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AMENDED AND RESTATED
SECURED CREDIT AGREEMENT
DATED AS OF
SEPTEMBER 3, 1998
AMONG
PALEX, INC., AS BORROWER
AND
THE LENDERS PARTY HERETO
AND
BANK ONE, TEXAS, NATIONAL ASSOCIATION,
AS ADMINISTRATIVE AGENT
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TABLE OF CONTENTS
PAGE
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SECTION 1. DEFINITIONS; INTERPRETATION.................................... 1
Section 1.1 Definitions................................................ 1
Section 1.2 Interpretation............................................. 13
SECTION 2. THE CREDIT FACILITY............................................ 13
Section 2.1 Loans...................................................... 13
Section 2.2 Letters of Credit.......................................... 13
Section 2.3 Types of Loans and Minimum Borrowing Amounts............... 17
Section 2.4 Manner of Borrowing........................................ 18
Section 2.5 Interest Periods........................................... 20
Section 2.6 Interest Payments.......................................... 20
Section 2.7 Default Rates.............................................. 21
Section 2.8 Maturity of Loans.......................................... 22
Section 2.9 Optional Prepayments....................................... 22
Section 2.10 Mandatory Prepayments of Loans............................. 23
Section 2.11 The Note................................................... 23
Section 2.12 Breakage Fees.............................................. 23
Section 2.13 Commitment Terminations.................................... 24
SECTION 3. FEES AND PAYMENTS.............................................. 24
Section 3.1 Fees....................................................... 24
Section 3.2 Place and Application of Payments.......................... 25
Section 3.3 Withholding Taxes.......................................... 26
SECTION 4. CONDITIONS PRECEDENT........................................... 28
Section 4.1 Conditions Precedent to Initial Borrowing.................. 28
Section 4.2 Conditions Precedent to all Borrowings..................... 29
SECTION 5. REPRESENTATIONS AND WARRANTIES................................. 30
Section 5.1 Organization............................................... 31
Section 5.2 Power and Authority; Validity.............................. 31
Section 5.3 No Violation............................................... 31
Section 5.4 Litigation................................................. 32
Section 5.5 Use of Proceeds; Margin Regulations........................ 32
Section 5.6 Investment Company Act..................................... 32
Section 5.7 Public Utility Holding Company Act......................... 32
Section 5.8 True and Complete Disclosure............................... 32
Section 5.9 Financial Statements....................................... 32
Section 5.10 No Material Adverse........................................ 33
Section 5.11 Labor Controversies........................................ 33
Section 5.12 Taxes...................................................... 33
Section 5.13 ERISA...................................................... 33
Section 5.14 Consents................................................... 33
Section 5.15 Capitalization............................................. 33
Section 5.16 Ownership of Property...................................... 34
Section 5.17 Compliance with Statutes................................... 34
Section 5.18 Environmental Matters...................................... 34
Section 5.19 Year 2000 Compliance....................................... 35
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Section 5.20 Existing Liens and Indebtedness............................ 35
SECTION 6. COVENANTS...................................................... 35
Section 6.1 Corporate Existence........................................ 35
Section 6.2 Maintenance................................................ 36
Section 6.3 Taxes...................................................... 36
Section 6.4 ERISA...................................................... 36
Section 6.5 Insurance.................................................. 36
Section 6.6 Financial Reports and Other Information.................... 36
Section 6.7 Lenders Inspection Rights.................................. 39
Section 6.8 Conduct of Business........................................ 39
Section 6.9 New Subsidiaries........................................... 39
Section 6.10 Dividends and Negative Pledges............................. 39
Section 6.11 Restrictions on Fundamental Changes........................ 40
Section 6.12 Environmental Laws......................................... 40
Section 6.13 Liens...................................................... 41
Section 6.14 Indebtedness............................................... 42
Section 6.15 Loans, Advances and Investments............................ 43
Section 6.16 Transfer of Assets......................................... 43
Section 6.17 Transactions with Affiliates............................... 44
Section 6.18 Compliance with Laws....................................... 44
Section 6.19 Credit Exposure............................................ 44
Section 6.20 Minimum Consolidated Net Worth............................. 44
Section 6.21 Minimum Fixed Charge Coverage Ratio........................ 45
Section 6.22 Maximum Funded Debt to EBITDA Ratio........................ 45
Section 6.23 Minimum Tangible Assets to Senior Debt Plus
Current Liabilities Ratio.................................. 45
Section 6.24 Maximum Senior Debt to EBITDA Ratio........................ 45
SECTION 7. EVENTS OF DEFAULT AND REMEDIES................................. 45
Section 7.1 Events of Default.......................................... 45
Section 7.2 Non-Bankruptcy Defaults.................................... 47
Section 7.3 Bankruptcy Defaults........................................ 47
Section 7.4 Collateral for Undrawn Letters of Credit................... 48
Section 7.5 Notice of Default.......................................... 48
SECTION 8. CHANGE IN CIRCUMSTANCES........................................ 49
Section 8.1 Change of Law.............................................. 49
Section 8.2 Unavailability of Deposits or Inability to Ascertain
LIBOR Rate................................................. 49
Section 8.3 Increased Cost and Reduced Return.......................... 49
Section 8.4 Lending Offices............................................ 51
Section 8.5 Discretion of Lender as to Manner of Funding............... 51
SECTION 9. THE AGENT...................................................... 51
Section 9.1 Appointment and Authorization of Agent..................... 51
Section 9.2 Rights and Powers.......................................... 51
Section 9.3 Action by Agent............................................ 51
Section 9.4 Consultation with Experts.................................. 52
Section 9.5 Indemnification Provisions................................. 52
Section 9.6 Indemnity.................................................. 53
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Section 9.7 Resignation of Agent and Successor Agent................... 53
SECTION 10. MISCELLANEOUS.................................................. 53
Section 10.1 No Waiver of Rights........................................ 53
Section 10.2 Non-Business Day........................................... 54
Section 10.3 Documentary Taxes.......................................... 54
Section 10.4 Survival of Representations................................ 54
Section 10.5 Survival of Indemnities.................................... 54
Section 10.6 Setoff..................................................... 54
Section 10.7 Notices.................................................... 55
Section 10.8 Counterparts............................................... 56
Section 10.9 Successors and Assigns..................................... 56
Section 10.10 Sales and Transfers of Borrowings and Notes;
Participations in Borrowings and Notes..................... 56
Section 10.11 Amendments................................................. 58
Section 10.12 Headings................................................... 59
Section 10.13 Legal Fees, Other Costs and Indemnification................ 59
Section 10.14 Governing Law; Arbitration; Submission to Jurisdiction;
Waiver of Jury Trial....................................... 60
Section 10.15 Confidentiality............................................ 62
Section 10.16 Severability............................................... 62
Section 10.17 Change in Accounting Principles or Tax Laws................ 62
Section 10.18 Loans Under Prior Credit Agreement......................... 62
Section 10.19 Effectiveness.............................................. 63
Section 10.20 Notice..................................................... 63
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EXHIBITS
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Exhibit 2.2A Form of Borrowing Request
Exhibit 2.2B Form of Application
Exhibit 2.11 Form of Note
Exhibit 4.1A Form of Subsidiary Guaranty
Exhibit 4.1B Form of Stock Pledge Agreement
Exhibit 4.1C Form of Financial Condition Certificate
Exhibit 6.6 Form of Compliance Certificate
Exhibit 10.10 Form of Assignment Agreement
SCHEDULES
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Schedule 5.1 List of Subsidiaries
Schedule 5.4 List of Litigation
Schedule 5.20 List of Existing Liens and Indebtedness
Schedule 6.13 List of Permitted Liens and Indebtedness
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AMENDED AND RESTATED SECURED CREDIT AGREEMENT, dated as of September 3,
1998, between PalEx, Inc., a Delaware corporation (the "Borrower"), Ridge
Pallets, Inc., a Florida corporation (a "Borrower" for purposes of Section
2.2(c) hereof), Bank One, Texas, National Association ("Bank One"), National
City Bank, Xxxxx Fargo Bank, Comerica Bank, Paribas f/k/a Banque Paribas, and
the other lenders from time to time parties hereto (each a "Lender" and
collectively, the "Lenders"), and Bank One as administrative agent for the
Lenders (in such capacity, the "Agent").
WITNESSETH:
WHEREAS, the Borrower, certain of the Lenders and the Agent have previously
entered into that certain Secured Credit Agreement dated as of January 29, 1998
(the "Prior Credit Agreement"); and
WHEREAS, certain of the parties to the Prior Credit Agreement desire to
amend and restate such agreement in its entirety as provided herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION.
Section 1.1 Definitions. Unless otherwise defined herein, the following
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terms shall have the following meanings:
"Acquisition" means a direct or indirect purchase by the Borrower or any of
its Subsidiaries after the Effective Date hereof for cash, stock, subordinated
convertible notes or other securities or other property, whether in one or more
related transactions, of all or substantially all of the assets or voting
securities or other equity interests of a Person or a business unit, division or
group of a Person.
"Adjusted LIBOR Rate" means, for any Borrowing of LIBOR Loans, a rate per
annum determined in accordance with the following formula:
Adjusted LIBOR Rate = LIBOR Rate
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1.00 - Eurodollar Reserve Percentage
"Affiliate" means, for any Person, (i) any other Person that directly or
indirectly through one or more intermediaries controls, or is under common
control with, or is controlled by, such Person, and (ii) any other Person owning
beneficially or controlling ten percent (10%) or more of the equity interests in
such Person. As used in this definition, "control" means the power, directly or
indirectly,
to direct or cause the direction of management or policies of a Person (through
ownership of voting securities or other equity interests, by contract or
otherwise).
"Agent" means Bank One acting in its capacity as administrative agent for
the Lenders, and any successor agent appointed hereunder pursuant to Section
9.7.
"Agent Loans" means the loans made by the Agent, in its sole discretion,
described in Section 2.1(b).
"Agent Swing Line" means the uncommitted credit facility in an amount of
$5,000,000 for making Agent Loans described in Section 2.1(b).
"Agreement" means this Secured Credit Agreement, as amended, restated or
supplemented from time to time.
"Applicable Margin" means for Base Rate Loans or LIBOR Loans, as
applicable, for any day at such times as the relevant Funded Debt to EBITDA
Ratio is in one of the following ranges, the percentage per annum set forth
opposite such Funded Debt to EBITDA Ratio for such Loans as follows:
Funded Debt to
EBITDA Ratio LIBOR Loans Base Rate Loans
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Less than or equal to 1.25 to 1.0 0.75% 0.00%
Greater than 1.25 to 1.0 but less 1.00% 0.00%
than or equal to 1.50 to 1.0
Greater than 1.50 to 1.0 but less 1.25% 0.00%
than or equal to 2.0 to 1.0
Greater than 2.0 to 1.0 but less 1.50% 0.00%
than or equal to 2.50 to 1.0
Greater than 2.50 to 1.0 but less 1.75% 0.25%
than or equal to 3.0 to 1.0
Greater than 3.0 to 1.0 2.00% 0.25%
For the period from the Effective Date through the Commitment Step-down Date,
the Applicable Margin for LIBOR Loans shall be 2.00% and the Applicable Margin
for Base Rate Loans shall be 0.25%. Thereafter, the Applicable Margin shall be
set by the Agent upon its receipt of the applicable financial statements and
Compliance Certificate as required by Section 6.6(a)(i) or (ii) and Section
6.6(b) from the Borrower to be effective as of the date (i) one (1) day after
the Commitment Step-down Date or (ii) one (1) Business Day after the earlier of
the date such financial statements are
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required to be provided or the date such financial statements are provided to
the Agent, as applicable.
"Application" means an application for a Letter of Credit as defined in
Section 2.2(c).
"Arranger" means Bank One Capital Markets.
"Assignment Agreement" means an agreement in substantially the form of
Exhibit 10.10 whereby a Lender conveys part or all of its Commitments, Loans and
participations in Letters of Credit to another Person that thereupon becomes a
Lender, or that increases its Commitments, outstanding Loans and outstanding
participations in Letters of Credit pursuant to Section 10.10.
"Base Rate" means, for any day, the fluctuating commercial loan rate
announced by the Agent from time to time as its base rate for Dollar loans in
the United States of America in effect on such day (which base rate may not be
the lowest rate charged by the Agent on loans to any of its customers), with any
change in the Base Rate resulting from a change in such announced rate to be
effective on the date of the relevant change.
"Base Rate Loan" means (i) a Revolving Loan bearing interest prior to
maturity at the Base Rate plus the Applicable Margin, or (ii) an Agent Loan
bearing interest prior to maturity at the Base Rate minus 0.5%, as applicable.
"Borrower" means PalEx, Inc., a Delaware corporation, and for purposes of
Section 2.2(b), Ridge Pallets.
"Borrowing" means any extension of credit made by the Lenders or the Agent,
as the case may be, by way of Loans or Letters of Credit, including any
Borrowings advanced, continued or converted. A Borrowing is "advanced" on the
day the Lenders or the Agent, as the case may be, advances funds comprising such
Borrowing to the Borrower or a Letter of Credit is issued, is "continued" (in
the case of LIBOR Loans) on the date a new Interest Period commences for such
Borrowing and is "converted" when such Borrowing is changed from one type of
Loan to the other, all as requested by the Borrower pursuant to Section 2.4(a).
"Borrowing Request" means a request for a Borrowing as defined in Section
2.2(c).
"Business Day" means any day other than a Saturday or Sunday on which banks
are not authorized or required to close in Houston, Texas, and, if the
applicable Business Day relates to the advance or continuation of, conversion
into or payment on a LIBOR Loan, on which banks are dealing in Dollar deposits
in the interbank eurocurrency market in London, England.
"Capitalized Lease Obligations" means, for any Person, the amount of such
Person's liabilities under all leases of real or personal property (or any
interest therein) which is required to be capitalized on the balance sheet of
such Person as determined in accordance with GAAP.
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"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than twelve (12) months
from the date of acquisition; (ii) U.S. Dollar denominated time deposits and
certificates of deposit maturing within one (1) year from the date of
acquisition thereof with any Lender or any other financial institution whose
short-term senior unsecured debt rating is at least A-1 from S&P or P-1 from
Xxxxx'x; (iii) LIBOR denominated time deposits and certificates of deposit
maturing within six (6) months from the date of acquisition thereof with any
Lender or any other financial institution whose short-term senior unsecured debt
rating is at least A-1 from S&P or P-1 from Xxxxx'x; (iv) commercial paper or
Eurocommercial paper with a rating of at least A-1 from S&P or P-1 from Xxxxx'x,
with maturities of not more than twelve (12) months from the date of
acquisition; (v) repurchase obligations entered into with any Lender or any
other financial institution whose short-term senior unsecured debt rating is at
least A-1 from S&P or P-1 from Xxxxx'x, which are secured by a fully perfected
security interest in any obligation of the type described in (i) above and has a
market value of the time such repurchase is entered into of not less than 100%
of the repurchase obligation of such Lender or such other Person thereunder;
(vi) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within twelve (12) months from the date of
acquisition thereof or providing for the resetting of the interest rate
applicable thereto not less often than annually and, at the time of acquisition,
having one of the two highest ratings obtainable from either S&P or Xxxxx'x; and
(vii) money market funds which have at least $1,000,000,000 in assets and which
invest primarily in securities of the types described in clauses (i) through
(vi) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means the stock of any Subsidiary in which the Agent is
granted a Lien for the benefit of the Lenders under the terms of a Stock Pledge
Agreement.
"Collateral Account" means the cash collateral account for outstanding
undrawn Letters of Credit as defined in Section 7.4(b).
"Commitment" means, relative to any Lender, such Lender's obligation to
make Revolving Loans and participate in Letters of Credit issued pursuant to
Sections 2.1 and 2.2 in the percentage set forth opposite its signature hereto
for the period from the Effective Date to the Commitment Step-down Date or for
the period on and after the Commitment Step-down Date to the Commitment
Termination Date, as applicable, or pursuant to the provisions of Section 10.10,
as such commitment may be reduced from time to time pursuant to this Agreement,
provided that the obligation of the Agent to make Revolving Loans and
participate in Letters of Credit shall be limited to the amount of the Agent's
commitment at such time minus the outstanding principal amount of the Agent
Loans from time to time outstanding.
"Commitment Amount" means (i) prior to the Commitment Step-down Date, an
amount equal to $150,000,000 minus the outstanding principal amount of Agent
Loans, and (ii) on and after the
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Commitment Step-down Date, an amount equal to $125,000,000 minus the outstanding
principal amount of Agent Loans, in each case as such amounts may be reduced
from time to time pursuant to the terms of this Agreement.
"Commitment Step-down Date" means the earlier of (i) December 31, 1998, and
(ii) the date on which the Borrower receives the proceeds of a Public Debt
Issue.
"Commitment Termination Date" means the earliest of (i) the Maturity Date;
(ii) the date on which the Commitments are terminated in full or reduced to zero
pursuant to Section 2.13; or (iii) the occurrence of any Event of Default
described in Section 7.1(f) or (g) with respect to the Borrower or the
occurrence and continuance of any other Event of Default and either (x) the
declaration of the Loans to be due and payable pursuant to Section 7.2, or (y)
in the absence of such declaration, the giving of written notice by the Agent,
acting at the direction of the Majority Lenders, to the Borrower pursuant to
Section 7.2 that the Commitments have been terminated.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit 6.6.
"Consolidated Interest Expense" means, for any period, total interest
expense of the Borrower and its Subsidiaries on a consolidated basis for such
period in connection with Indebtedness, determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income (or loss),
after provision for taxes, of the Borrower and its Subsidiaries on a
consolidated basis for such period, determined in accordance with GAAP.
"Consolidated Net Worth" means, as of any date of determination, the
Borrower's consolidated stockholders equity determined in accordance with GAAP.
"Credit Documents" means this Agreement, the Notes, the Subsidiary
Guaranties, the Stock Pledge Agreements, the Applications, the Borrowing
Requests and any other documents or instruments executed by the Borrower or any
of the Guarantors in connection with this Agreement.
"Current Liabilities" means, as of any date of determination, the sum of
all current liabilities (including, without duplication, the aggregate face
amount of all undrawn Letters of Credit but excluding all other contingent
obligations) calculated on a consolidated basis for the Borrower and its
Subsidiaries in accordance with GAAP.
"Default" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.
"Dollar" and "U.S. Dollar" and the sign "$" means lawful money of the
United States of America.
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"EBITDA" means, for any period, on a historic four fiscal quarter rolling
basis, the sum of (i) Consolidated Net Income plus each of the following to the
extent actually deducted in determining Consolidated Net Income (a) Consolidated
Interest Expense, (b) provisions for taxes based on income or revenues, and (c)
any extraordinary, unusual or nonrecurring gains or losses plus (ii) the amount
of all depreciation, amortization expense and other non-cash charges deducted in
determining Consolidated Net Income, all calculated on a consolidated basis for
the Borrower and its Subsidiaries and as determined in accordance with GAAP.
