligations then due and owing. 4. Unconditional Obligations. This is a guaranty of payment and not of collection. The Guarantors' Obligations under this Guaranty Agreement shall be joint and several, absolute and unconditional irrespective of the validity, legality or enforceability of the Credit Agreement, the Notes or any other Loan Document or any other guaranty of the Borrower's Liabilities, and shall not be affected by any action taken under the Credit Agreement, the Notes or any other Loan Document, any other guaranty of the Borrower's Liabilities, or any other agreement between the Agent or the Lenders and the Borrower or any other Person, in the exercise of any right or power therein conferred, or by any failure or omission to enforce any right conferred thereby, or by any waiver of any covenant or condition therein provided, or by any acceleration of the maturity of any of the Borrower's Liabilities, or by the release or other disposal of any security for any of the I-2 Borrower's Liabilities, or by the dissolution of the Borrower or the combination or consolidation of the Borrower into or with another entity or any transfer or disposition of any assets of the Borrower or by any extension or renewal of the Credit Agreement, any of the Notes or any other Loan Document, in whole or in part, or by any modification, alteration, amendment or addition of or to the Credit Agreement, any of the Notes or any other Loan Document, any other guaranty of the Borrower's Liabilities, or any other agreement between the Agent or the Lenders and the Borrower or any other Person, or by any other circumstance whatsoever (with or without notice to or knowledge of any Guarantor) which may or might in any manner or to any extent vary the risks of any Guarantor, or might otherwise constitute a legal or equitable discharge of a surety or guarantor; it being the purpose and intent of the parties hereto that this Guaranty Agreement and the Guarantors' Obligations hereunder shall be absolute and unconditional under any and all circumstances and shall not be discharged except by payment as herein provided. 5. Currency and Funds of Payment. Each Guarantor hereby guarantees that the Guarantors' Obligations will be paid in lawful currency of the United States of America and in immediately available funds, regardless of any law, regulation or decree now or hereafter in effect that might in any manner affect the Borrower's Liabilities, or the rights of the Agent or any Lender with respect thereto as against the Borrower, or cause or permit to be invoked any alteration in the time, amount or manner of payment by the Borrower of any or all of the Borrower's Liabilities. 6. Events of Default. In the event that (a) there shall occur an Event of Default under the Credit Agreement; (b) any default shall occur in the payment of amounts due hereunder; or (c) any other default shall occur hereunder which remains uncured or unwaived for a period of thirty (30) days (each of the foregoing an "Event of Default" hereunder); then notwithstanding any collateral available to the Agent or the Lenders from the Borrower or any Guarantor or any other guarantor of the Borrower's Liabilities, or any other party, at the Agent's election and without notice thereof or demand therefor, so long as such Event of Default shall be continuing, the Guarantors' Obligations shall immediately become due and payable. 7. Suits. Each Guarantor from time to time shall pay to the Agent for the benefit of the Lenders, on demand, at the Agent's place of business set forth in the Credit Agreement or such other address as the Agent shall give notice of to the Guarantor, the Guarantors' Obligations as they become or are declared due, and in the event such payment is not made forthwith, the Agent or the Lenders or any of them may proceed to suit against any one or more or all of the Guarantors. At the Agent's election, one or more and successive or concurrent suits may be brought hereon by the Agent against any one or more or all of the Guarantors, whether or not suit has been commenced against the Borrower, any other guarantor of the Borrower's Liabilities, or any other Person and whether or not the Agent or any Lender has taken or failed to take any other action to collect all or any portion of the Borrower's Liabilities. 8. Set-Off and Waiver. Each Guarantor waives any right to assert against the Agent and the Lenders as a defense, counterclaim, set-off or cross claim, any defense (legal or equitable) or other claim which such Guarantor may now or at any time hereafter have against the Borrower, I-3 the Agent or the Lenders, without waiving any additional defenses, set-offs, counterclaims or other claims otherwise available to such Guarantor. If at any time hereafter the Agent or any Lender employs counsel for advice or other representation to enforce the Guarantors' Obligations that arise out of an Event of Default, then, in any of the foregoing events, all of the reasonable attorneys' fees arising from such services and all expenses, costs and charges in any way or respect arising in connection therewith or relating thereto shall be jointly and severally paid by the Guarantors to the Agent, for the benefit of the Lenders, on demand. 