Upon the consummation of any Acquisition, EBITDA shall be adjusted to include
the historical financial results of the acquired business (on a trailing four
fiscal quarter pro forma basis consistent with SEC regulations).
"Effective Date" means the date this Agreement becomes effective as defined
in Section 10.19.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of non-
compliance or violations, investigations or proceedings relating to any
Environmental Law ("Claims") or any permit issued under any Environmental Law,
including, without limitation, (i) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and (ii)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials or arising from alleged injury or threat of injury to health
or safety in relation to the environment.
"Environmental Law" means any federal, state or local statute, law, rule,
regulation, ordinance, code, policy or rule of common law now or hereafter in
effect, including any judicial or administrative order, consent, decree or
judgment relating to (i) the environment, (ii) health or safety in relation to
the environment or (iii) Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eurodollar Reserve Percentage" means, with respect to each Interest Period
for a LIBOR Loan, a percentage (expressed as a decimal) equal to the daily
average during such Interest Period of the percentages in effect on each day of
such Interest Period, if any, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor thereto), for determining the maximum
reserve requirements (including, without limitation, any supplemental, marginal
and emergency reserves) applicable to "Eurocurrency Liabilities" pursuant to
Regulation D of the Board of Governors of the Federal Reserve System or any
other then applicable regulation of the Board of Governors which prescribes
reserve requirements applicable to "Eurocurrency Liabilities" as presently
defined in Regulation D.
"Event of Default" means any of the events or circumstances specified in
Section 7.1.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16th 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 next Business
6
Day, provided that (A) if such day is not a Business Day, the rate on such
transactions on the immediately preceding Business Day as so published on the
next Business Day shall apply, and (B) if no such rate is published on such next
Business Day, the rate for such day shall be the average of the offered rates
quoted to the Agent by two (2) federal funds brokers of recognized standing on
such day for such transactions as selected by the Agent.
"Fee Letter" means that certain letter agreement dated August 10, 1998, by
and between the Agent, the Arranger and the Borrower.
"Fixed Charge Coverage Ratio" means, for any period, on a historic four
fiscal quarter rolling basis, the ratio of (i) the sum of, without duplication,
(a) EBITDA, minus (b) cash taxes, minus (c) all cash expenditures (which have
not been financed) for fixed or capital assets which in accordance with GAAP
would be classified as capital expenditures, minus (d) all cash dividends,
distributions or payments made in respect of the capital stock of the Borrower
to the extent permitted hereunder; to (ii) the sum of, without duplication, (a)
the portion of Funded Debt due and payable within one (1) year of the date of
determination (including an amount equal to 1/7th of any outstanding balance of
the Loans), plus (b) Consolidated Interest Expense for the four fiscal quarters
then ended, all calculated on a consolidated basis for the Borrower and its
Subsidiaries and as determined in accordance with GAAP. Upon the consummation
of any Acquisition, the Fixed Charge Coverage Ratio shall be determined
including the historical financial results of the acquired business (on a
trailing four fiscal quarter pro forma basis, consistent with SEC regulations).
"Funded Debt" means, as of any date of determination, the sum, without
duplication, of the following for the Borrower and its Subsidiaries: (i)
Indebtedness for borrowed money, all obligations evidenced by bonds, debentures,
notes or similar instruments, and purchase money obligations which in accordance
with GAAP would be shown on the consolidated balance sheet of the Borrower as a
liability, (ii) all contingent and uncontingent reimbursement obligations
relative to the face amount of all drawn and undrawn letters of credit issued
for the account of the Borrower or any of its Subsidiaries, and (iii) all
Capitalized Lease Obligations.
"Funded Debt to EBITDA Ratio" means, for any period, the ratio of (i)
Funded Debt, to (ii) EBITDA.
"GAAP" means generally accepted accounting principles from time to time in
effect as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the statements and pronouncements of the Financial Accounting Standards Board or
in such other statements, opinions and pronouncements by such other entity as
may be approved by a significant segment of the U.S. accounting profession.
"Guarantor" means each domestic Subsidiary of the Borrower listed on
Schedule 5.1 and any other domestic Subsidiary of the Borrower required to
become a Guarantor pursuant to Section 6.9.
"Guaranty" by any Person means all obligations (other than endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) of such Person guarantying or in effect guarantying any
Indebtedness, dividend or other obligation (including, without limitation,
7
obligations in connection with sales of any property) of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation, or
to purchase any property or assets constituting security therefor, primarily for
the purpose of assuring the owner of such Indebtedness or obligations of the
ability of the primary obligor to make payment of the Indebtedness or
obligation; or (ii) to advance or supply funds (x) for the purchase or payment
of such Indebtedness or obligation, or (y) to maintain working capital or other
balance sheet condition, or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation, in each case primarily
for the purpose of assuring the owner of such Indebtedness or obligation of the
ability of the primary obligor to make payment of the Indebtedness or
obligation; or (iii) to lease property or to purchase securities or other
property or services of the primary obligor primarily for the purpose of
assuring the owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of the Indebtedness or obligation; or (iv)
otherwise to assure the owner of the Indebtedness or obligation of the primary
obligor against loss in respect thereof. For the purpose of all computations
made under this Agreement, the amount of a Guaranty in respect of any obligation
shall be deemed to be equal to the amount that would apply if such obligation
were the direct obligation of such Person rather than the primary obligor or, if
less, the maximum aggregate potential liability of such Person under the terms
of the Guaranty.
"Hazardous Material" shall have the meaning assigned to that term in the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Acts of 1986, and shall
include any substance defined as "hazardous" or "toxic" or words used in place
thereof under any Environmental Law applicable to the Borrower or any of its
Subsidiaries.
"Highest Lawful Rate" means the maximum nonusurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the Loans or the Reimbursement Obligations, or under laws
applicable to the Agent or any of the Lenders, which are presently in effect or,
to the extent allowed by applicable law, under such laws which may hereafter be
in effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow. Determination of the rate of interest for the
purpose of determining whether the Loans or the Reimbursement Obligations are
usurious under all applicable laws shall be made by amortizing, prorating,
allocating, and spreading, in equal parts during the period of the full stated
term of the Loans, all interest at any time contracted for, taken, reserved,
charged or received from the Borrower in connection with the Loans or the
Reimbursement Obligations, as applicable.
"Indebtedness" means, for any Person, the following obligations of such
Person, without duplication: (i) obligations of such Person for borrowed money;
(ii) obligations of such Person representing the deferred purchase price of
property or services other than accounts payable arising in the ordinary course
of business and other than amounts which are being contested in good faith and
for which reserves in conformity with GAAP have been provided; (iii) obligations
of such Person evidenced by bonds, notes, bankers acceptances, debentures or
other similar instruments of such Person or reimbursement obligations or other
obligations with respect to letters of credit issued for such Person's account
or letters of credit issued pursuant to such Person's application therefor;
8
(iv) obligations of other Persons, whether or not assumed, secured by Liens upon
property or payable out of the proceeds or production from property now or
hereafter owned or acquired by such Person, but only to the extent of such
property's fair market value; (v) Capitalized Lease Obligations of such Person;
(vi) obligations under hedge, swap, exchange, forward, future, collar or cap
arrangements, fixed price agreements and all other agreements or arrangements
designed to protect against fluctuations in interest rates, commodity prices,
and currency exchange rates; and (vii) obligations of such Person pursuant to a
Guaranty of any of the foregoing of another Person. For purposes of this
Agreement, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture to which such Person is a party, to the extent such
Indebtedness has recourse to such Person.
"Indemnified Taxes" shall have the meaning ascribed to such term in Section
3.3.
"Initial Borrowing Date" means the date on which all conditions precedent
set forth herein to the initial Borrowings are satisfied or waived in writing
and the initial Borrowing hereunder occurs.
"Interest Payment Date" means (i) for a Base Rate Loan, the last Business
Day of each calendar quarter such Loan is outstanding commencing September 30,
1998, and (ii) for a LIBOR Loan, the last Business Day of each Interest Period
for such Loan and, during any Interest Period of six (6) months, the next
Business Day occurring three (3) months after the commencement of such Interest
Period.
"Interest Period" means the period commencing on the date that a Borrowing
of LIBOR Loans is advanced, continued or created by conversion and, subject to
Section 2.5, ending on the date one (1), two (2), three (3) or six (6) months
thereafter as selected by the Borrower pursuant to the terms of this Agreement.
"Interest Rate Protection Agreement" means any hedge, swap, exchange,
forward, future collar or cap arrangements, fixed price agreements or other
agreements or arrangements designed to protect against fluctuations in interest
rates.
"Investments" shall have the meaning ascribed to such term in Section 6.15.
"L/C Commitments" means, relative to any Lender, such Lender's obligation
to participate in Letters of Credit pursuant to Section 2.2 in the percentage
set forth opposite its signature hereto or pursuant to Section 10.10, as such
commitments may be reduced from time to time pursuant to the terms of this
Agreement; provided that the obligation of the Agent to participate in Letters
of Credit pursuant to its L/C Commitment shall be reduced proportionately from
time to time by the outstanding principal of the Agent Loans and shall be
reinstated from time to time as and when the Agent Loans are repaid.
"L/C Commitment Amount" means $10,000,000, as such amount may be reduced
from time to time pursuant to the terms of this Agreement.
9
"L/C Documents" means this Agreement, the Letters of Credit and any
Borrowing Requests and Applications with respect thereto and any draft or other
document presented in connection with a drawing thereunder.
"L/C Obligations" means the undrawn face amounts of all outstanding Letters
of Credit and all unpaid Reimbursement Obligations with respect to Letters of
Credit.
"Lenders" is defined in the preamble.
"Lending Office" means the branch, office or affiliate of a Lender
specified on the appropriate signature page hereof or designated pursuant to
Sections 8.4 or 10.10.
"Letter of Credit" means any of the letters of credit issued by the Agent
on behalf of the Lenders for the account of the Borrower pursuant to Section
2.2(a) or (b).
"LIBOR Loan" means a Revolving Loan bearing interest prior to maturity at
the Adjusted LIBOR Rate plus the Applicable Margin.
"LIBOR Rate" means, relative to any Interest Period for each LIBOR Loan
comprising part of the same Borrowing, a rate of interest per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/16 of 1%), equal to
the arithmetic average of the quotation by the Agent of the rate of interest per
annum at which deposits in Dollars in immediately available and freely
transferable funds are offered to the Agent two (2) Business Days before the
commencement of such Interest Period by major banks in the London interbank
market as at or about 10:00 a.m. (New York, New York time) for a period
approximately equal to such Interest Period and in an amount equal or comparable
to the aggregate principal amount of the LIBOR Loan to which such Interest
Period relates scheduled to be made, continued or converted pursuant to the
terms hereof, as applicable, as part of such Borrowing.
"Lien" means any interest in any property or asset in favor of a Person
other than the owner of the property or asset and securing an obligation owed to
such Person, whether such interest is based on the common law, statute or
contract, including, but not limited to, the security interest lien arising from
a mortgage, encumbrance, pledge, conditional sale, security agreement or trust
receipt, or a lease, consignment or bailment for security purposes.
"Loan" mean a Base Rate Loan or a LIBOR Loan, each of which is a "type" of
Loan hereunder, outstanding as a Revolving Loan or an Agent Loan, as applicable.
"Majority Lenders" means, at any time, the Lenders then holding in the
aggregate at least sixty-six and two-thirds percent (66 2/3%) of the aggregate
of the Commitments plus the outstanding principal amount of the Agent Loans, or
if the Commitments have terminated pursuant to the terms hereof, the aggregate
Obligations. The percentage set forth opposite each Lender's name in the line
"Percentage" on the signature page hereto reflects the initial voting percentage
of each Lender hereunder on the Effective Date.
10
"Material Adverse Effect" means an effect that results in a material
adverse change since June 28, 1998, in (i) the business, properties, assets,
financial condition or prospects of the Borrower or of the Borrower and its
Subsidiaries taken as a whole, or (ii) in the ability of the Borrower or any of
the Guarantors to perform its Obligations under the Credit Documents to which it
is a party.
"Maturity Date" means January 29, 2003.
"Moody's" means Xxxxx'x Investors Service, Inc., or any successor thereto.
"Notes" means the revolving promissory notes of the Borrower as defined in
Section 2.11.
"Obligations" means all joint and several obligations of the Borrower and
the Guarantors to pay fees, costs and expenses hereunder, to pay principal or
interest on Loans and Reimbursement Obligations and to pay any other obligations
to the Agent or the Lenders arising under or in relation to any Credit Document.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Percentage" means, for each Lender, the percentage of the Commitments
represented by such Lender's Commitment; provided that, if the Commitments are
terminated, each Lender's Percentage shall be calculated based on its Commitment
in effect immediately before such termination, subject to any assignments by
such Lender of Obligations pursuant to Section 10.10.
"Permitted Business" means any business described in Section 6.8.
"Permitted Liens" means the Liens described in Section 6.13.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization or any other entity or
organization, including a government or any agency or political subdivision
thereof.
"Plan" means an employee pension benefit plan covered by Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the Code that
is either (i) maintained by the Borrower or any of its Subsidiaries, or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
the Borrower or any of its Subsidiaries is then making or accruing an obligation
to make contributions or has within the preceding five (5) plan years made or
had an obligation to make contributions.
"Public Debt Issue" means an issuance of debt securities of the Borrower in
an aggregate principal amount of at least $150,000,000, the terms of which debt
securities are approved in advance of the offering thereof by the Majority
Lenders in their sole discretion.
11
"Reimbursement Obligation" means the obligations of the Borrower to
reimburse the Agent, for the benefit of the Lenders, for each drawing under a
Letter of Credit as described in Section 2.2(c).
"Revolving Loans" means the revolving loans by the Lenders described in
Section 2.1(a).
"Ridge Pallets" means Ridge Pallets, Inc., a Florida corporation.
"S&P" means Standard & Poor's Rating Group or any successor thereto.
"Senior Debt" means, as of the date of any determination, the outstanding
Indebtedness under the Credit Documents.
"Senior Debt to EBITDA Ratio" means the ratio of (i) Senior Debt to (ii)
EBITDA.
"Stock Pledge Agreements" means each Stock Pledge Agreement of the Borrower
and any Subsidiary of the Borrower which owns a Subsidiary in substantially the
form of Exhibit 4.1B.
"Subsidiary" means, for any Person, any corporation or other entity of
which more than fifty percent (50%) of the outstanding stock or comparable
equity interests having ordinary voting power for the election of the board of
directors of such corporation, any managers of such limited liability company or
similar governing body (irrespective of whether or not, at the time, stock or
other equity interests of any other class or classes of such corporation or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned by such Person, as
applicable, or by one or more of its Subsidiaries.
"Subsidiary Guaranty" means each Guaranty of the Subsidiary Guarantors in
substantially the form of Exhibit 4.1A.
"Tangible Assets" means all property would be considered to be tangible
under GAAP, all calculated on a consolidated basis for the Borrower and its
Subsidiaries.
"Tangible Assets to Senior Debt Plus Current Liabilities Ratio" means, for
any period, the ratio of (i) Tangible Assets, to (ii) the sum of Senior Debt
plus Current Liabilities.
"Taxes" shall have the meaning ascribed to such term in Section 5.12.
"Unfunded Vested Liabilities" means, for any Plan at any time, the amount
by which the present value of all vested nonforfeitable accrued benefits under
such Plan exceeds the fair market value of all Plan assets allocable to such
benefits, determined as of the then most recent valuation date for such Plan,
but only to the extent that such excess represents a potential liability of the
Borrower or any of its Subsidiaries to the PBGC or such Plan.
12
Section 1.2 Interpretation. The foregoing definitions shall be equally
--------------
applicable to the singular and plural forms of the terms defined. All
references to times of day in this Agreement shall be references to Houston,
Texas time unless otherwise specifically provided.
SECTION 2. THE CREDIT FACILITY.
Section 2.1 Loans.
-----
(a) Revolving Loans. Subject to the terms and conditions hereof, each
---------------
Lender severally and not jointly agrees to make one or more loans (each a
"Revolving Loan") to the Borrower from time to time before the Commitment
Termination Date on a revolving basis in an aggregate amount not to exceed at
any time outstanding an amount equal to its Percentage of the Commitment Amount
(for each Lender, its "Commitment"), subject to any reductions thereof pursuant
to the terms of this Agreement. No Lender shall be permitted or required to
make any Revolving Loan if, after giving effect thereto, (i) the aggregate
principal amount of the Revolving Loans of all Lenders and L/C Obligations
outstanding of the Borrower would thereby exceed the Commitment Amount then in
effect; (ii) the aggregate principal amount of all Revolving Loans of such
Lender and its participating interest in all L/C Obligations would thereby
exceed the Percentage of such Lender of the Commitment Amount then in effect; or
(iii) with respect to the Agent, the aggregate principal amount of all Revolving
Loans, its participating interest in all L/C Obligations and the aggregate
principal amount of all its Agent Loans would thereby exceed its Commitment.
Each Borrowing of Revolving Loans shall be made ratably from the Lenders in
proportion to their respective Percentages (subject to the limitation of the
Commitment of the Agent). Revolving Loans may be repaid, in whole or in part,
and all or any portion of the principal amount thereof reborrowed, before the
Commitment Termination Date, subject to the terms and conditions hereof.
(b) Agent Loans. Subject to the terms and conditions hereof, the Agent
-----------
may, in its sole discretion, make one or more loans (each an "Agent Loan") to
the Borrower from time to time before the Commitment Termination Date in an
aggregate amount not to exceed at any time outstanding the amount of the Agent
Swing Line. Agent Loans may be repaid, in whole or in part, at any time. Upon
an Event of Default and at the request of the Agent, (i) the Lenders agree to
make Revolving Loans to the Borrower in an amount equal to the outstanding
amount of the Agent Loans so long as no Event of Default of which the Agent had
actual knowledge was in existence at the time the Agent Loan was made, and the
Borrower hereby instructs the Agent in such circumstance to apply the proceeds
of such Revolving Loans to such Agent Loans such that the Agent Loans are repaid
in full; or (ii) in the event any such Revolving Loans are not made, each Lender
severally and not jointly agrees to purchase from the Agent, and the Agent
hereby agrees to sell to each Lender, an undivided percentage participation
interest, up to the extent of its Percentage, in each Agent Loan, in each case
such that the principal amount of each Lender's Revolving Loans and/or
participations in Agent Loans shall be an amount equal to its Percentage times
the principal amount of all Loans.
Section 2.2 Letters of Credit.
-----------------
(a) Issuance of Letters of Credit. Subject to the terms and conditions
-----------------------------
hereof, the Agent agrees to issue, from time to time prior to the Commitment
Termination Date, at the request of the Borrower and on behalf of the Lenders
and in reliance on their obligations under this Section 2.2,
13
one or more letters of credit (each a "Letter of Credit") for the Borrower's
account; provided that the Agent shall have no obligation to issue a Letter of
Credit if, after the issuance thereof, (i) the outstanding Loans and L/C
Obligations would thereby exceed the Commitment Amount then in effect, (ii) the
outstanding L/C Obligations would thereby exceed the L/C Commitment Amount then
in effect, or (iii) the issuance of such Letter of Credit would violate any
legal or regulatory restriction then applicable to the Agent or any Lender as
notified by such Lender to the Agent before the date of issuance of such Letter
of Credit.
(b) Ridge Pallets Letter of Credit. Bank One has issued at the request of
------------------------------
the Borrower and Ridge Pallets an irrevocable standby letter of credit (the
"Ridge Pallets Letter of Credit") for the account of Ridge Pallets and for the
benefit of Credit Commercial de France, New York Branch (the "Facing Bank") in
the amount of $641,500 in connection with the Economic Development Revenue
Bonds, Series 1989-B (Ridge Pallets, Inc. Project) in the principal amount of
$950,000 issued by the South Carolina Jobs-Economic Development Authority (the
"Bonds"). Ridge Pallets hereby irrevocably and unconditionally agrees to
reimburse the Agent, for the benefit of the Lenders, for each payment or
disbursement made by the Agent to settle its obligations under any draft drawn
under the Ridge Pallets Letter of Credit (the "Ridge Pallets Reimbursement
Obligation") within two (2) Business Days from when such draft is paid as
provided in Section 2.2(d). For the limited purpose of the Ridge Pallets Letter
of Credit and the Ridge Pallets Reimbursement Obligation, Ridge Pallet shall be
a co-borrower under this Agreement, and each of Ridge Pallets and the Borrower
hereby agrees to be jointly and severally liable for the Ridge Pallets
Reimbursement Obligation. The stated amount of the Ridge Pallets Letter of
Credit shall be included in the use of the Commitment Amount, the Ridge Pallets
Letter of Credit shall be for all purposes a Letter of Credit under this
Agreement and the Ridge Pallets Reimbursement Obligation shall be for all
purposes a Reimbursement Obligation under this Agreement. The Ridge Pallets
Reimbursement Obligation shall be absolute, unconditional and irrevocable and
shall be performed strictly in accordance with the terms of this Agreement under
all circumstances whatsoever (other than the defense of payment in accordance
with this Agreement or a defense based on the gross negligence or willful
misconduct of the Agent), all as provided in Section 2.2(d)(ii). Ridge Pallets
agree to maintain the Facing Letter of Credit and Reimbursement Agreement dated
as of December 1, 1989, between Ridge Pallets and the Facing Bank (the "Facing
Letter of Credit Agreement") in effect at all times during the period prior to
the expiry date of the Ridge Pallets Letter of Credit, as it may be extended
from time to time, and Ridge Pallets agrees to not make any amendment to or
modification of the Facing Letter of Credit Agreement or the Letter of Credit
issued by the Facing Bank on behalf of Ridge Pallets without the written consent
of the Agent. The repayment of the Ridge Pallets Reimbursement Obligation shall
not be secured by any of the Collateral or receive the benefits of any of the
Stock Pledge Agreements.
(c) Issuance Procedure. To request that the Agent issue a Letter of
------------------
Credit, the Borrower shall deliver to the Agent (with a duplicate copy to an
operations employee of the Agent as designated by the Agent from time to time) a
duly executed Borrowing Request in the form of Exhibit 2.2A (each a "Borrowing
Request"), together with a duly executed application for the relevant Letter of
Credit substantially in the form of Exhibit 2.2B (each an "Application"), or
such other computerized issuance or application procedure, instituted from time
to time by the Agent and agreed to by the Borrower, completed to the reasonable
satisfaction of the Agent, and such other
14
documentation and information as the Agent may reasonably request. In the event
of any irreconcilable difference or inconsistency between this Agreement and an
Application, the provisions of this Agreement shall govern. Upon receipt of a
properly completed and executed Borrowing Request and Application and any other
reasonably requested documents or information at least three (3) Business Days
prior to any requested issuance date, the Agent will process such Borrowing
Request and Application in accordance with its customary procedures and issue
the requested Letter of Credit on the requested issuance date. The Borrower may
cancel any requested issuance of a Letter of Credit prior to the issuance
thereof. The Agent will notify each Lender of the amount and expiration date of
each Letter of Credit it issues promptly upon issuance thereof. Each Letter of
Credit (except for up to $2,000,000 in aggregate face amounts of Letters of
Credit) shall have an expiration date no later than one (1) year from the date
of issuance thereof, provided that in no event shall a Letter of Credit have an
expiration date later than four (4) Business Days before the Maturity Date. If
the Agent issues any Letters of Credit with expiration dates that automatically
extend unless the Agent gives notice that the expiration date will not so
extend, the Agent will give such notice of non-renewal before the time necessary
to prevent such automatic extension if before such required notice date (i) the
expiration date of such Letter of Credit if so extended would be later than four
(4) Business Days before the Maturity Date, (ii) the Commitment Termination Date
shall have occurred, (iii) an Event of Default has occurred and is continuing,
or (iv) the Agent is so directed by the Borrower. The Agent agrees to issue
amendments to any Letter of Credit increasing its amount, or extending its
expiration date, at the request of the Borrower subject to the conditions
precedent for all Loans of Section 4.2 and the other terms and conditions of
this Section 2.2.
(d) The Borrower's Reimbursement Obligations.
----------------------------------------
(i) The Borrower hereby irrevocably and unconditionally agrees to
reimburse the Agent, for the benefit of the Lenders, for each payment or
disbursement made by the Agent to settle its obligations under any draft
drawn under a Letter of Credit (each, a "Reimbursement Obligation") within
two (2) Business Days from when such draft is paid with either funds not
borrowed hereunder or with a Borrowing subject to Section 2.4 and the other
terms and conditions contained in this Agreement. The Reimbursement
Obligation shall bear interest (which the Borrower hereby promises to pay)
from and after the date such draft is paid until (but excluding the date)
the Reimbursement Obligation is paid at the lesser of the Highest Lawful
Rate or the Base Rate plus the Applicable Margin so long as the
Reimbursement Obligation shall not be past due, and thereafter at the
default rate per annum as set forth in Section 2.7(c), whether or not the
Maturity Date shall have occurred. If any such payment or disbursement is
reimbursed to the Agent on the date such payment or disbursement is made by
the Agent, interest shall be paid on the reimbursable amount for one (1)
day. The Agent shall give the Borrower notice of any drawing on a Letter
of Credit within one (1) Business Day after such drawing is paid.
(ii) The Borrower agrees for the benefit of the Agent and each Lender
that, notwithstanding any provision of any Application, the obligations of
the Borrower under this Section 2.2(d) and each applicable Application
shall be absolute, unconditional and irrevocable (subject to Section
2.2(c)) and shall be performed strictly in accordance with the terms of
this Agreement and each applicable Application under all circumstances
whatsoever
15
INCLUDING, BUT NOT LIMITED TO, ANY DEFENSE BASED UPON THE AGENT'S OR ANY
LENDER'S OWN SIMPLE OR CONTRIBUTORY NEGLIGENCE (other than the defense of
payment in accordance with this Agreement or a defense based on the gross
negligence or willful misconduct of the Agent or any Lender), including,
without limitation, the following circumstances (subject in all cases to
the defense of payment in accordance with this Agreement or a defense based
on the gross negligence or willful misconduct of the Agent or any Lender):
(1) any lack of validity or enforceability of any of the L/C
Documents;
(2) any amendment or waiver of or any consent to depart from all
or any of the provisions of any of the L/C Documents;
(3) the existence of any claim, setoff, defense or other right
the Borrower or any Subsidiary may have at any time against a
beneficiary of a Letter of Credit (or any Person for whom a
beneficiary may be acting), the Agent, any Lender or any other Person,
whether in connection with this Agreement, another L/C Document or any
unrelated transaction;
(4) any statement or any other document presented under a 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, provided that the Agent's determination that documents
presented under the Letter of Credit comply with the terms thereof did
not constitute gross negligence or willful misconduct of the Agent;
(5) payment by the Agent under a Letter of Credit against
presentation to the Agent of a draft or certificate that does not
comply with the terms of the Letter of Credit, provided that the
Agent's determination that documents presented under the Letter of
Credit comply with the terms thereof did not constitute gross
negligence or willful misconduct of the Agent; or
(6) any other act or omission to act or delay of any kind by the
Agent, any Lender or any other Person or any other event or
circumstance whatsoever that might, but for the provisions of this
Section 2.2(d), constitute a legal or equitable discharge of the
Borrower's obligations hereunder or under any L/C Document, provided
that such act or omission of the Agent did not constitute gross
negligence or willful misconduct of the Agent or any Lender.
(e) The Participating Interests. Each Lender severally and not jointly
---------------------------
agrees to purchase from the Agent, and the Agent hereby agrees to sell to each
Lender, an undivided percentage participating interest, to the extent of its
Percentage, in each Letter of Credit (including the Ridge Pallets Letter of
Credit and all other outstanding Letters of Credit issued by the Agent) issued
by, and Reimbursement Obligation owed to, the Agent in connection with a Letter
of Credit. Upon any failure by the Borrower to pay any Reimbursement Obligation
in connection with a Letter of Credit at the time required in Sections 2.2(d)
and 2.4(c), or if the Agent is required at any time to return to
16
the Borrower or to a trustee, receiver, liquidator, custodian or other Person
any portion of any payment by the Borrower of any Reimbursement Obligation in
connection with a Letter of Credit, the Agent shall promptly give notice of same
to each Lender, and the Agent shall have the right to require each Lender to
fund its participation in such Reimbursement Obligation. Each Lender (except the
Agent to the extent it is also a Lender) shall pay to the Agent an amount equal
to each Lender's Percentage of such unpaid or recaptured Reimbursement
Obligation not later than the Business Day it receives notice from the Agent to
such effect, if such notice is received before 2:00 p.m., or not later than the
following Business Day if such notice is received after such time. If a Lender
fails to pay timely such amount to the Agent, it shall also pay to the Agent
interest on such amount accrued from the date payment of such amount was made by
the Agent to the date of such payment by the Lender at a rate per annum equal to
the Federal Funds Rate in effect for each such day, and only after such payment
shall such Lender be entitled to receive its Percentage of each payment received
on the relevant Reimbursement Obligation and of interest paid thereon. If any
such Lender fails to pay such amount to the Agent, any payments made by the
Borrower with respect to the relevant Reimbursement Obligation shall first be
applied by the Agent to the unfunded participation in such Reimbursement
Obligation before any other Lenders receive any payments or proceeds. The Agent
will thereafter pay each Lender its Percentage of each payment received by it
relating to that for which such Lender has funded its Percentage, from the date
of funding. THE SEVERAL OBLIGATIONS OF THE LENDERS TO THE AGENT UNDER THIS
SECTION 2.2(E) SHALL BE ABSOLUTE, IRREVOCABLE AND UNCONDITIONAL UNDER ANY AND
ALL CIRCUMSTANCES WHATSOEVER AND SHALL NOT BE SUBJECT TO ANY SETOFF,
COUNTERCLAIM OR DEFENSE TO PAYMENT ANY LENDER MAY HAVE OR HAVE HAD AGAINST THE
BORROWER, THE AGENT, ANY OTHER LENDER OR ANY OTHER PERSON WHATSOEVER INCLUDING,
BUT NOT LIMITED TO, ANY DEFENSE BASED ON THE FAILURE OF THE DEMAND FOR PAYMENT
UNDER THE LETTER OF CREDIT TO CONFORM TO THE TERMS OF SUCH LETTER OF CREDIT OR
THE LEGALITY, VALIDITY, REGULARITY OR ENFORCEABILITY OF SUCH LETTER OF CREDIT
AND INCLUDING, BUT NOT LIMITED TO, THOSE RESULTING FROM THE AGENT'S OWN SIMPLE
OR CONTRIBUTORY NEGLIGENCE. Without limiting the generality of the foregoing,
such obligations shall not be affected by any Default or Event of Default or by
any subsequent reduction or termination of any Commitment of a Lender, and each
payment by a Lender under Section 2.2 shall be made without any offset,
abatement, withholding or reduction whatsoever.
Section 2.3 Types of Loans and Minimum Borrowing Amounts. Borrowings of
--------------------------------------------
Revolving Loans may be outstanding as either Base Rate Loans or LIBOR Loans, as
selected by the Borrower pursuant to Section 2.4. Borrowings of Agent Loans may
be outstanding only as Base Rate Loans. All Borrowings of LIBOR Loans advanced
on the Initial Borrowing Date shall be advanced as Base Rate Loans unless the
requisite notice for a LIBOR Loan has been given pursuant to Section 2.4(a) and
indemnification has been provided to the Lenders in connection therewith. Each
Borrowing of Base Rate Loans shall be in an amount of not less than $500,000 and
each Borrowing of LIBOR Loans shall be in an amount of not less than $1,000,000.
17
Section 2.4 Manner of Borrowing.
-------------------
(a) Notice to the Agent. Subject to the limitations in Section 2.3, the
-------------------
Borrower shall give notice to the Agent by no later than 11:00 a.m. at least
three (3) Business Days before the date on which the Borrower requests the
Lenders or the Agent, as applicable, to advance a Borrowing of LIBOR Loans and
on the date the Borrower requests the Lenders or the Agent, as applicable, to
advance a Borrowing of Base Rate Loans pursuant to a duly executed Borrowing
Request, and the Agent shall promptly give the Lenders notice thereof.
(b) Selection of Interest Periods. The Borrower may select multiple
-----------------------------
Interest Periods for the Revolving Loans constituting any particular Borrowing,
provided that at no time shall the number of different Interest Periods for
outstanding LIBOR Loans exceed five (5). The Revolving Loans included in each
Borrowing shall bear interest initially at the type of rate specified in the
Borrowing Request with respect thereto. Thereafter, the Borrower may from time
to time elect to change or continue the type of interest rate borne by each
Borrowing or, subject to Section 2.3's minimum amount requirement for each
outstanding Borrowing, a portion thereof, as follows: (i) if such Borrowing is
of LIBOR Loans, the Borrower may continue part or all of such Borrowing as LIBOR
Loans for an Interest Period specified by the Borrower or convert part or all of
such Borrowing into Base Rate Loans on the last day of the Interest Period
applicable thereto, or the Borrower may earlier convert part or all of such
Borrowing into Base Rate Loans so long as it pays the breakage fees and funding
losses provided in Section 2.12 and all interest accrued on such Borrowing, and
(ii) if such Borrowing is of Base Rate Loans, the Borrower may convert all or
part of such Borrowing into LIBOR Loans for an Interest Period specified by the
Borrower on any Business Day. Notices of the continuation of a Borrowing of
LIBOR Loans for an additional Interest Period or of the conversion of part or
all of a Borrowing of LIBOR Loans into Base Rate Loans or of Base Rate Loans
into LIBOR Loans must be given by no later than 11:00 a.m. at least three (3)
Business Days before the date of the requested continuation or conversion. The
Borrower shall give such notices concerning the advance, continuation, or
conversion of a Borrowing by telephone or facsimile (which notice shall be
irrevocable once given and, if by telephone, shall be promptly confirmed in
writing) pursuant to a Borrowing Request which shall specify the date of the
requested advance, continuation or conversion (which shall be a Business Day),
the amount of the requested Borrowing, the type of Loans to comprise such new,
continued or converted Borrowing and, if such Borrowing is to be comprised of
LIBOR Loans, the Interest Period applicable thereto. The Borrower agrees that
the Agent and each Lender may rely on any such telephonic or facsimile notice
given by any person it in good faith believes is an authorized representative of
the Borrower without the necessity of independent investigation and that, if any
such notice by telephone conflicts with any written confirmation, such
telephonic notice shall govern if the Agent or any Lender has acted in reliance
thereon.
(c) Borrower's Failure to Notify. If the Borrower fails to give notice
----------------------------
pursuant to Section 2.4(a) or (b) of (i) the continuation or conversion of any
outstanding principal amount of a Borrowing of LIBOR Loans or of (ii) a
Borrowing of Loans to pay outstanding Reimbursement Obligations, as applicable,
and has not notified the Agent by 11:00 a.m. at least three (3) Business Days
before the last day of the Interest Period for such Borrowing of LIBOR Loans or
the day such Reimbursement Obligation becomes due that it intends to repay such
Borrowing or such Reimbursement Obligation with funds not borrowed hereunder,
the Borrower shall be deemed to have requested, (x) the continuation of such
Borrowing as a LIBOR Loan with an Interest Period of
18
one (1) month, or (y) the advance of a new Borrowing of Base Rate Loans on such
day in the amount of the Reimbursement Obligation then due, which Borrowing
shall be deemed to have been funded on such day to pay the Reimbursement
Obligation then due, in each case so long as no Default or Event of Default
shall have occurred and be continuing or would occur as a result of such
Borrowing but otherwise disregarding the conditions to a Borrowing set forth in
Section 4.2. Upon the occurrence and during the continuance of any Event of
Default, (i) each LIBOR Loan will automatically, on the last day of the then
existing Interest Period therefor, convert into a Base Rate Loan and (ii) the
obligation of the Lenders to make, continue or convert Loans into LIBOR Loans
shall be suspended.
(d) Funding and Disbursement of Loans. Not later than 1:00 p.m. on the
---------------------------------
date of any requested advance of a new Borrowing of Revolving Loans, each
Lender, subject to all other provisions hereof, shall make available its
Revolving Loan comprising its ratable share of such Borrowing in funds
immediately available in Houston, Texas for the benefit of the Agent and
according to the disbursement instructions of the Agent. The Agent shall make
the proceeds of each such Borrowing, and each Agent Loan which the Agent makes,
in its sole discretion, available in immediately available funds to the Borrower
on the date of any requested advance of a new Borrowing by 2:00 p.m. No Lender
shall be responsible to the Borrower for any failure by another Lender to fund
its portion of a Borrowing, and no such failure by a Lender shall relieve any
other Lender from its obligation, if any, to fund its portion of a Borrowing.