9. Waiver; Subrogation. (a) Each Guarantor hereby waives notice of the following events or occurrences: (i) the Agent's acceptance of this Guaranty Agreement; (ii) the Lenders' heretofore, now or from time to time hereafter loaning monies or giving or extending credit to or for the benefit of the Borrower, whether pursuant to the Credit Agreement, the Notes or the other Loan Documents, or any amendments, modifications, or supplements thereto, or replacements or extensions thereof; (iii) the Agent, the Lenders or the Borrower heretofore, now or at any time hereafter, obtaining, amending, substituting for, releasing, waiving or modifying the Credit Agreement, the Notes or any other Loan Documents; (iv) presentment, demand, notices of default, non-payment, partial payment and protest; (v) the Agent or the Lenders heretofore, now or at any time hereafter granting to the Borrower (or any other party liable to the Lenders on account of the Borrower's Liabilities) any indulgence or extensions of time of payment of the Borrower's Liabilities; and (vi) the Agent or the Lenders heretofore, now or at any time hereafter accepting from the Borrower or any other person, any partial payment or payments on account of the Borrower's Liabilities or any collateral securing the payment thereof or the Agent settling, subordinating, compromising, discharging or releasing the same in whole or in part. Each Guarantor agrees that the Agent and each Lender may heretofore, now or at any time hereafter do any or all of the foregoing in such manner, upon such terms and at such times as the Agent and each Lender, in its sole and absolute discretion, deems advisable, without in any way or respect impairing, affecting, reducing or releasing such Guarantor from the Guarantors' Obligations, and each Guarantor hereby consents to each and all of the foregoing events or occurrences. (b) Each Guarantor hereby agrees that payment or performance by such Guarantor of the Guarantors' Obligations under this Guaranty Agreement may be enforced by the Agent on behalf of the Lenders upon demand by the Agent to such Guarantor without the Agent being required, each Guarantor expressly waiving any right it may have to require the Agent, to (i) prosecute collection or seek to enforce or resort to any remedies against the Borrower or any other Guarantor or any other guarantor of the Borrower's Liabilities, IT BEING EXPRESSLY UNDERSTOOD, ACKNOWLEDGED AND AGREED TO BY EACH GUARANTOR THAT DEMAND UNDER THIS GUARANTY AGREEMENT MAY BE MADE BY THE AGENT, AND THE PROVISIONS HEREOF ENFORCED BY THE AGENT, EFFECTIVE AS OF THE FIRST DATE ANY EVENT OF DEFAULT OCCURS AND IS CONTINUING UNDER THE CREDIT AGREEMENT, or (ii) seek to enforce or resort to any remedies with respect to any security interests, Liens or encumbrances granted to the Agent by the Borrower or any other Person on account of the Borrower's Liabilities or any guaranty thereof. Neither the Agent nor I-4 any Lender shall have any obligation to protect, secure or insure any of the foregoing security interests, Liens or encumbrances on the properties or interests in properties subject thereto. The Guarantors' Obligations shall in no way be impaired, affected, reduced, or released by reason of the Agent's or any Lender's failure or delay to do or take any of the acts, actions or things described in this Guaranty Agreement including, without limiting the generality of the foregoing, those acts, actions and things described in this Section 9. (c) Each Guarantor further agrees with respect to this Guaranty Agreement that such Guarantor shall have no right of subrogation, reimbursement or indemnity, nor any right of recourse to security for the Borrower's Liabilities until such time as all of the Obligations of the Borrower are fully, finally and irrevocably paid and satisfied. 