(e) Agent Reliance on Lender Funding. Unless the Agent shall have been
--------------------------------
notified by a Lender before the date on which such Lender is scheduled to make
payment to the Agent of the proceeds of a Revolving Loan (which notice shall be
effective upon receipt) that such Lender does not intend to make such payment,
the Agent may assume that such Lender has made such payment when due and in
reliance upon such assumption may (but shall not be required to) make available
to the Borrower the proceeds of the Revolving Loan to be made by such Lender
and, if any Lender has not in fact made such payment to the Agent, such Lender
shall, on demand, pay to the Agent the amount made available to the Borrower
attributable to such Lender together with interest thereon for each day during
the period commencing on the date such amount was made available to the Borrower
and ending on (but excluding) the date such Lender pays such amount to the Agent
at a rate per annum equal to the interest rate attributable to the relevant
Revolving Loan. If such amount is not received from such Lender by the Agent
immediately upon demand, the Borrower will, on demand, repay to the Agent the
proceeds of the Loan attributable to such Lender with interest thereon at a rate
per annum equal to the interest rate applicable to the relevant Revolving Loan.
Section 2.5 Interest Periods. As provided in Section 2.4(a) and (b), at
----------------
the time of each request for the advance or continuation of, or conversion into,
a Borrowing of LIBOR Loans, the Borrower shall select an Interest Period
applicable to such LIBOR Loans from among the available options subject to the
limitations in Section 2.4(a); provided, however, that:
(i) the Borrower may not select an Interest Period for a Borrowing
of LIBOR Loans that extends beyond the Maturity Date;
19
(ii) whenever the last day of any Interest Period would otherwise be
a day that is not a Business Day, the last day of such Interest Period
shall either be (i) extended to the next succeeding Business Day, or (ii)
reduced to the immediately preceding Business Day if the next succeeding
Business Day is in the next calendar month; and
(iii) for purposes of determining an Interest Period, a month means a
period starting on one day in a calendar month and ending on the
numerically corresponding day in the next calendar month; provided,
however, that if there is no such numerically corresponding day in the
month in which an Interest Period is to end or if such Interest Period
begins on the last Business Day of a calendar month, then such Interest
Period shall end on the last Business Day of the calendar month in which
such Interest Period is to end.
Section 2.6 Interest Payments.
-----------------
(a) Base Rate Loans. Each Base Rate Loan shall bear interest (computed on
---------------
the basis of a 365/366-day year and actual days elapsed, excluding the date of
repayment) on the unpaid principal amount thereof from the date such Loan is
made until maturity (whether by acceleration or otherwise) or conversion to a
LIBOR Loan in accordance with Section 2.4(b) hereof, at a rate per annum equal
to the lesser of (i) the Highest Lawful Rate, or (ii) with respect to Revolving
Loans, the sum of the Base Rate from time to time in effect plus the Applicable
Margin, or with respect to Agent Loans, the sum of the Base Rate from time to
time in effect minus 0.5%, payable in arrears on each Interest Payment Date for
such Loan and at maturity (whether by acceleration or otherwise) or conversion
to a LIBOR Loan in accordance with Section 2.4(b).
(b) LIBOR Loans. Each LIBOR Loan shall bear interest (computed on the
-----------
basis of a 360-day year and actual days elapsed, excluding the date of
repayment) on the unpaid principal amount thereof from the date such Loan is
made until maturity (whether by acceleration or otherwise) or conversion to a
Base Rate Loan in accordance with Section 2.4(b) hereof, at a rate per annum
equal to the lesser of (i) the Highest Lawful Rate, or (ii) the sum of the
Adjusted LIBOR Rate plus the Applicable Margin, payable in arrears on each
Interest Payment Date for such Loan and at maturity (whether by acceleration or
otherwise) or conversion to a Base Rate Loan in accordance with Section 2.4(b).
(c) Rate Determinations. The Agent shall determine each interest rate
-------------------
applicable to the Loans and Reimbursement Obligations hereunder and such
determination shall be conclusive and binding except in the case of the Agent's
manifest error or willful misconduct. The Agent shall give prompt telephonic,
telex or facsimile notice to the Borrower and each Lender (in the case of
Revolving Loans) of the interest rate applicable to each Loan or Reimbursement
Obligation (but, if such notice is given by telephone, the Agent shall confirm
such rate in writing) promptly after the Agent has made such determination.
Section 2.7 Default Rates. If any payment of principal on any Loan is
-------------
not made when due after the expiration of the grace period therefor provided in
Section 7.1 (whether by acceleration or otherwise), such Loan shall bear
interest (computed on the basis of a year of 360, 365 or 366 days,
20
as applicable, and actual days elapsed) from the date such payment was due until
such principal then due is paid in full, payable on demand, at a rate per annum
equal to:
(a) for any Base Rate Loan which is a Revolving Loan the lesser of (i) the
Highest Lawful Rate, or (ii) the sum of two percent (2%) per annum plus the Base
Rate from time to time in effect (but not less than the Base Rate in effect at
maturity) plus the Applicable Margin;
(b) for any LIBOR Loan the lesser of (i) the Highest Lawful Rate, or (ii)
the sum of two percent (2%) per annum plus the rate of interest in effect
thereon at the time of such default until the end of the Interest Period for
such Loan and, thereafter, at a rate per annum equal to the sum of two percent
(2%) per annum plus the Base Rate from time to time in effect (but not less than
the Base Rate in effect at maturity) plus the Applicable Margin;
(c) for any unpaid Reimbursement Obligations, the lesser of (i) the Highest
Lawful Rate, or (ii) the sum of two percent (2%) per annum plus the Base Rate
from time to time in effect (but not less than the Base Rate in effect at
maturity) plus the Applicable Margin; and
(d) for any Base Rate Loan which is an Agent Loan, the lesser of (i) the
Highest Lawful Rate, or (ii) the sum of two percent (2%) per annum plus the Base
Rate from time to time in effect (but not less than the Base Rate in effect at
maturity) minus 0.5%.
It is the intention of the Agent and each Lender to conform strictly to usury
laws applicable to it. Accordingly, if the transactions contemplated hereby or
the Loans or the Reimbursement Obligations would be usurious as to the Agent or
the Lenders under laws applicable to it (including the laws of the United States
of America and the State of Texas or any other jurisdiction whose laws may be
mandatorily applicable to the Agent or such Lender notwithstanding the other
provisions of this Agreement, the Notes or any other Credit Document), then, in
that event, notwithstanding anything to the contrary in this Agreement, the
Notes or any other Credit Document, it is agreed as follows: (i) the aggregate
of all consideration which constitutes interest under laws applicable to the
Lenders that is contracted for, taken, reserved, charged or received by the
Lenders under this Agreement, the Notes or any other Credit Document or
otherwise shall under no circumstances exceed the Highest Lawful Rate, and any
excess shall be credited by the applicable Lender on the principal amount of the
applicable Note or to the Reimbursement Obligations (or, if the principal amount
of such Note and all Reimbursement Obligations owed to such Lender shall have
been paid in full, refunded by such Lender to the Borrower); (ii) in the event
that the maturity of the Notes is accelerated by reason of an election of the
holder or holders thereof resulting from any Event of Default hereunder or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under laws applicable to the Lenders may
never include more than the Highest Lawful Rate, and excess interest, if any,
provided for in this Agreement, the Notes, any other Credit Document or
otherwise shall be automatically canceled by the applicable Lenders as of the
date of such acceleration or prepayment and, if theretofore paid, shall be
credited by the applicable Lenders on the principal amount of the applicable
Notes or Reimbursement Obligations (or if the principal amounts thereof shall
have been paid in full, refunded by the applicable Lender to the Borrower); and
(iii) if at any time the interest provided hereunder, together with any other
fees payable pursuant to this Agreement, the Notes or any other Credit Document
and deemed interest under applicable
21
law, exceeds the amount that would have accrued at the Highest Lawful Rate, the
amount of interest and any such fees to accrue to the Lenders hereunder and
thereunder shall be limited to the amount which would have accrued at the
Highest Lawful Rate, but any subsequent reductions shall not reduce the interest
to accrue to the Lenders hereunder and thereunder below the Highest Lawful Rate
until the total amount of interest accrued pursuant hereto and thereto and such
fees deemed to be interest equals the amount of interest which would have
accrued to the Lenders if a varying rate per annum equal to the interest
hereunder had at all times been in effect plus the amount of fees which would
have been received but for the effect of this Section 2.7. The Agent and the
Lenders hereby elect to determine the applicable rate ceiling under
Article 5069-1D.001 to 1D.013 of the Texas Credit Revised Civil Statutes by the
weekly rate ceiling from time to time in effect, subject to the Agent's and the
Lenders' right subsequently to change such method in accordance with applicable
law. In the event the Loans and all Reimbursement Obligations are paid in full
by the Borrower prior to the Maturity Date and the interest received for the
actual period of the existence of the Loans or the Reimbursement Obligations
exceeds the Highest Lawful Rate, the applicable Lenders shall refund to the
Borrower the amount of the excess or shall credit the amount of the excess
against amounts owing under the Loans and none of the Lenders shall be subject
to any of the penalties provided by law for contracting for, taking, reserving,
charging or receiving interest in excess of the Highest Lawful Rate. The
provisions of Chapter 346 of Tex. Finance Code Xxx. (Xxxxxx 1998), regulating
certain revolving credit accounts shall not apply to this Agreement or any of
the Notes.
Section 2.8 Maturity of Loans. Each Revolving Loan, together with
-----------------
accrued and unpaid interest thereon and all other fees then due and owing under
any Credit Document, shall mature and become due and payable on the Maturity
Date. Each Agent Loan, together with accrued and unpaid interest thereon, shall
mature and become due and payable five (5) days after the date of such Agent
Loan, provided that all such Agent Loans shall mature and become due and payable
no later than the Maturity Date.
Section 2.9 Optional Prepayments. The Borrower shall have the privilege
--------------------
of prepaying the Loans without premium or penalty in whole or in part at any
time. If the Borrower is prepaying LIBOR Loans, it shall give to the Agent
notice of such prepayment no later than 11:00 a.m. at least three (3) Business
Days before the proposed prepayment date. All prepayments of LIBOR Loans shall
be accompanied by accrued interest thereon, together with any applicable
breakage fees and funding losses pursuant to Section 2.12. The Borrower may
direct the application of any optional prepayment hereunder to the Base Rate
Loans or LIBOR Loans outstanding.
Section 2.10 Mandatory Prepayments of Loans. If the aggregate principal
------------------------------
amount of outstanding Loans and L/C Obligations shall at any time for any reason
exceed the Commitment Amount then in effect, the Borrower shall, immediately and
without notice or demand, pay the amount of such excess to the Lenders as a
prepayment of the Loans and, if all Loans have been paid, a pre-funding of
Letters of Credit pursuant to the provisions of Section 7.4. Any mandatory
prepayment of Loans pursuant hereto shall not be limited by the notice provision
for prepayments set forth in Section 2.9, but immediately upon determining the
need to make any such prepayment, the Borrower shall notify the Agent of such
required prepayment. Each such prepayment shall be
22
accompanied by a payment of all accrued and unpaid interest on the Loans prepaid
and any applicable breakage fees and funding losses pursuant to Section 2.12.
Section 2.11 The Notes. The Revolving Loans outstanding to the Borrower
---------
from the Lenders (and, with respect to the Agent, any Agent Loans outstanding to
the Borrower) shall be evidenced by promissory notes of the Borrower payable to
each of the Lenders in the form of Exhibit 2.11 (such promissory notes, together
with any replacements thereof, the "Notes"). Each holder of a Note shall record
on its books and records or on a schedule to the Note the amount of each Loan
outstanding from it to the Borrower, all payments of principal and interest and
the principal balance from time to time outstanding thereon, the type of such
Loan and, if a LIBOR Loan, the Interest Period and interest rate applicable
thereto. Such record, whether shown on the books and records of a holder of a
Note or on a schedule to its Note, shall be prima facie evidence as to all such
matters; provided, however, that the failure of any holder to record any of the
foregoing or any error in any such record shall not limit or otherwise affect
the obligation of the Borrower to repay all Loans outstanding to it hereunder,
together with accrued interest thereon. At the request of any holder of a Note
and upon such holder tendering to the Borrower the Note to be replaced, the
Borrower shall furnish a new Note to such holder to replace any outstanding Note
and at such time the first notation appearing on the schedule on the reverse
side of, or attached to, such new Note shall set forth the aggregate unpaid
principal amount of all Loans, if any, then outstanding thereon.
Section 2.12 Breakage Fees. If any Lender incurs any loss, cost or
-------------
expense (including, without limitation, any loss of profit and loss, cost,
expense or premium reasonably incurred by reason of the liquidation or re-
employment of deposits or other funds acquired by such Lender to fund or
maintain any LIBOR Loan or the relending or reinvesting of such deposits or
amounts paid or prepaid to the Lenders) as a result of any of the following
events other than any such occurrence as a result of a change of circumstance
described in Sections 8.1 or 8.2:
(i) any payment, prepayment or conversion of a LIBOR Loan on a date
other than the last day of its Interest Period (whether by acceleration,
prepayment or otherwise);
(ii) any failure to make a principal payment of a LIBOR Loan on the
due date therefor; or
(iii) any failure by the Borrower to borrow, continue, prepay or
convert to a LIBOR Loan on the date specified in a notice given pursuant to
Section 2.4(a) or (b),
then the Borrower shall pay to such Lender such amount as will reimburse such
Lender for such loss, cost or expense. If any Lender makes such a claim for
compensation, it shall provide to the Borrower a certificate executed by an
officer of such Lender setting forth the amount of such loss, cost or expense in
reasonable detail (including an explanation of the basis for and the computation
of such loss, cost or expense), and the amounts shown on such certificate shall
be conclusive and binding absent manifest error. Within ten (10) days of
receipt of such certificate, the Borrower shall pay to such Lender such amount
as will compensate such Lender for such loss, cost or expense as provided
herein.
23
Section 2.13 Commitment Terminations. The Borrower shall have the right
-----------------------
at any time and from time to time, upon five (5) Business Days' prior and
irrevocable written notice to the Agent, to terminate or reduce the Commitments
without premium or penalty, in whole or in part, any partial termination to be
(i) in an amount not less than $1,000,000 as determined by the Borrower, and
(ii) allocated ratably among the Lenders in proportion to their respective
Commitments, as applicable; provided that the Commitment Amount may not be
reduced to an amount less than the sum of the aggregate principal amount of
outstanding Loans plus the aggregate outstanding L/C Obligations, after giving
effect to payments on such proposed termination or reduction date, unless the
Borrower provides to the Lenders or the Agent, as applicable, cash collateral in
an amount sufficient to cover such shortage or back to back letters of credit
from a financial institution satisfactory to all of the Lenders in an amount
equal to the undrawn face amount of any applicable outstanding Letters of Credit
with an expiry date of at least five (5) days after the expiry date of any
applicable Letter of Credit and which provide that the Lenders may make a
drawing thereunder in the event that it pays a drawing under such Letter of
Credit. Any termination of the Commitments pursuant to this Section 2.13 is
permanent and may not be reinstated. The Agent shall give prompt notice to each
Lender of any such termination of the Commitments.
SECTION 3. FEES AND PAYMENTS.
Section 3.1 Fees.
----
(a) Commitment Fee. For the period from the Effective Date to and
--------------
including the Commitment Termination Date the Borrower shall pay to the Agent
for the ratable account of the Lenders, a commitment fee (computed on a basis of
a 365/366-day year and actual days elapsed) on an amount equal to the average
daily difference between (i) the sum of the Commitment Amount plus the
outstanding principal amount of the Agent Loans and (ii) the outstanding
Revolving Loans and L/C Obligations, such commitment fee to be calculated, for
any day, at such times as the relevant Funded Debt to EBITDA Ratio is in one of
the following ranges, based upon the percentage per annum set forth opposite
such Funded Debt to EBITDA Ratio set forth below times such amount:
Funded Debt to EBITDA Ratio Commitment Fee
--------------------------- --------------
Less than or equal to 1.25 to 1.0 0.175%
Greater than 1.25 to 1.0 but less
than or equal to 1.50 to 1.0 0.200%
Greater than 1.50 to 1.0 but less
than or equal to 2.0 to 1.0 0.250%
Greater than 2.0 to 1.0 but less
than or equal to 2.50 to 1.0 0.250%
24
Greater than 2.50 to 1.0 but less
than or equal to 3.0 to 1.0 0.300%
Greater than 3.0 to 1.0 0.300%
For the period from the Effective Date through the Commitment Step-down Date,
the commitment fee percentage shall be 0.300%. Thereafter, the commitment fee
percentage shall be set by the Agent at the same time and in the same manner as
the Applicable Margin is set. Such commitment fees shall be payable in arrears
commencing on September 30, 1998, and on the last Business Day of each calendar
quarter thereafter and on the Maturity Date unless the Commitments are
terminated in whole on an earlier date, in which event the commitment fee for
the period to but not including the date of such termination shall be paid in
whole on the date of such termination.
(b) Letter of Credit Fees. Commencing upon the date of issuance or
---------------------
extension of any Letter of Credit, the Borrower shall pay to the Agent quarterly
in arrears (pro rated, if necessary for any portion of such quarter) for the
ratable account of the Lenders and a non-refundable fee equal to the greater of
(x) $500, or (y) the face amount of such Letter of Credit times the Applicable
Margin for LIBOR Loans, calculated on the basis of a 365/366-day year and actual
days in the period and based on the then scheduled expiry date of the Letter of
Credit. Thereafter, such fees shall be payable by the Borrower in arrears on
the last Business Day of each calendar quarter of each year commencing with the
next succeeding calendar quarter, with the last such payment on the date any
such Letter of Credit expires. In addition, the Borrower shall pay to the Agent
solely for the Agent's account, in connection with each Letter of Credit,
reasonable administrative and amendment fees and expenses for letters of credit
established by the Agent from time to time in accordance with its customary
practices and as agreed between the Agent and the Borrower and the fronting fee
described in the Fee Letter.
(c) Agent Fees. The Borrower shall pay to each of the Agent and the
----------
Arranger the fees agreed to between the Agent, the Arranger and the Borrower
pursuant to the Fee Letter, and any other fees from time to time agreed to by
the Borrower and the Agent.
Section 3.2 Place and Application of Payments. All payments of
---------------------------------
principal of and interest on the Loans and the Reimbursement Obligations and all
other amounts payable by the Borrower under the Credit Documents shall be made
by the Borrower to the Agent by no later than 1:30 p.m. on the due date thereof
at the office of the Agent in Houston, Texas (or such other location as the
Agent may designate to the Borrower). Any payments received by the Agent from
the Borrower after 1:30 p.m. shall be deemed to have been received on the next
Business Day.
Section 3.3 Withholding Taxes.
-----------------
(a) Payments Free of Withholding. Except as otherwise required by law and
----------------------------
subject to Section 3.3(b), each payment by the Borrower to the Agent or any
Lender under this Agreement or any other Credit Document shall be made without
withholding for or on account of any present or future taxes (other than overall
net income taxes on the recipient) imposed by or within the jurisdiction in
which the Borrower is domiciled, any jurisdiction from which the Borrower makes
25
any payment, or (in each case) any political subdivision or taxing authority
thereof or therein, excluding, in the case of each Lender and the Agent, taxes,
assessments or other governmental charges
(i) imposed on, based upon, or measured by its income, and branch
profits, franchise and similar taxes imposed on it, by any jurisdiction in
which the Agent or such Lender, as the case may be, is incorporated or
maintains its principal place of business or Lending Office or which
subjects the Agent or such Lender to tax by reason of a connection between
the taxing jurisdiction and the Agent or such Lender (other than a
connection resulting from the transactions contemplated by this Agreement);
(ii) imposed as a result of a connection between the taxing
jurisdiction and the Agent or such Lender, as the case may be, other than a
connection resulting from the transactions contemplated by this Agreement;
(iii) imposed as a result of the transfer by such Lender of its
interest in this Agreement or any other Credit Document or a designation by
such Lender (other than pursuant to Section 3.3(d) hereof) of a new Lending
Office (other than taxes imposed as a result of any change in treaty, law
or regulation after such transfer of the Lender's interest in this
Agreement or any Credit Document or designation of a new Lending Office);
(iv) imposed by the United States of America upon a Lender organized
under the laws of a jurisdiction outside of the United States, except to
the extent that such tax is imposed or increased as a result of any change
in applicable law, regulation or treaty (other than any addition of or
change in any "anti-treaty shopping," "limitation of benefits," or similar
provision applicable to a treaty) after the Effective Date hereof, in the
case of each Lender originally a party hereto or, in the case of any
Purchasing Lender (as defined in Section 10.10), after the date on which it
becomes a Lender;
(v) which would not have been imposed but for (a) the failure of the
Agent or any Lender, as the case may be, to provide (x) an Internal Revenue
Service Form 1001 or 4224, as the case may be, or any substitute or
successor form prescribed by the Internal Revenue Service pursuant to
Section 3.3(b) below, or (y) any other certification, documentation or
proof which is reasonably requested by the Borrower, or (b) a determination
by a taxing authority or a court of competent jurisdiction that a
certification, documentation or other proof provided by such Lender or the
Agent to establish an exemption from such tax, assessment or other
governmental charge is false
(all such non-excluded taxes, assessments or other governmental charges and
liabilities being hereinafter referred to as "Indemnified Taxes"). If any such
withholding is so required, the Borrower shall make the withholding, pay the
amount withheld to the appropriate governmental authority before penalties
attach thereto or interest accrues thereon and forthwith pay such additional
amount as may be necessary to ensure that the net amount actually received by
the Agent and each Lender is free and clear of such Indemnified Taxes (including
Indemnified Taxes on such additional amount) and is equal to the amount that the
Agent or such Lender (as the case may be) would have received
26
had such withholding not been made. If the Agent or any Lender pays any amount
in respect of any Indemnified Taxes, penalties or interest, the Borrower shall
reimburse the Agent or that Lender for the payment on demand in the currency in
which such payment was made. If the Borrower pays any Indemnified Taxes,
penalties or interest, it shall deliver official tax receipts evidencing the
payment or certified copies thereof, or other satisfactory evidence of payment
if such tax receipts have not yet been received by the Borrower (with such tax
receipts to be promptly delivered when actually received), to the Agent or the
Lender on whose account such withholding was made (with a copy to the Agent if
not the recipient of the original) within fifteen (15) days of such payment.
(b) U.S. Withholding Tax Exemptions. Each Lender that is not a United
-------------------------------
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Borrower and the Agent on or before the Effective Date, two duly
completed and signed copies of either Form 1001 (entitling such Lender to a
complete exemption from withholding under the Code on all amounts to be received
by such Lender, including fees, pursuant to the Credit Documents) or Form 4224
(relating to all amounts to be received by such Lender, including fees, pursuant
to the Credit Documents) of the Internal Revenue Service. Thereafter and from
time to time, each Lender shall submit to the Borrower and the Agent such
additional duly completed and signed copies of one or the other of such forms
(or such successor forms as shall be adopted from time to time by the relevant
United States taxing authorities) as may be (i) notified by the Borrower,
directly or through the Agent, to such Lender, and (ii) required under then-
current United States law or regulations to avoid United States withholding
taxes on payments in respect of all amounts to be received by such Lender,
including fees, pursuant to the Credit Documents. Upon the request of the
Borrower, each Lender that is a United States person shall submit to the
Borrower a certificate to the effect that it is such a United States person.
(c) Inability of Lender to Submit Forms. If any Lender determines, as a
-----------------------------------
result of any change in applicable law, regulation or treaty, or in any official
application or interpretation thereof, that it is unable to submit to the
Borrower or the Agent any form or certificate that such Lender is obligated to
submit pursuant to Section 3.3(b) or that such Lender is required to withdraw or
cancel any such form or certificate previously submitted or any such form or
certificate otherwise becomes ineffective or inaccurate, such Lender shall
promptly notify the Borrower and the Agent of such fact and the Lender shall to
that extent not be obligated to provide any such form or certificate and will be
entitled to withdraw or cancel any affected form or certificate, as applicable.
(d) Refund of Taxes. If any Lender or the Agent receives a refund of any
---------------
Indemnified Tax or any tax referred to in Section 10.3 with respect to which the
Borrower has paid any amount pursuant to this Section 3.3 or Section 10.3, such
Lender or the Agent shall pay the amount of such refund (including any interest
received with respect thereto) to the Borrower.
SECTION 4. CONDITIONS PRECEDENT.
Section 4.1 Conditions Precedent to Initial Borrowing. The obligation
-----------------------------------------
of each Lender to advance the initial Loans hereunder and of the Agent to issue
any Letter of Credit on the Initial Borrowing Date is subject to the following
conditions precedent, all in form and substance satisfactory to the Lenders (and
which shall be evidenced by the making of such Loan(s) and, if
27
applicable, the issuance of such Letter(s) of Credit) and in sufficient number
of signed counterparts, where applicable, to provide one for each Lender (except
for the Notes, of which only one original shall be signed for each Lender):
(a) The Agent shall have received:
(i) Notes. The duly executed Notes of the Borrower;
-----
(ii) Subsidiary Guaranties. The duly executed Guaranties of each of
---------------------
the Guarantors in substantially the form of Exhibit 4.1A;
(iii) Stock Pledge Agreements. The duly executed Stock Pledge
-----------------------
Agreements from the Borrower, Palex Container Systems, Inc., Acme Barrel
Company, Inc. and Environmental Recyclers of Colorado, Inc. in
substantially the form of Exhibit 4.1B, together with all of the pledged
securities referred to in the Stock Pledge Agreements as required to be
delivered to effectuate and perfect such stock pledges, accompanied by
executed and undated stock powers;
(iv) UCC-1 Financing Statements. The duly executed UCC-1 Financing
--------------------------
Statements of each of the Borrower, Palex Container Systems, Inc., Acme
Barrel Company, Inc. and Environmental Recyclers of Colorado, Inc. with
respect to the stock and limited liability company interests referenced in
the Stock Pledge Agreements;
(v) Certificate of Officers of Borrower and Guarantors. A
--------------------------------------------------
certificate of the Secretary or Assistant Secretary and the President or
Vice President of each of the Borrower and the Guarantors containing
specimen signatures of the persons authorized to execute Credit Documents
on such Person's behalf or any other documents provided for herein,
together with (x) copies of resolutions of the Board of Directors of such
Person authorizing the execution and delivery of the Credit Documents and
of all other legal documents or proceedings taken by such Person in
connection with the execution and delivery of the Credit Documents, (y)
copies of such Person's Certificate or Articles of Incorporation, certified
by the Secretary of State of such Person's jurisdiction of organization,
and Bylaws or other organizational documents;
(vi) Certificates of Existence and Good Standing. Certificates of
-------------------------------------------
existence and good standing from the appropriate governing agency of the
Borrower's and each Guarantor's jurisdiction of organization and of all
jurisdictions where such Person is authorized to do business;
(vii) Fees. Payment of all fees and all expenses incurred through the
----
Effective Date then due and owing to the Agent and the Arranger pursuant to
this Agreement and the Fee Letter;
28
(viii) Consents. Certified copies of all documents evidencing any
--------
necessary consents and governmental approvals taken or obtained by the
Borrower and the Guarantors with respect to the Credit Documents;
(ix) Financial Condition Certificate. A certificate of the
-------------------------------
principal financial officer of the Borrower in substantially the form of
Exhibit 4.1C;
(x) Opinion of Counsel. The opinion of Xxxxxx Xxxxx, Esquire,
------------------
General Counsel to the Borrower and the Guarantors covering such matters as
the Lenders may reasonably require; and
(xi) Other Documents. Such other documents as the Lenders may
---------------
reasonably request.
(b) All legal matters incident to the execution and delivery of the Credit
Documents shall be satisfactory to the Lenders.
Section 4.2 Conditions Precedent to all Borrowings. In the case of each
--------------------------------------
advance of a Borrowing hereunder (including the issuance of, increase in the
amount of, or extension of the expiry date of, a Letter of Credit and the
initial Borrowing hereunder but excluding the Revolving Loans to be made as
required by Section 2.1(b)):
(a) Notices. In the case of a Borrowing, the Agent shall have received the
-------
Borrowing Request required by Section 2.4, and in the case of the issuance,
extension or increase of a Letter of Credit, the Agent shall have received a
duly completed Borrowing Request and Application for such Letter of Credit
meeting the requirements of Section 2.2;
(b) Representations and Warranties True and Correct. Each of the
-----------------------------------------------
representations and warranties of the Borrower and its Subsidiaries set forth
herein and in the Credit Documents shall be true and correct in all material
respects as of the time of such new Borrowing, except as a result of the
transactions expressly permitted hereunder or thereunder and except to the
extent that any such representation or warranty relates solely to an earlier
date, in which case it shall have been true and correct in all material respects
as of such earlier date;
(c) No Default. No Default or Event of Default shall have occurred and be
----------
continuing or would occur as a result of such Borrowing;
(d) New Litigation and Changes in Pending Litigation. Since the Effective
------------------------------------------------
Date, no new litigation (including, without limitation, derivative or injunctive
actions), arbitration proceedings or governmental proceedings shall be pending
or known to be threatened against the Borrower or any of its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect; and no material
development (whether or not disclosed) shall have occurred in any litigation
(including, without limitation, derivative or injunctive actions), arbitration
proceedings or governmental proceedings previously disclosed, which could
reasonably be expected to have a Material Adverse Effect;
29
(e) Regulation U; Other Laws. The Borrowings to be made by the Borrower
------------------------
shall not result in either the Borrower or the Agent or any Lender being in non-
compliance with or in violation of Regulation U of the Board of Governors of the
Federal Reserve System and shall not be prohibited by any other legal
requirement (including Regulations G, T and X of the Board of Governors of the
Federal Reserve System) imposed by the banking laws of the United States of
America, and shall not otherwise subject the Agent or any Lender to a penalty or
other onerous conditions under or pursuant to any legal requirement; and
(f) Material Adverse Change. There has occurred no event or effect that
-----------------------
has had or could reasonably be expected to have a Material Adverse Effect.
Each request for the advance of a Borrowing and each request for the issuance
of, increase in the amount of, or extension of the expiry date of, a Letter of
Credit shall be deemed to be a representation and warranty by the Borrower on
the date of such Borrowing, or issuance of, increase in the amount of, or
extension of the expiry date of, such Letter of Credit that all conditions
precedent to such Borrowing have been satisfied or fulfilled unless the Borrower
gives to the Agent written notice to the contrary, in which case no Lender shall
be required to fund such advances and the Agent shall not be required to issue,
increase the amount of or extend the expiry date of such Letter of Credit unless
the Majority Lenders shall have previously waived in writing such non-
compliance. In the event that any of the conditions specified in Section 4.2(c)
are not satisfied, the Borrower may not convert any Base Rate Loan into a LIBOR
Loan or continue any LIBOR Loan and may only convert or continue any LIBOR Loan
into or as a Base Rate Loan in accordance with Section 2.4(b) hereof and subject
to the applicability of the provisions of Section 2.8 regarding default rates of
interest. Further, in such case, any LIBOR Loan which has not been accelerated
pursuant to the terms hereof shall automatically convert into a Base Rate Loan
at the end of the applicable Interest Period unless prior to such time, the
conditions specified in Section 4.2(c) shall have been satisfied or waived
pursuant to the terms hereof.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Agent and each Lender as
follows:
Section 5.1 Organization.
------------
(a) The Borrower and each of its Subsidiaries (i) is a duly incorporated
and existing corporation (or other Person) in good standing under the laws of
the jurisdiction of its organization, (ii) has all necessary corporate power (or
comparable power, in the case of a Subsidiary that is not a corporation) to own
the property and assets it uses in its business and otherwise to carry on its
business as presently conducted, and (iii) is duly licensed or qualified and in
good standing in each jurisdiction in which the nature of the business
transacted by it or the nature of the property owned or leased by it makes such
licensing or qualification necessary, except where the failure to be so licensed
or qualified could not reasonably be expected to have a Material Adverse Effect.
30
(b) As of the Effective Date, the Borrower has no Subsidiaries other than
the Persons listed on Schedule 5.1, and the Borrower owns one hundred percent
(100%) of each class of capital stock or ownership interests of each such
Subsidiary except as otherwise disclosed on Schedule 5.1.
Section 5.2 Power and Authority; Validity. Each of the Borrower and the
-----------------------------
Guarantors has the corporate (or comparable power, in the case of a Subsidiary
that is not a corporation) power and authority to execute, deliver and carry out
the terms and provisions of the Credit Documents to which it is a party and has
taken all necessary corporate (or comparable action, in the case of a Subsidiary
that is not a corporation) action to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. Each of the
Borrower and the Guarantors has duly executed and delivered each such Credit
Document and each such Credit Document constitutes the legal, valid and binding
obligation of such Person enforceable in accordance with its terms, subject as
to enforcement only to bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity, regardless of whether in a proceeding in equity
or at law.
Section 5.3 No Violation. Neither the execution, delivery nor
------------
performance by the Borrower or any of the Guarantors of the Credit Documents nor
compliance by any of such Persons with the terms and provisions thereof, nor the
consummation by it of the transactions contemplated herein or therein, will (i)
contravene any applicable provision of any law, statute, rule or regulation, or
any applicable order, writ, injunction or decree of any court or governmental
instrumentality, except where such contravention could not reasonably be
expected to have a Material Adverse Effect, (ii) conflict with or result in any
breach of any term, covenant, condition or other provision of, or constitute a
default under (except where such conflict, breach or default could not
reasonably be expected to have a Material Adverse Effect), or result in the
creation or imposition of (or the obligation to create or impose) any Lien other
than any Permitted Lien upon any of the property or assets of the Borrower or
its Subsidiaries under the terms of any contractual obligation to which the
Borrower or any of its Subsidiaries is a party or by which it or any of its
properties or assets are bound or to which it may be subject, or (iii) violate
or conflict with any provision of the Certificate or Articles of Incorporation
or Bylaws or other governance documents, as applicable of such Person.
Section 5.4 Litigation. As of the Effective Date, there are no lawsuits
----------
(including, without limitation, derivative or injunctive actions), arbitration
proceedings or governmental proceedings pending or, to the best knowledge of the
Borrower, threatened, involving the Borrower or any of its Subsidiaries except
as disclosed in Schedule 5.4 and except for such lawsuits or other proceedings
which could not reasonably be expected to have a Material Adverse Effect.
Section 5.5 Use of Proceeds; Margin Regulations. The proceeds of the
-----------------------------------
Loans may only be used to repay existing Indebtedness, to provide working
capital and for general corporate purposes (including the issuance of Letters of
Credit) and for Acquisitions. Neither the Borrower nor any of its Subsidiaries
are engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock. No proceeds of any Loan will be used to purchase or
carry any "margin stock" (as defined in Regulation U of the Board of Governors
of the Federal Reserve System), to extend credit for the purpose of purchasing
or carrying any "margin stock," or for a purpose which violates Regulations G,
T, U or X of the Board of Governors of the Federal Reserve System.
31
Section 5.6 Investment Company Act. Neither the Borrower nor any of its
----------------------
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 5.7 Public Utility Holding Company Act. Neither the Borrower
----------------------------------
nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 5.8 True and Complete Disclosure. All factual information (not
----------------------------
including estimated, pro forma financial information and other projections)
heretofore or contemporaneously furnished by the Borrower or any of its
Subsidiaries in writing to the Lenders in connection with any Credit Document or
any transaction contemplated therein is, and all other such factual information
hereafter furnished by any such Persons in writing to the Lenders in connection
herewith, any of the other Credit Documents or the Loans will be, true and
accurate in all material respects, taken as a whole, on the date of such
information and not incomplete by omitting to state any material fact necessary
to make the information therein not misleading at such time in light of the
circumstances under which such information was provided. All estimates, pro
forma financial information and projections furnished by the Borrower or any of
its Subsidiaries in writing to the Lenders in connection with any Credit
Document or any transaction contemplated therein, were prepared by the Borrower
in good faith based upon assumptions believed by the Borrower to be reasonable
at the time such information was prepared.
Section 5.9 Financial Statements. The financial statements heretofore
--------------------
delivered to the Lenders for the Borrower's fiscal quarter ending June 28, 1998,
were prepared on a consolidated basis in accordance with GAAP, and such
financial statements, together with the related notes and schedules, fairly
presents the financial position of the Borrower and its Subsidiaries as of the
date thereof and the results of operations for the period covered thereby,
subject to normal year-end adjustments and omission of certain footnotes as
permitted by the SEC. The Borrower and its Subsidiaries have no material
contingent liabilities or Indebtedness other than those disclosed in such
financial statements and in the Borrower's SEC filings.
Section 5.10 No Material Adverse Change. From June 28, 1998, there has
--------------------------
occurred no event or effect that has had, or to the best knowledge of the
Borrower could reasonably be expected to have, a Material Adverse Effect.
Section 5.11 Labor Controversies. There are no labor strikes, lock-outs,
-------------------
slow downs, work stoppages or similar events pending or, to the best knowledge
of the Borrower, threatened against the Borrower or any of its Subsidiaries that
could reasonably be expected to have a Material Adverse Effect.
Section 5.12 Taxes. Except as disclosed on Schedule 5.12, the Borrower
-----
and its Subsidiaries have filed all federal tax returns and all other material
tax returns required to be filed, and have paid all governmental taxes, rates,
assessments, fees, charges and levies (collectively,
32
"Taxes") except such Taxes, if any, as are being contested in good faith and for
which reserves have been provided in accordance with GAAP and except where the
failure to pay such Taxes could not reasonably be expected to have a Material
Adverse Effect. Except as disclosed on Schedule 5.12, no tax liens have been
filed and no claims are being asserted for Taxes. Except as disclosed on
Schedule 5.12, the charges, accruals and reserves on the books of the Borrower
and its Subsidiaries for Taxes and other governmental charges have been
determined in accordance with GAAP.