10. Effectiveness; Enforceability. This Guaranty Agreement shall be effective as of the date of the initial Advance under the Credit Agreement, and shall continue in full force and effect until the Borrower's Obligations (other than obligations in the nature of continuing indemnities and liability for expenses which are not yet due and payable, which shall survive as an obligation guarantied by the Guarantors hereunder notwithstanding any termination hereof) are fully, finally and irrevocably paid and satisfied, the Lenders shall be under no further obligation to advance funds or issue Letters of Credit and there shall be no Letters of Credit outstanding. The Agent shall give each Guarantor written notice of such termination at each Guarantor's address set forth below such Guarantor's execution hereof on the signature pages of this Guaranty or such other address for the Guarantor as such Guarantor shall give notice to the Agent in the manner provided for the giving of notices under the Credit Agreement (the "Guarantor's Address"). This Guaranty Agreement shall be binding upon and inure to the benefit of each Guarantor, the Agent and the Lenders and their respective successors and assigns. Notwithstanding the foregoing, no Guarantor may, without the prior written consent of the Agent, assign any rights, powers, duties or obligations hereunder. Any claim or claims that the Agent and the Lenders may at any time hereafter have against any Guarantor under this Guaranty Agreement may be asserted by the Agent or any Lender by written notice directed to any one or more or all of the Guarantors at the applicable Guarantor's Address. 11. Representations and Warranties. Each Guarantor warrants and represents to the Agent for the benefit of the Lenders that it is duly authorized to execute, deliver and perform this Guaranty Agreement, that this Guaranty Agreement is legal, valid, binding and enforceable against such Guarantor in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; and that such Guarantor's execution, delivery and performance of this Guaranty Agreement do not violate or constitute a breach of any of its charter or governance documents or any agreement to which such Guarantor is a party, or any law, order, rule, regulation, decree or award of any applicable Governmental Authority or arbitral body. I-5 12. Expenses. Each Guarantor agrees to be liable for the payment of all reasonable fees and expenses, including attorney's fees, incurred by the Agent or any Lender in connection with the enforcement of this Guaranty Agreement. 13. Reinstatement. Each Guarantor agrees that this Guaranty Agreement shall continue to be effective or be reinstated, as the case may be, at any time payment received by the Agent under the Credit Agreement or any other Loan Document or this Guaranty Agreement is rescinded or must be restored for any reason. 14. Counterparts. This Guaranty Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall constitute one and the same instrument. 15. Reliance. Each Guarantor represents and warrants to the Agent, for the benefit of the Agent and the Lenders, that: (a) such Guarantor has adequate means to obtain from Borrower, on a continuing basis, information concerning Borrower and Borrower's financial condition and affairs and has full and complete access to Borrower's books and records; (b) such Guarantor is not relying on the Agent, any Co-Agent or any Lender, its or their employees, agents or other representatives, to provide such information, now or in the future; (c) such Guarantor is executing this Guaranty Agreement freely and deliberately, and understands the obligations and financial risk undertaken by providing this Guaranty; (d) such Guarantor has relied solely on the Guarantor's own independent investigation, appraisal and analysis of Borrower and Borrower's financial condition and affairs in deciding to provide this Guaranty and is fully aware of the same; and (e) such Guarantor has not depended or relied on the Agent, any Co-Agent or any Lender, its or their employees, agents or representatives, for any information whatsoever concerning Borrower or Borrower's financial condition and affairs or other matters material to such Guarantor's decision to provide this Guaranty or for any counselling, guidance, or special consideration or any promise therefor with respect to such decision. Each Guarantor agrees that neither the Agent, any Co-Agent nor any Lender has any duty or responsibility whatsoever, now or in the future, to provide to any Guarantor any information concerning Borrower or Borrower's financial condition and affairs, other than as expressly provided herein, and that, if such Guarantor receives any such information from the Agent, any Co-Agent or any Lender, its or their employees, agents or other representatives, such Guarantor will independently verify the information and will not rely on the Agent, any Co-Agent or any Lender, its or their employees, agents or other representatives, with respect to such information. 16. Governing Law. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. I-6 (b) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF HILLSBOROUGH, STATE OF FLORIDA, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (c) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE GUARANTOR'S ADDRESS (AS HEREIN DEFINED) FOR EACH GUARANTOR AND AT THE ADDRESS OF SUCH OTHER PARTY PROVIDED IN SECTION 12.02 OF THE CREDIT AGREEMENT OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF FLORIDA. (d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL PRECLUDE ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT. (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND EACH PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED I-7 BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. IN WITNESS WHEREOF, the parties have duly executed this Guaranty Agreement on the day and year first written above. GUARANTORS: WITNESS: By:______________________________________ Name:____________________________________ ______________________ Title:___________________________________ ______________________ Address for Notices: _________________________________________ _________________________________________ _________________________________________ Telefacsimile: / - WITNESS: By:______________________________________ Name:____________________________________ ______________________ Title:___________________________________ ______________________ Address for Notices: _________________________________________ _________________________________________ _________________________________________ Telefacsimile: / - I-8 AGENT: NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Lenders By:______________________________________ Name:_________________________________ Title:________________________________ I-9 EX-99.1 4 PRESS RELEASE CONTACT: David L. Townsend Walter Industries, Inc. (813) 871-4448 FOR IMMEDIATE RELEASE WALTER INDUSTRIES TO ACQUIRE APPLIED INDUSTRIAL MATERIALS CORPORATION Tampa, FL, September 22, 1997 -- Walter Industries, Inc. (Nasdaq: WLTR) announced today that it has signed a definitive agreement to acquire privately held Applied Industrial Materials Corporation ("AIMCOR"), a leading international provider of products and outsourcing services to both the petroleum industry and steel, foundry and aluminum industries. The purchase price is approximately $400 million, to be funded through new bank credit facilities underwritten by NationsBank. The transaction has been approved by the boards of directors of both companies and is expected to close during Walter Industries' fiscal second quarter ending November 30, subject to review under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act. "The acquisition of AIMCOR is consistent with our stated goal of increasing returns for our shareholders by strengthening the balance of our homebuilding and industrial businesses," said Kenneth E. Hyatt, Walter Industries' Chairman and Chief Executive Officer. "It affords us an excellent opportunity to enhance our industrial operations and overall profitability. Given the timing of the transaction, we expect AIMCOR to be slightly accretive to net earnings in our current fiscal year, with increasing contributions anticipated in subsequent years." AIMCOR, headquartered in Stamford, Connecticut, currently generates approximately $450 million in revenues and $50 million in operating income annually. It has approximately 440 employees worldwide. AIMCOR's Carbon Products Group (84% of revenues) is the world's largest marketer and distributor of petroleum cokes ("petcoke"), shipping more than seven million tons annually, and an integrated supplier of value-added services from the production source to the company's global customer base. A by-product of oil refining, petcoke is a competitively priced fuel and carbon source used in numerous industrial applications, including the manufacture of steel and cement. In its most refined form, as calcined coke, it is used as the primary ingredient in anodes for the smelting of aluminum. The refining industry's trend toward outsourcing of non-core operations has driven AIMCOR to undertake increasing in-refinery services, warehousing, and terminal operations which add value to the petcoke it ultimately markets and distributes. - more - - 2 - AIMCOR's Metals Group, with operating facilities in Canada, Mexico and the U.S., produces and markets a variety of ferroalloys, metals and specialty materials that are used primarily as alloying agents, fluxing agents and/or performance improvement additives by the steelmaking and metal-casting industries. Mr. Hyatt commented: "We were attracted to AIMCOR because of its prominence in niche markets, value-added services, long-term relationships with major refineries, and favorable industry dynamics which are expected to support continued earnings growth in the company's global businesses." AIMCOR will join other industrial businesses of Walter Industries which offer proprietary products and leading market positions. These include: United