Section 5.13 ERISA. With respect to each Plan, the Borrower and its
-----
Subsidiaries have fulfilled their obligations under the minimum funding
standards of, and are in compliance in all material respects with, ERISA and
with the Code to the extent applicable to it, and have not incurred any
liability under Title IV of ERISA to the PBGC or a Plan other than a liability
to the PBGC for premiums under Section 4007 of ERISA, except where such
liability could not reasonably be expected to have a Material Adverse Effect.
Neither the Borrower nor any of its Subsidiaries has any contingent liability
with respect to any post-retirement benefits under a welfare plan as defined in
ERISA other than liability for continuation coverage described in Part 6 of
Title I of ERISA, except where such liability could not reasonably be expected
to have a Material Adverse Effect.
Section 5.14 Consents. All consents and approvals of, and filings and
--------
registrations with, and all other actions of, all governmental agencies,
authorities or instrumentalities required to consummate the Borrowings
hereunder, on the date of each such Borrowing, have been obtained or made and
are or will be in full force and effect.
Section 5.15 Capitalization. All outstanding shares of the Borrower and
--------------
its Subsidiaries have been duly and validly issued, are fully paid and
nonassessable. None of the Borrower's Subsidiaries has outstanding any
securities convertible into or exchangeable for its capital stock or outstanding
any rights to subscribe for or to purchase, or any options for the purchase of,
or any agreement providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock
except for the nonvoting stock exchangeable into shares of the Borrower to be
issued by a Canadian Subsidiary of the Borrower to the sellers in connection
with the Acquisition of SMG Corporation and its Subsidiaries.
Section 5.16 Ownership of Property. The Borrower and its Subsidiaries
---------------------
have good and marketable title to or a valid leasehold interest in all of its
property except to the extent, in the aggregate, no Material Adverse Effect
could reasonably be expected to result from the failure to have such title or
interest, subject to no Liens except Permitted Liens. The Borrower and its
Subsidiaries own or hold valid licenses to use all the material patents,
trademarks, permits, service marks and trade names, free of any burdensome
restrictions, that are necessary to the operation of the business of the
Borrower and its Subsidiaries as presently conducted, except where the failure
to own or hold such licenses could not reasonably be expected to have a Material
Adverse Effect.
Section 5.17 Compliance with Statutes. The Borrower and its Subsidiaries
------------------------
are in compliance in all material respects with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies and have all necessary permits, licenses and other necessary
authorizations with respect to the conduct of their businesses and the ownership
33
and operation of their properties except where the failure to so comply or hold
such permits, licenses or other authorizations could not reasonably be expected
to have a Material Adverse Effect.
Section 5.18 Environmental Matters.
---------------------
(a) Borrower and its Subsidiaries have complied with, and on the date of
each Borrowing will be in compliance with, all applicable Environmental Laws and
the requirements of any permits issued under such Environmental Laws except
where failure to so comply could not reasonably be expected to have a Material
Adverse Effect. To the best knowledge of the Borrower, there are no pending,
past or threatened Environmental Claims against the Borrower or any of its
Subsidiaries or any property owned or operated by the Borrower or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect. To the best knowledge of the Borrower, there are no conditions or
occurrences on any property owned or operated by the Borrower or any of its
Subsidiaries or on any property adjoining or in the vicinity of any such
property that could reasonably be expected (i) to form the basis of an
Environmental Claim against the Borrower or any of its Subsidiaries or any
property owned or operated by the Borrower or any of its Subsidiaries, or (ii)
to cause any property owned or operated by the Borrower or any of its
Subsidiaries to be subject to any material restrictions on the ownership,
occupancy, use or transferability of such property by the Borrower or any of its
Subsidiaries under any applicable Environmental Law except for any such
condition or occurrence described in clauses (i) or (ii) which could not
reasonably be expected to have a Material Adverse Effect.
(b) To the best knowledge of the Borrower (i) Hazardous Materials have not
at any time been generated, used, treated or stored on, or transported to or
from, any property owned or operated by the Borrower or any of its Subsidiaries
in a manner that has violated or could reasonably be expected to violate any
Environmental Law, except for such violation which could not reasonably be
expected to have a Material Adverse Effect, and (ii) Hazardous Materials have
not at any time been released on or from any property owned or operated by the
Borrower or any of its Subsidiaries in a matter that has violated or could
reasonably be expected to violate any Environmental Law, except for such
violation which could not reasonably be expected to have a Material Adverse
Effect.
(c) To the best knowledge of the Borrower, the Environmental Claim
disclosed in the Borrower's SEC filings as of the Effective Date should not have
a Material Adverse Effect.
Section 5.19 Year 2000 Compliance. All devices, systems, machinery,
--------------------
information technology, computer software and hardware, and other date sensitive
technology (jointly and severally its "systems") necessary for the Borrower and
its Subsidiaries to carry on their business as presently contemplated to be
conducted will be Year 2000 Compliant within a period of time calculated to
result in no material disruption of any of their business operations. For
purposes hereof, "Year 2000 Compliant" means that such systems are designed to
be used prior to, during and after the Gregorian calendar year 2000 A.D. and
will operate during each such time period without error relating to date data,
specifically including any error relating to, or the product of, date data which
represents or references different centuries or more than one century. The
Borrower and its Subsidiaries will (i) undertake a detailed inventory, review,
and assessment of all areas within their businesses and operations that could be
adversely affected by the failure of the Borrower and its Subsidiaries to be
Year 2000 Compliant on a timely basis; and (ii) develop a detailed plan and
34
timeline for becoming Year 2000 Compliant on a timely basis. The Borrower will,
as soon as reasonably practicable, make written inquiry of each of its and its
Subsidiaries' key suppliers, vendors, and customers, and will obtain in writing
confirmations from all such Persons, as to whether such Persons have initiated
programs to become Year 2000 Compliant. For purposes hereof, "key suppliers,
vendors, and customers" refers to those suppliers, vendors, and customers of the
Borrower and its Subsidiaries whose business failure could reasonably be
expected to have a Material Adverse Effect. The fair market value of all
Collateral pledged to the Lenders as collateral to secure the Loans is not and
shall not be less than currently anticipated or subject to substantial
deterioration in value because of the failure of such Collateral to be Year 2000
Compliant.
Section 5.20 Existing Liens and Indebtedness. The Borrower and its
-------------------------------
Subsidiaries have no Liens or Indebtedness on any of their properties or assets
on the Effective Date other than as listed on Schedule 5.20.
SECTION 6. COVENANTS.
The Borrower covenants and agrees that, without the consent of the Majority
Lenders and so long as any Note, Letter of Credit or Reimbursement Obligation or
any other Obligation is outstanding or any Commitment is outstanding hereunder:
Section 6.1 Corporate Existence. The Borrower and its Subsidiaries will
-------------------
preserve and maintain their existence except (i) for the dissolution of any
Subsidiaries whose assets are transferred to the Borrower or any of its
Subsidiaries and (ii) as otherwise expressly permitted herein.
Section 6.2 Maintenance. The Borrower and its Subsidiaries will
-----------
maintain, preserve and keep their material plants, properties and equipment
necessary to the proper conduct of their businesses in reasonably good repair,
working order and condition (normal wear and tear excepted) and will from time
to time make all reasonably necessary repairs, renewals, replacements, additions
and betterments thereto so that at all times such plants, properties and
equipment are reasonably preserved and maintained; provided, however, that
nothing in this Section 6.2 shall prevent the Borrower or any of its
Subsidiaries from discontinuing the operation or maintenance of any such plants,
properties or equipment if such discontinuance is, in the judgment of the
Borrower or any such Subsidiary, as applicable, desirable in the conduct of its
business and not materially disadvantageous to the Lenders.
Section 6.3 Taxes. The Borrower and its Subsidiaries will duly pay and
-----
discharge all Taxes upon or against them or their properties before payment is
delinquent and before penalties accrue thereon, unless and to the extent that
the same is being contested in good faith and by appropriate proceedings and
reserves have been established in conformity with GAAP.
Section 6.4 ERISA. The Borrower and its Subsidiaries will promptly pay
-----
and discharge all obligations and liabilities arising under ERISA or otherwise
with respect to each Plan of a character which if unpaid or unperformed might
result in the imposition of a material Lien against any properties or assets of
the Borrower or any of its Subsidiaries and will promptly notify the Agent of
(i) the occurrence of any reportable event (as defined in ERISA) relating to a
Plan other than any such event with respect to which the PBGC has waived notice
by regulation; (ii) receipt of any notice
35
from PBGC of its intention to seek termination of any Plan or appointment of a
trustee therefor; (iii) the Borrower's or any of its Subsidiary's intention to
terminate or withdraw from any Plan; and (iv) the occurrence of any event that
could result in the incurrence of any material liability, fine or penalty, or
any material increase in the contingent liability of the Borrower or any of its
Subsidiaries, in connection with any post-retirement benefit under a welfare
plan benefit (as defined in ERISA).
Section 6.5 Insurance. The Borrower and its Subsidiaries will maintain
---------
or cause to be maintained with responsible insurance companies, insurance
against any loss or damage to all material insurable property and assets owned
by them, such insurance to be of a character and in or in excess of such amounts
as are customarily maintained by companies similarly situated and operating like
property or assets, all of which policies shall provide that no policy shall
terminate without at least thirty (30) days' advance written notice to the Agent
and be reasonably acceptable to the Agent. The Borrower and each of its
Subsidiaries will also insure employers' and public and product liability risks
with responsible insurance companies, all as reasonably acceptable to the Agent.
The Borrower will on or before January 31st of each calendar year and upon the
request of the Agent, furnish a certificate from an officer of the Borrower
setting forth the nature and extent of the insurance maintained pursuant to this
Section 6.5.
Section 6.6 Financial Reports and Other Information.
---------------------------------------
(a) The Borrower and its Subsidiaries will maintain a system of accounting
in such manner as will enable preparation of financial statements in accordance
with GAAP and will furnish to the Lenders and its authorized representatives
such information about the business and financial condition of the Borrower and
its Subsidiaries, including, without limitation, any corporate documents and
records, within such time period, as any Lender may reasonably request; and,
without any request, will furnish to the Agent:
(i) within forty-five (45) days after the end of each fiscal quarter
of each fiscal year of the Borrower, the consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal quarter and the
related consolidated and consolidating statements of income and retained
earnings and of cash flows for such fiscal quarter and for the portion of
the fiscal year ended with the last day of such fiscal quarter, all of
which shall be in reasonable detail and certified by an officer of the
Borrower acceptable to the Agent that they fairly present the financial
condition of the Borrower and its Subsidiaries as of the dates indicated
and the results of their operations and changes in their cash flows for the
periods indicated and that they have been prepared in accordance with GAAP,
in each case, subject to normal year-end audit adjustments; and
(ii) within one hundred twenty (120) days after the end of each
fiscal year of the Borrower, consolidated and consolidating balance sheets
of the Borrower and its Subsidiaries as at the end of such fiscal year and
the related consolidated and consolidating statements of income and
retained earnings and of cash flows for such fiscal year and setting forth
consolidated comparative figures for the preceding fiscal year and
certified by the an officer of the Borrower acceptable to the Agent, to the
effect that such statements fairly present the financial condition of the
Borrower and its Subsidiaries as of the dates indicated and the results of
their operations and changes in their cash flows, and in the case of the
consolidated
36
statements, audited by an independent nationally-recognized accounting firm
acceptable to the Agent together with a certificate of such accountants to
the Lenders stating that in the course of the regular audit of the business
of Borrower, which audit was conducted in accordance with GAAP, such
accountants obtained no knowledge that a Default or an Event of Default has
occurred and is continuing, or if, in the opinion of such accountants, a
Default or an Event of Default has occurred and is continuing, a statement
as to the nature thereof.
(b) Each financial statement furnished to the Agent pursuant to subsections
(i) and (ii) of Section 6.6(a) shall be accompanied by (i) a written certificate
signed by an officer of the Borrower acceptable to the Agent to the effect that
(x) no Default or Event of Default has occurred during the period covered by
such statements or, if any such Default or Event of Default has occurred during
such period, setting forth a description of such Default or Event of Default and
specifying the action, if any, taken by the Borrower to remedy the same, and (y)
the representations and warranties contained herein are true and correct in all
material respects as though made on the date of such certificate, except to the
extent that any such representation or warranty relates solely to an earlier
date, in which case it was true and correct as of such earlier date and except
as otherwise described therein, as a result of the transactions expressly
permitted hereunder or as previously disclosed to the Lenders, and (ii) a
Compliance Certificate in the form of Exhibit 6.6 showing the Borrower's
compliance with the financial covenants set forth herein.
(c) Promptly upon receipt thereof, the Borrower will provide the Agent with
a copy of each report or "management letter" submitted to the Borrower or any of
its Subsidiaries by its independent accountants or auditors in connection with
any annual, interim or special audit made by them of the books and records of
the Borrower or any of its Subsidiaries.
(d) Promptly after obtaining knowledge of any of the following, the
Borrower will provide the Agent with written notice in reasonable detail of:
(i) any pending or threatened Environmental Claim against the Borrower or any of
its Subsidiaries or any property owned or operated by the Borrower or any of its
Subsidiaries that if adversely determined could reasonably be expected to have a
Material Adverse Effect; (ii) any condition or occurrence on any property owned
or operated by the Borrower or any of its Subsidiaries that results in
noncompliance by the Borrower or any of its Subsidiaries with any Environmental
Law that could reasonably be expected to have a Material Adverse Effect; and
(iii) the taking of any material removal or remedial action in response to the
actual or alleged presence of any Hazardous Material on any property owned or
operated by the Borrower or any of its Subsidiaries, which Hazardous Material or
the removal or remediation thereof could reasonably be expected to have a
Material Adverse Effect.
(e) The Borrower will promptly and in any event, within ten (10) days after
an officer of the Borrower has knowledge thereof, give written notice to the
Agent of: (i) any pending or threatened litigation or proceeding against the
Borrower or any of its Subsidiaries asserting any claim or claims against any of
same in excess of $250,000 in the aggregate; (ii) the occurrence of any Default
or Event of Default; (iii) any circumstance that has had a Material Adverse
Effect; and (iv) any event which would result in a breach of, Sections 6.20,
6.21, 6.22, 6.23 or 6.24.
(f) The Borrower will (i) furnish such additional information, statements
and other reports with respect to the Borrower's compliance (and its approach to
and progress towards
37
achieving compliance) with Section 5.19 as the Agent may request from time to
time; (ii) in the event of any change in circumstances that causes or will
likely cause any of the Borrower's representations and warranties set forth in
Section 5.19, to no longer be true, the Borrower shall promptly, and in any
event within ten (10) days of receipt of information regarding a change in
circumstances, provide the Agent with written notice that describes in
reasonable detail the change in circumstances and any additional information any
Lender requests of the Borrower in connection therewith; and (iii) give any
representative of any Lender access during all business hours to, and permit
such representative to examine, copy or make excerpts from, any and all books,
records and documents in the possession of the Borrower and its Subsidiaries and
relating to their affairs, and to inspect any of the properties and systems of
the Borrower and its Subsidiaries, and to project test its systems to determine
if they are Year 2000 Compliant in an integrated environment, all at the sole
cost and expense of the Lenders.
(g) The Agent will promptly provide to each Lender all information provided
to it by the Borrower pursuant to this Section 6.6.
Section 6.7 Lenders Inspection Rights. Upon reasonable notice from the
-------------------------
Agent or any Lender, the Borrower will permit the Agent or any Lender (and such
Persons as the Agent or any Lender may designate), at the Borrower's expense
while an Event of Default has occurred and is continuing, during normal business
hours following reasonable notice to visit and inspect any of the properties of
the Borrower or any of its Subsidiaries, to examine all of their books and
records, to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants (and by this provision, the Borrower authorizes
such accountants to discuss with the Agent or any Lender, and such Persons as
the Agent or any Lender may designate, the affairs, finances and accounts of the
Borrower and its Subsidiaries provided that the Borrower has the opportunity to
be present at such discussions), all at such reasonable times and as often as
may be reasonably requested.
Section 6.8 Conduct of Business. The Borrower and its Subsidiaries will
-------------------
not engage in any line of business other than the pallet manufacturing,
recycling and leasing services business, the drum and other industrial container
reconditioning, manufacturing, distributing and leasing business, and related
services (each, a "Permitted Business").
Section 6.9 New Subsidiaries. The Borrower shall cause (i) any direct
----------------
or indirect domestic Subsidiary which is formed or acquired after the Effective
Date to become a Guarantor with respect to, and jointly and severally liable
with all other Guarantors for, all of the Obligations under this Agreement and
the Note pursuant to a Guaranty substantially in the form of Exhibit 4.1A, and
(ii) any Subsidiary which forms or acquires a Subsidiary after the Effective
Date to execute and deliver to the Agent a Stock Pledge Agreement substantially
in the form of Exhibit 4.1B and to deliver to the Agent the original stock
certificates for any such Subsidiary as set forth therein (or other evidence of
its ownership interest therein) and undated stock powers executed in blank with
respect thereto, in each case within thirty (30) days following such formation
or acquisition. The Borrower shall provide to the Agent a list of all its
Subsidiaries with the state or country of incorporation and the location of the
principal place of business of each such Subsidiary at the same time as it
provides its quarterly financial reports to the Agent pursuant to Section
6.6(a)(i).
38
Section 6.10 Dividends and Negative Pledges.
------------------------------
(a) The Borrower shall not pay any dividends or other distributions on its
capital stock.
(b) Neither the Borrower nor any of its Subsidiaries shall, directly or
indirectly, create or otherwise permit to exist or become effective any
restriction on the ability of any Subsidiary of the Borrower to (i) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or to pay any
Indebtedness owed to the Borrower, or (ii) make loans or advances to the
Borrower or any of its Subsidiaries, except in either case for restrictions
existing under or by reason of applicable law, this Agreement and the other
Credit Documents.
(c) Neither the Borrower nor any of its Subsidiaries shall enter into any
agreement creating or assuming any Lien upon its properties, revenues or assets,
whether now owned or hereafter acquired other than as permitted hereunder.
Neither the Borrower nor any of its Subsidiaries shall enter into any agreement
other than this Agreement and the Credit Documents prohibiting the creation or
assumption of any Lien upon its properties, revenues or assets, whether now
owned or hereafter acquired or prohibiting or restricting the ability of the
Borrower or any of its Subsidiaries to amend or otherwise modify this Agreement
or any Credit Document.