States Pipe and Foundry Company, the nation's leading manufacturer of ductile iron pressure pipe; Sloss Industries, a furnace coke, foundry coke and specialty chemicals company; and JW Aluminum Company, a provider of value-added specialty aluminum products. "Beyond its considerable product and marketing strengths, AIMCOR's high-caliber management will be an excellent fit with Walter Industries," said Mr. Hyatt. "They have assembled a strong and aggressive team of seasoned professionals averaging 20 years of industry experience and 15 years with the company. We look forward to combining our manufacturing expertise and capital resources to help them further grow their businesses. AIMCOR will function as an autonomous subsidiary within Walter Industries in keeping with the entrepreneurial focus of each of our operating units." Peter Scott-Hansen, AIMCOR's Chief Executive Officer, President of its Carbon Products Group and a pioneering influence in the development of the worldwide petcoke market, said: "As a proven leader in a broad range of niche industrial markets, Walter Industries offers an excellent environment for AIMCOR's continued growth and development. We are delighted to become part of the Walter Industries organization and look forward to contributing to the company's operating and earnings expansion." NationsBank, as Agent, is expected to arrange an $800 million financing package, comprised of a $350 million Revolving Credit Facility and a $450 million Term Loan Facility. These credit facilities will be used to fund the AIMCOR purchase, retire existing bank debt, and provide for Walter Industries' ongoing working capital needs. - more - - 3 - Note to Editor: Walter Industries, Inc., based in Tampa, Florida, is a diversified, multi- subsidiary company with major interests in homebuilding/financing and industrial operations. Walter Industries and its subsidiaries employ 7,600 at manufacturing facilities and sales offices throughout the United States. In its most recent fiscal year ended May 31, 1997, Walter Industries generated revenues of $1.5 billion and $144.7 million of operating income. The preceding contains certain forward-looking statements which reflect the current views of Walter Industries, Inc. with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Among those factors which could cause actual results to differ materially are the degree to which Walter Industries is leveraged, risks of business downturn, and other risk factors listed from time to time in the Company's SEC reports. # # # # # EX-99.2 5 PRESS RELEASE CONTACT: David L. Townsend Walter Industries, Inc. (813) 871-4448 FOR IMMEDIATE RELEASE WALTER INDUSTRIES COMPLETES AIMCOR ACQUISITION Tampa, FL, October 16, 1997 -- Walter Industries, Inc. (Nasdaq: WLTR) announced today that it has completed its previously announced acquisition of privately held Applied Industrial Materials Corporation ("AIMCOR"), a leading international provider of products and outsourcing services to the petroleum industry and steel, foundry and aluminum industries. The purchase price was approximately $400 million and was funded through new bank credit facilities underwritten by NationsBank. Kenneth E. Hyatt, Walter Industries' Chairman and Chief Executive Officer, said: "We welcome the management and employees of AIMCOR as they become part of the Walter Industries team. We look forward to working with them to maximize AIMCOR's potential and its contribution to our company. AIMCOR represents an excellent opportunity to increase returns for our shareholders by accelerating the earnings momentum from our balanced mix of homebuilding and industrial businesses." AIMCOR, headquartered in Stamford, Connecticut, is the world's largest marketer and distributor of petroleum cokes, shipping more than seven million tons annually. The company is also an integrated supplier of value-added services from the production source to the company's global customer base. Additionally, AIMCOR produces and markets ferroalloys, metals and specialty materials used primarily as alloying agents, fluxing agents, and/or performance improvement additives by the steelmaking and metal-casting industries. AIMCOR currently generates more than $450 million in revenues and $50 million in operating income annually. Note to Editor: Walter Industries, Inc., based in Tampa, Florida, is a diversified, multi-subsidiary company with major interests in homebuilding/financing and industrial operations. Walter Industries and its subsidiaries employ 7,600 at manufacturing facilities and sales offices throughout the United States. In its most recent fiscal year ended May 31, 1997, Walter Industries generated revenues of $1.5 billion and $144.7 million of operating income. # # # # # -----END PRIVACY-ENHANCED MESSAGE-----