Section 6.11 Restrictions on Fundamental Changes. Neither the Borrower
-----------------------------------
nor any of its Subsidiaries shall be a party to any merger into or consolidation
with, make an Acquisition or otherwise purchase or acquire all or substantially
all of the assets or stock of, any other Person, or sell all or substantially
all of its assets or stock, except:
(a) the Borrower or any of its Subsidiaries may merge into or consolidate
with, make an Acquisition or otherwise purchase or acquire all or substantially
all of the assets or stock of any other Person if upon the consummation of any
such merger, consolidation, purchase or Acquisition, (i) the Borrower or such
Subsidiary is the surviving corporation to any such merger or consolidation (or
the other Person will thereby become a Subsidiary); (ii) the nature of the
business of such acquired Person is a Permitted Business; (iii) the Borrower
shall have delivered to the Agent (which the Agent shall promptly provide to
each Lender) within ten (10) Business Days prior to the consummation of an
Acquisition a report signed by an executive officer of the Borrower which shall
contain calculations demonstrating the Borrower's compliance with Sections 6.20,
6.21, 6.22 and 6.23 (on a trailing four fiscal quarter pro forma basis,
consistent with SEC regulations), such calculations to use historical financial
results of the acquired business; (iv) the maximum cash purchase price paid and
Indebtedness incurred to a seller by the Borrower or any of its Subsidiaries in
connection with any single Acquisition shall not exceed $10,000,000 (provided
that the Lenders hereby consent to the Acquisition of SMG Corporation, an
Ontario corporation, and its Subsidiaries); (v) no Default or Event of Default
shall have occurred and be continuing or would otherwise be existing as a result
of such merger, consolidation, purchase or Acquisition; and (vi) such merger,
consolidation, purchase or Acquisition is non-hostile in nature; and
(b) the Borrower may purchase or otherwise acquire all or substantially all
of the stock or assets of, or otherwise acquire by merger or consolidation, any
of its Subsidiaries, and any such
39
Subsidiary may merge into, or consolidate with, or purchase or otherwise acquire
all or substantially all of the assets or stock of or sell all or substantially
all of its assets or stock to, any other Subsidiary of the Borrower or the
Borrower, in each case so long as the Borrower shall be the surviving entity to
any such merger or consolidation if the transaction is with the Borrower.
Except as otherwise permitted in this Section 6.11, the Borrower shall not sell
or dispose of any capital stock of or its ownership interest in any of the
Guarantors or any other Subsidiaries which it may form.
Section 6.12 Environmental Laws. The Borrower and its Subsidiaries shall
------------------
comply with all Environmental Laws (including, without limitation, obtaining and
maintaining all necessary permits, licenses and other necessary authorizations)
applicable to or affecting the properties or business operations of the Borrower
or any of its Subsidiaries except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect.
Section 6.13 Liens. The Borrower and its Subsidiaries shall not create,
-----
incur, assume or suffer to exist any Lien of any kind on any of their properties
or assets of any kind except the following (collectively, the "Permitted
Liens"):
(a) Liens arising in the ordinary course of business by operation of law in
connection with workers' compensation, unemployment insurance, old age benefits,
social security obligations, taxes, assessments, statutory obligations or other
similar charges, good faith deposits, pledges or other Liens in connection with
(or to obtain letters of credit in connection with) bids, performance bonds,
contracts or leases to which the Borrower or its Subsidiaries are a party or
other deposits required to be made in the ordinary course of business; provided
that in each case the obligation secured is not for Indebtedness and is not
overdue or, if overdue, is being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP have been provided therefor;
(b) mechanics', workmen, materialmen, landlords', carriers' or other
similar Liens arising in the ordinary course of business (or deposits to obtain
the release of such Liens) related to obligations not due or, if due, that are
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP have been provided therefor;
(c) inchoate Liens under ERISA and Liens for Taxes not yet due or which are
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP have been provided therefor;
(d) Liens arising out of judgments or awards against the Borrower or any of
its Subsidiaries, or in connection with surety or appeal bonds or the like in
connection with bonding such judgments or awards, the time for appeal from which
or petition for rehearing of which shall not have expired or for which the
Borrower or such Subsidiary shall be prosecuting on appeal or proceeding for
review and for which it shall have obtained a stay of execution or the like
pending such appeal or proceeding for review; provided that the aggregate amount
of uninsured or underinsured liabilities (including interest, costs, fees and
penalties, if any) of the Borrower and its Subsidiaries secured by such Liens
shall not exceed $250,000 at any one time outstanding and
40
provided further there is adequate assurance, in the sole discretion of the
Lenders, that the insurance proceeds attributable thereto shall be paid promptly
upon the expiry of such time period or resolution of such proceeding if
necessary to remove such Liens;
(e) rights of a common owner of any interest in property held by a Person
and such common owner as tenants in common or through other common ownership;
(f) encumbrances (other than to secure the payment of Indebtedness),
easements, restrictions, servitudes, permits, conditions, covenants, exceptions
or reservations in any property or rights-of-way of a Person for the purpose of
roads, pipelines, transmission lines, transportation lines, distribution lines,
removal of gas, oil, coal, metals, steam, minerals, timber or other natural
resources, and other like purposes, or for the joint or common use of real
property, rights-of-way, facilities or equipment, or defects, irregularity and
deficiencies in title of any property or rights-of-way which do not materially
diminish the value of or the ability to use such property;
(g) financing statements filed by lessors of property (but only with
respect to the property so leased) and Liens under any conditional sale or title
retention agreements entered into in the ordinary course of business;
(h) rights of lessees of equipment owned by the Borrower or any of its
Subsidiaries;
(i) existing Liens in connection with Indebtedness permitted under Section
6.14(d) and any extension, renewal or replacement thereof;
(j) Liens securing Indebtedness permitted by Section 6.14(d) on any assets
acquired;
(k) existing Liens listed on Schedule 6.13 and any extension, renewal or
replacement thereof;
(l) Liens created by the Stock Pledge Agreements; and
(m) Liens on any assets acquired in an Acquisition, provided that all such
Liens, other than Permitted Liens listed in (a) through (l) of this Section,
shall be released on or before thirty (30) days from the date of such
Acquisition.
Section 6.14 Indebtedness. The Borrower and its Subsidiaries shall not
------------
contract, assume or suffer to exist any Indebtedness (including, without
limitation, any Guaranties), except:
(a) Indebtedness under the Credit Documents;
(b) unsecured intercompany loans and advances from the Borrower to any of
its Subsidiaries and unsecured intercompany loans and advances from any of such
Subsidiaries to the Borrower or any other Subsidiaries of the Borrower;
41
(c) existing Indebtedness listed on Schedule 6.13, and any subsequent
extensions, renewals or refinancings thereof so long as such Indebtedness is not
increased in amount, the maturity date thereof is not made earlier in time, the
interest rate per annum applicable thereto is not increased, any amortization of
principal thereunder is not shortened and the payments thereunder are not
increased;
(d) Capitalized Lease Obligations and purchase money Indebtedness on assets
acquired in an aggregate amount not to exceed $2,000,000 at any one time
outstanding;
(e) unsecured Indebtedness to a seller incurred in connection with an
Acquisition, provided that such Indebtedness is subordinated in payment to the
Obligations hereunder, such Indebtedness contains covenants no more restrictive
than the covenants contained in this Agreement and subordination and standstill
provisions reasonably acceptable to the Agent and no payments may be made
thereon if a Default or Event of Default shall have occurred and be continuing
or would occur as a result of any such payment;
(f) Indebtedness under any Interest Rate Protection Agreement entered into
to protect the Borrower against fluctuations in interest rates and not for
speculative purposes; and
(g) Indebtedness incurred in connection with a Public Debt Issue.
Section 6.15 Loans, Advances and Investments. The Borrower and its
-------------------------------
Subsidiaries shall not lend money or make advances to any Person, or purchase or
acquire any stock, indebtedness, obligations or securities of, or any other
interest in, or make any capital contribution to, any Person (any of the
foregoing, an "Investment") other than:
(a) Investments in Cash Equivalents;
(b) receivables owing to the Borrower or its Subsidiaries created or
acquired in the ordinary course of business and payable on customary trade terms
of the Borrower or such Subsidiary and in compliance with the requirements of
Section 6.17;
(c) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in the
ordinary course of business;
(d) deposits made in the ordinary course of business consistent with past
practices to secure the performance of leases;
(e) as permitted by Section 6.14(b);
(f) loans to employees of the Borrower or any of its Subsidiaries, provided
that all such loans shall not exceed $100,000 at any one time;
42
(g) advances to vendors in the ordinary course of business, provided that
no such advance to a vendor shall be in excess of $100,000 and such advances
shall not exceed $500,000 at any one time; and
(h) (i) unsecured intercompany loans or advances from the Borrower to any
of its Subsidiaries or from any Subsidiaries of the Borrower to the Borrower or
any other Subsidiary of the Borrower, and (ii) Investments of the Borrower or
any Subsidiary of the Borrower in any of its Subsidiaries.
Section 6.16 Transfer of Assets. The Borrower and its Subsidiaries shall
------------------
not permit any sale, transfer, conveyance, assignment or other disposition of
any material asset of the Borrower or any of its Subsidiaries except:
(a) transfers of inventory, equipment and other assets in the ordinary
course of business;
(b) the retirement or replacement of assets (with assets of equal or
greater value) in the ordinary course of business;
(c) transfers of any assets among the Borrower and any of its Subsidiaries;
and
(d) (i) the transfer of cash or other assets as consideration for an
Acquisition and (ii) the transfer of any assets acquired in an Acquisition which
are not necessary for the operation of the business of the Borrower and its
Subsidiaries, provided that the net cash proceeds thereof are reinvested by the
Borrower and its Subsidiaries in the operation of a Permitted Business.
Section 6.17 Transactions with Affiliates. Except as otherwise
----------------------------
specifically permitted herein, the Borrower and its Subsidiaries shall not enter
into or be a party to any material transaction or arrangement or series of
related transactions or arrangements which in the aggregate would be material
with any Affiliate of such Person, including without limitation, the purchase
from, sale to or exchange of property with or the rendering of any service by or
for, any Affiliate, except pursuant to the reasonable requirements of such
entity's business and upon fair and reasonable terms.
Section 6.18 Compliance with Laws. The Borrower and its Subsidiaries
--------------------
shall conduct their businesses and otherwise be in compliance in all material
respects with all applicable laws, regulations, ordinances and orders of all
governmental, judicial and arbitral authorities applicable to them and shall
obtain and maintain all necessary permits, licenses and other authorizations
necessary to conduct their businesses and own and operate their properties
except where the failure to comply or have such permits, licenses or other
authorizations could not reasonably be expected to have a Material Adverse
Effect.
Section 6.19 Credit Exposure. No more than ten percent (10%) of the
---------------
Borrower's Consolidated Net Worth shall be subject to credit risk from any
single customer (including any Affiliate of such customer) unless such accounts
receivable are supported by a letter of credit issued or confirmed by a
financial institution acceptable to the Agent.
43
Section 6.20 Minimum Consolidated Net Worth. The Borrower will maintain
------------------------------
a minimum Consolidated Net Worth of not less than an amount equal to the sum of
(i) $49,400,000, plus (ii) for each fiscal quarter ended prior to (but not on)
such date of determination, commencing with the fiscal quarter ended December
31, 1997 (which period shall include September 1, 1997 through December 31,
1997, as a result of the change in the Borrower's fiscal year), an amount equal
to 50% of Consolidated Net Income for such fiscal quarter, if positive, plus
(iii) for the fiscal quarter during which such date of determination falls, an
amount equal to 100% of the amount of any equity issuance by the Borrower,
including in a secondary offering or where equity is used to acquire another
entity in an Acquisition, plus (iv) for the fiscal quarter during which such
determination falls, an amount equal to 100% of the stockholders equity of any
entity acquired in an Acquisition for which the Borrower uses the pooling of
interest method of accounting in accordance with GAAP.
Section 6.21 Minimum Fixed Charge Coverage Ratio. The Borrower will
-----------------------------------
maintain a Fixed Charge Coverage Ratio of at least 1.0 to 1.0 through March 31,
1999, 1.10 to 1.0 from April 1, 1999, through June 30, 1999, and 1.25 to 1.0
thereafter.
Section 6.22 Maximum Funded Debt to EBITDA Ratio. The Borrower will
-----------------------------------
maintain a maximum Funded Debt to EBITDA Ratio of not greater than 3.25 to 1.0
through March 31, 1999, and 3.0 to 1.0 thereafter; provided that if a Public
Debt Issue shall have closed, the Borrower will maintain a maximum Funded Debt
to EBITDA Ratio of not greater than 3.75 to 1.0 from and after the date thereof.
Section 6.23 Minimum Tangible Assets to Senior Debt Plus Current
---------------------------------------------------
Liabilities Ratio. The Borrower will maintain a minimum Tangible Assets to
-----------------
Senior Debt Plus Current Liabilities Ratio of not less than 1.0 to 1.0 through
December 31, 1998, 1.2 to 1.0 from January 1, 1999 through December 31, 1999,
and 1.4 to 1.0 thereafter.
Section 6.24 Maximum Senior Debt to EBITDA Ratio. The Borrower will
-----------------------------------
maintain a maximum Senior Debt to EBITDA Ratio of not greater than 3.0 to 1.0
through March 31, 1999, and 2.75 to 1.0 thereafter.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES.
Section 7.1 Events of Default. Any one or more of the following shall
-----------------
constitute an Event of Default:
(a) default by the Borrower in the payment of the principal amount of any
Loan, any Reimbursement Obligation or any interest thereon or any fees payable
hereunder within ten (10) days of the date such payment is due;
(b) default by the Borrower in the observance or performance of any
covenant set forth in Sections 6.6(e), 6.10(a), 6.11 or 6.16;
(c) default by the Borrower or any of its Subsidiaries in the observance or
performance of any provision hereof or of any other Credit Document not
mentioned in (a) or (b) above
44
(excluding any default of Section 6.21 solely as a result of distributions or
dividends made by the entity acquired in an Acquisition before the date of such
Acquisition), which is not remedied within thirty (30) days after the earlier of
(i) such default or event of default first becoming known to any officer of the
Borrower, or (ii) notice to the Borrower by the Agent of the occurrence of such
default or event of default;
(d) any representation or warranty or other written statement made or
deemed made herein, in any other Credit Document or in any financial or other
report or document furnished in compliance herewith or therewith by the Borrower
or any of its Subsidiaries proves untrue in any material respect as of the date
of the issuance or making, or deemed issuance or making thereof;
(e) default occurs in the payment when due (after any applicable grace
period) of Indebtedness in an aggregate principal amount of $250,000 or more of
the Borrower or any of its Subsidiaries, or the occurrence of any other default,
which with the passage of time or notice would permit the holder or beneficiary
of such Indebtedness, or a trustee therefor, to cause the acceleration of the
maturity of any such Indebtedness or any mandatory unscheduled prepayment,
purchase, or other early funding thereof;
(f) the Borrower or any of its Subsidiaries (i) has entered involuntarily
against it an order for relief under the United States Bankruptcy Code or a
comparable action is taken under any bankruptcy or insolvency law of another
country or political subdivision of such country, (ii) generally does not pay,
or admits its inability generally to pay, its debts as they become due, (iii)
makes a general assignment for the benefit of creditors, (iv) applies for,
seeks, consents to, or acquiesces in, the appointment of a receiver, custodian,
trustee, examiner, liquidator or similar official for it or any substantial part
of its property, (v) institutes any proceeding seeking to have entered against
it an order for relief under the United States Bankruptcy Code or any comparable
law, to adjudicate it insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fails to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (vi) makes any
board of directors resolution in direct furtherance of any matter described in
clauses (i)-(v) above, or (vii) fails to contest in good faith any appointment
or proceeding described in Section 7.1(f);
(g) a custodian, receiver, trustee, examiner, liquidator or similar
official is appointed for the Borrower or any of its Subsidiaries or any
substantial part of its property, or a proceeding described in Section 7.1(f)(v)
is instituted against the Borrower or any of its Subsidiaries, and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of sixty (60) days;
(h) the Borrower or any of its Subsidiaries fails within thirty (30) days
(or such earlier date as any steps to execute on such judgment or order take
place) to pay, bond or otherwise discharge, or to obtain an indemnity against on
terms and conditions satisfactory to the Lenders in its sole discretion, any one
or more judgments or orders for the payment of money in excess of $250,000 in
the aggregate which is uninsured or underinsured by at least such amount
(provided that there is adequate assurance, in the sole discretion of the
Lenders, that the insurance proceeds
45
attributable thereto shall be paid promptly upon the expiration of such time
period or resolution of such proceeding), which is not stayed on appeal or
otherwise being appropriately contested in good faith in a manner that stays
execution;
(i) the Borrower or any of its Subsidiaries fails to pay when due an amount
aggregating in excess of $250,000 that it is liable to pay to the PBGC or to a
Plan under Title IV of ERISA; or a notice of intent to terminate a Plan having
Unfunded Vested Liabilities of the Borrower or any of its Subsidiaries in excess
of $250,000 (a "Material Plan") is filed under Title IV of ERISA; or the PBGC
institutes proceedings under Title IV of ERISA to terminate or to cause a
trustee to be appointed to administer any Material Plan; or a proceeding is
instituted by a fiduciary of any Material Plan against the Borrower or any of
its Subsidiaries to collect any liability under Section 515 or 4219(c)(5) of
ERISA and such proceeding is not dismissed within thirty (30) days thereafter;
or a condition exists by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated;
(j) the Borrower, any of its Subsidiaries, any Person acting on behalf of
the Borrower or any of its Subsidiaries, or any governmental, judicial or
arbitral authority challenges the validity of any Credit Document or any
Person's obligations thereunder, or any Credit Document ceases to be in full
force and effect in all material respects or ceases to give to the Agent and the
Lenders the rights and powers purported to be granted in its favor thereby in
all material respects; or
(k) any Person or two or more Persons acting in concert shall acquire
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934), directly or indirectly, of securities of the Borrower (or
other securities convertible into such securities) representing fifty percent
(50%) or more of the combined voting power of all outstanding securities of the
Borrower entitled to vote in the election of directors.
Section 7.2 Non-Bankruptcy Defaults. When any Event of Default other
-----------------------
than those described in subsections (f) or (g) of Section 7.1 has occurred and
is continuing, the Agent shall, by notice to the Borrower: (a) if so directed by
the Majority Lenders, terminate the remaining Commitments and all other
obligations of the Lenders hereunder on the date stated in such notice (which
may be the date thereof); (b) if so directed by the Majority Lenders, declare
the principal of and the accrued interest on all outstanding Notes to be
forthwith due and payable and thereupon all outstanding Notes, including both
principal and interest thereon, shall be and become immediately due and payable
together with all other amounts payable under the Credit Documents without
further demand, presentment, protest or notice of any kind, including, but not
limited to, notice of intent to accelerate and notice of acceleration, each of
which is expressly waived by the Borrower; and (c) if so directed by the
Majority Lenders, demand that the Borrower immediately pay to the Agent (to be
held by the Agent pursuant to Section 7.4) the full amount then available for
drawing under each or any outstanding Letter of Credit; and the Borrower agrees
to immediately make such payment and acknowledges and agrees that neither the
Agent nor the Lenders would have an adequate remedy at law for failure by the
Borrower to honor any such demand and that the Agent, for the benefit of the
Lenders shall have the right to require the Borrower to specifically perform
such undertaking whether or not any drawings or other demands for payment have
been made under any Letter of Credit. The Agent, after giving notice to the
Borrower pursuant to Section 7.1(c) or (d) or this
46
Section 7.2, shall also promptly send a copy of such notice to the other
Lenders, but the failure to do so shall not impair or annul the effect of such
notice.
Section 7.3 Bankruptcy Defaults. When any Event of Default described in
-------------------
subsections (f) or (g) of Section 7.1 has occurred and is continuing with
respect to the Borrower, then (i) all outstanding Notes shall immediately become
due and payable together with all other amounts payable under the Credit
Documents without presentment, demand, protest or notice of any kind, each of
which is expressly waived by the Borrower, (ii) all obligations of the Agent or
any Lender to extend further credit pursuant to any of the terms hereof shall
immediately terminate, and (iii) the Borrower shall immediately pay to the Agent
(to be held by the Agent pursuant to Section 7.4) the full amount then available
for drawing under all outstanding Letters of Credit, the Borrower acknowledging
and agreeing that neither the Agent nor the Lenders would have an adequate
remedy at law for failure by the Borrower to honor any such demand and that the
Agent and the Lenders shall have the right to require the Borrower to
specifically perform such undertaking whether or not any drawings or other
demands for payment have been made under any of the Letters of Credit.
Section 7.4 Collateral for Undrawn Letters of Credit.
----------------------------------------
(a) If the prepayment of the amount available for drawing under any or all
outstanding Letters of Credit is required under Section 7.2 or 7.3, the Borrower
shall forthwith pay the amount required to be so prepaid, to be held by the
Agent as provided in subsection (b) below.
(b) All amounts prepaid pursuant to subsection (a) above shall be held by
the Agent in a separate collateral account (such account, and the credit
balances, properties and any investments from time to time held therein, and any
substitutions for such account, any certificate of deposit or other instrument
evidencing any of the foregoing and all proceeds of and earnings on any of the
foregoing being collectively called the "Collateral Account") as security for,
and for application by the Agent (to the extent available) to, the reimbursement
of any drawing under any Letter of Credit then or thereafter made by the Agent,
and to the payment of the unpaid balance of any Loans and all other due and
unpaid Obligations (collectively, the "Collateralized Obligations"). The
Collateral Account shall be held in the name of and subject to the exclusive
dominion and control of the Agent, for the benefit of the Lenders, as pledgee
hereunder. If and when requested by the Borrower, the Agent shall invest and
reinvest funds held in the Collateral Account from time to time in Cash
Equivalents specified from time to time by the Borrower, provided that the Agent
is irrevocably authorized to sell investments held in the Collateral Account
when and as required to make payments out of the Collateral Account for
application to Collateralized Obligations due and owing from the Borrower to the
Lenders. If such funds have been deposited pursuant to Section 7.2 or 7.3, when
and if (i) the Borrower shall have made payment of all Collateralized
Obligations then due and payable, (ii) all relevant preference or other
disgorgement periods relating to the receipt of such payments have passed, and
(iii) no Letters of Credit, Commitments, Loans, Reimbursement Obligations or
other Obligations remain outstanding hereunder, the Agent shall repay to the
Borrower any remaining amounts held in the Collateral Account.
47
Section 7.5 Notice of Default. The Agent shall give notice to the
-----------------
Borrower under Section 7.1(c) and (d) and 7.2 promptly upon being requested to
do so by the Majority Lenders and shall thereupon notify all the Lenders
thereof.
Section 7.6 Application of Proceeds. After the occurrence of and during
-----------------------
the continuance of an Event of Default, any payment to the Agent hereunder or
from the proceeds of any cash collateral shall be applied as the Agent and the
Lenders shall elect in their sole discretion.
SECTION 8. CHANGE IN CIRCUMSTANCES.
Section 8.1 Change of Law. Notwithstanding any other provisions of this
-------------
Agreement or any Note, if at any time any change in applicable law or regulation
or in the interpretation thereof makes it unlawful for any Lender to make or
continue to maintain LIBOR Loans or to give effect to its obligations as
contemplated hereby, such Lender shall promptly give notice thereof to the
Borrower and such Lender's obligations to make, continue or convert Loans into
LIBOR Loans under this Agreement shall be suspended until it is no longer
unlawful for such Lender to make or maintain LIBOR Loans. The Borrower shall
prepay on demand the outstanding principal amount of any such affected LIBOR
Loans, together with all interest accrued thereon and all other amounts then due
and payable to such Lender under this Agreement; provided, however, subject to
all of the terms and conditions of this Agreement, the Borrower may then elect
to borrow the principal amount of the affected LIBOR Loans from such Lender by
means of Base Rate Loans from such Lender that shall not be made ratably by the
Lenders but only by such affected Lender.
Section 8.2 Unavailability of Deposits or Inability to Ascertain LIBOR
----------------------------------------------------------
Rate. If on or before the first day of any Interest Period for any Borrowing of
----
LIBOR Loans the Agent determines (after consultation with other Lenders) that,
due to changes in circumstances since the Effective Date, adequate and fair
means do not exist for determining the Adjusted LIBOR Rate or such rate will not
accurately reflect the cost to the Majority Lenders of funding LIBOR Loans for
such Interest Period, the Agent shall give notice of such determination to the
Borrower and the Lenders, whereupon until the Agent notifies the Borrower and
Lenders that the circumstances giving rise to such suspension no longer exist,
the obligations of the Lenders to make, continue or convert Loans into LIBOR
Loans shall be suspended.
Section 8.3 Increased Cost and Reduced Return.
---------------------------------
(a) If, on or after the Effective Date, the adoption of or any change in
any applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Lending Office), including the Agent in its capacity as
the issuer of Letters of Credit, with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:
(i) subjects any Lender of that type (or its Lending Office) to any
tax, duty or other charge related to any LIBOR Loan, Letter of Credit or
Reimbursement Obligation, or its participation in any thereof, or its
obligation to advance or maintain LIBOR Loans, issue Letters of Credit or
to participate therein, or shall change the basis of taxation of payments
48
to any Lender (or its Lending Office) of the principal of or interest on
its LIBOR Loans, Letters of Credit or participations therein, or any other
amounts due under this Agreement related to its LIBOR Loans, Letters of
Credit, Reimbursement Obligations or participations therein, or its
obligation to make LIBOR Loans, issue Letters of Credit or acquire
participations therein (except for changes in the rate of tax on the
overall net income of such Lender or its Lending Office imposed by the
jurisdiction in which such Lender's principal executive office or Lending
Office is located); or
(ii) imposes, modifies or deems applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System) against assets of, deposits with or for the account of, or credit
extended by, any Lender of that type (or its Lending Office) or imposes on
any Lender of that type (or its Lending Office) or on the interbank market
any other condition affecting its LIBOR Loans, its Letters of Credit, any
Reimbursement Obligation owed to it or its participation in any thereof, or
its obligation to advance or maintain LIBOR Loans, issue Letters of Credit
or to participate in any thereof;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Lending Office) of advancing or maintaining any LIBOR Loan, issuing or
maintaining a Letter of Credit or participation therein, or to reduce the amount
of any sum received or receivable by such Lender (or its Lending Office) in
connection therewith under this Agreement or its Note(s), by an amount deemed by
such Lender to be material, then, within fifteen (15) days after demand in
reasonable detail by such Lender (with a copy to the Agent), the Borrower shall
be obligated to pay to such Lender such additional amount or amounts as will
compensate such Lender for such increased cost or reduction.
(b) If, after the Effective Date, the Agent or any Lender shall have
determined that the adoption after the Effective Date of any applicable law,
rule or regulation regarding capital adequacy, or any change therein (including,
without limitation, any revision in the Final Risk-Based Capital Guidelines of
the Board of Governors of the Federal Reserve System (12 CFR Part 208, Appendix
A; 00 XXX Xxxx 000, Xxxxxxxx X) or of the Office of the Comptroller of the
Currency (12 CFR Part 3, Appendix A), or in any other applicable capital
adequacy rules heretofore adopted and issued by any governmental authority), or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Agent or any Lender (or its Lending
Office) with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Lender's capital, or on the capital of any corporation controlling such Lender,
as a consequence of its obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, change or compliance (taking
into consideration such Lender's policies with respect to capital adequacy) by
an amount deemed by such Lender to be material, then from time to time, within
fifteen (15) days after demand in reasonable detail by such Lender (with a copy
to the Agent), the Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction.
49
(c) The Agent and each Lender that determines to seek compensation under
this Section 8.3 shall notify the Borrower and, in the case of a Lender other
than the Agent, the Agent of the circumstances that entitle the Agent or Lender
to such compensation and will designate a different Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole judgment of such Lender, be otherwise disadvantageous
to it; provided that, the foregoing shall not in any way affect the rights of
any Lender or the obligations of the Borrower under this Section 8.3, and
provided further that no Lender shall be obligated to make its LIBOR Loans
hereunder at any office located in the United States. A certificate of any
Lender claiming compensation under this Section 8.3 and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, such Lender may use
any reasonable averaging and attribution methods.
Section 8.4 Lending Offices. The Agent and each Lender may, at its
---------------
option, elect to make its Loans hereunder at the Lending Office for each type of
Loan available hereunder or at such other of its branches, offices or Affiliates
as it may from time to time elect and designate in a written notice to the
Borrower and the Agent subject to Section 8.3(c).
Section 8.5 Discretion of Lender as to Manner of Funding.
--------------------------------------------
Notwithstanding any other provision of this Agreement, each Lender shall be
entitled to fund and maintain its funding of all or any part of its Loans in any
manner it sees fit, it being understood, however, that for the purposes of this
Agreement all determinations hereunder shall be made as if each Lender had
actually funded and maintained each LIBOR Loan through the purchase of deposits
in the eurodollar interbank market having a maturity corresponding to such
Loan's Interest Period and bearing an interest rate equal to LIBOR for such
Interest Period.
SECTION 9. THE AGENT.
Section 9.1 Appointment and Authorization of Agent. Each Lender hereby
--------------------------------------
appoints Bank One as the Agent under the Credit Documents and hereby authorizes
the Agent to take such action as Agent on its behalf and to exercise such powers
under the Credit Documents as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto.
Section 9.2 Rights and Powers. The Agent shall have the same rights and
-----------------
powers under the Credit Documents as any other Lender and may exercise or
refrain from exercising such rights and power as though it were not the Agent,
and the Agent and its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the Borrower or any of its
Subsidiaries or Affiliates as if it were not the Agent under the Credit
Documents. The term Lender as used in all Credit Documents, unless the context
otherwise clearly requires, includes the Agent in its individual capacity as a
Lender, including its capacity as a Lender under the Agent Swing Line.
References herein to the Agent Loans, or to the amount owing to the Agent for
which an interest rate is being determined, refer to the Agent in its individual
capacity as a Lender.
Section 9.3 Action by Agent. The obligations of the Agent under the
---------------
Credit Documents are only those expressly set forth therein. Without limiting
the generality of the foregoing, the Agent shall not be required to take any
action concerning any Default or Event of Default, except as
50
expressly provided in Sections 7.2 and 7.5. Upon the occurrence of an Event of
Default, the Agent shall take such action to enforce its Lien on the Collateral
and to preserve and protect the Collateral as may be directed by the Majority
Lenders. Unless and until the Majority Lenders give such direction, the Agent
may take or refrain from taking such actions as it deems appropriate and in the
best interest of all the Lenders. In no event, however, shall the Agent be
required to take any action in violation of applicable law or of any provision
of any Credit Document, and the Agent shall in all cases be fully justified in
failing or refusing to act hereunder or under any other Credit Document unless
it first receives any further assurances of its indemnification from the Lenders
that it may require, including prepayment of any related expenses and any other
protection it requires against any and all costs, expenses, and liabilities it
may incur in taking or continuing to take any such action. The Agent shall be
entitled to assume that no Default or Event of Default exists unless notified in
writing to the contrary by a Lender or the Borrower. In all cases in which the
Credit Documents do not require the Agent to take specific action, as
applicable, the Agent shall be fully justified in using its discretion in
failing to take or in taking any action thereunder. Any instructions of the
Majority Lenders, or of any other group of Lenders called for under specific
provisions of the Credit Documents, shall be binding on all the Lenders and
holders of Notes.
Section 9.4 Consultation with Experts. The Agent may consult with legal
-------------------------
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
Section 9.5 Indemnification Provisions. Neither the Agent nor any of
--------------------------
its directors, officers, agents, or employees shall be liable for any action
taken or not taken by it in connection with the Credit Documents (i) with the
consent or at the request of the Majority Lenders or all the Lenders where
unanimity is required or (ii) in the absence of its own gross negligence or
willful misconduct. Neither the Agent nor any of its directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into or verify (i) any statement, warranty or representation made in
connection with this Agreement, any other Credit Document or any Borrowing; (ii)
the performance or observance of any of the covenants or agreements of the
Borrower or any Subsidiary contained herein or in any other Credit Document;
(iii) the satisfaction of any condition specified in Section 4 hereof, except
receipt of items required to be delivered to the Agent; or (iv) the validity,
effectiveness, genuineness, enforceability, perfection, value, worth or
collectability hereof or of any other Credit Document or of the Liens provided
for by the Security Documents or of any other documents or writing furnished in
connection with any Credit Document or of the Collateral; and the Agent makes no
representation of any kind or character with respect to any such matters
mentioned in this sentence. The Agent may execute any of its duties under any
of the Credit Documents by or through employees, agents, and attorneys-in-fact
and shall not be answerable to the Lenders or any other Person for the default
or misconduct of any such agents or attorneys-in-fact selected with reasonable
care. The Agent shall not incur any liability by acting in reliance upon any
notice, consent, certificate, other document or statement (whether written or
oral) believed by it to be genuine or to be sent by the proper party or parties.
In particular and without limiting any of the foregoing, the Agent shall have no
responsibility for confirming the existence or worth of any Collateral or the
accuracy of any Compliance Certificate or other document or instrument received
by it under the Credit Documents. The Agent may treat the payee of any Note
51
as the holder thereof until written notice of transfer shall have been filed
with the Agent signed by such owner in form satisfactory to the Agent. Each
Lender acknowledges that it has independently and without reliance on the Agent
or any other Lender obtained such information and made such investigations and
inquiries regarding the Borrower and its Subsidiaries as it deems important, and
based upon such information, investigations and inquiries made its own credit
analysis and decision to extend credit to the Borrower in the manner set forth
in the Credit Documents. It shall be the responsibility of each Lender to keep
itself informed about the creditworthiness and business properties, assets,
liabilities, condition (financial or otherwise) and prospects of the Borrower
and its Subsidiaries, the creditworthiness of all account debtors of the
Borrower and its Subsidiaries, and the Agent shall have no liability whatsoever
to any Lender for such matters. The Agent shall have no duty to disclose to the
Lenders information that is not required by any Credit Document to be furnished
by the Borrower or any Subsidiaries to the Agent at such time, but is
voluntarily furnished to the Agent (either in its capacity as Agent or in its
individual capacity).
Section 9.6 Indemnity. The Lenders shall ratably, in accordance with
---------
their Percentages, indemnify and hold the Agent, and its directors, officers,
employees, agents and representatives harmless from and against any liabilities,
losses, costs or expenses suffered or incurred by it or by any security trustee
under any Credit Document or in connection with the transactions contemplated
thereby, regardless of when asserted or arising, except to the extent they are
promptly reimbursed for the same by the Borrower or out of the proceeds of the
Collateral and except to the extent that any event giving rise to a claim was
caused by the gross negligence or willful misconduct of the party seeking to be
indemnified. The obligations of the Lenders under this Section 9.6 shall
survive termination of this Agreement.
Section 9.7 Resignation of Agent and Successor Agent. The Agent may
----------------------------------------
resign at any time upon at least thirty (30) days' prior written notice to the
Lenders and the Borrower. Upon any such resignation of the Agent, the Majority
Lenders, with the consent of the Borrower (which consent shall not be
unreasonably withheld) shall have the right to appoint a successor Agent. If no
successor Agent, shall have been so appointed by the Majority Lenders and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent, may, on behalf
of the Lenders, appoint a successor Agent, as the case may be, which shall be
any Lender hereunder or any commercial bank organized under the laws of the
United States of America or of any State thereof and having a combined capital
and surplus of at least $500,000,000. Upon the acceptance of its appointment as
the Agent hereunder, such successor Agent, as the case may be, shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Agent, under the Credit Documents, and the retiring Agent, shall be discharged
from its duties and obligations thereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Section 9 and all
protective provisions of the other Credit Documents shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent.
SECTION 10. MISCELLANEOUS.
Section 10.1 No Waiver of Rights. No delay or failure on the part of the
-------------------
Agent or any of the Lenders, or on the part of the holder or holders of the
Notes, in the exercise of any power, right or remedy under any Credit Document
shall operate as a waiver thereof or as an acquiescence in any
52
default, nor shall any single or partial exercise thereof preclude any other or
further exercise of any other power, right or remedy. To the fullest extent
permitted by applicable law, the powers, rights and remedies under the Credit
Documents of the Lenders and the holder or holders of the Notes are cumulative
to, and not exclusive of, any rights or remedies any of them would otherwise
have.
Section 10.2 Non-Business Day. If any payment of principal or interest
----------------
on any Loan, Reimbursement Obligation or of any other Obligation or Agent
Obligation shall fall due on a day which is not a Business Day, interest or fees
(as applicable) at the rate, if any, for such Loan, such Reimbursement
Obligation or such other Obligation or Agent Obligation bears for the period
prior to maturity shall continue to accrue in the manner set forth herein on
such Obligation from the stated due date thereof to and including the next
succeeding Business Day on which the same shall be payable.
Section 10.3 Documentary Taxes. The Borrower agrees that it will pay any
-----------------
documentary, stamp or similar taxes payable with respect to any Credit Document,
including interest and penalties, in the event any such taxes are assessed
irrespective of when such assessment is made and regardless whether any credit
is then in use or available hereunder.
Section 10.4 Survival of Representations. All representations and
---------------------------
warranties made herein or in certificates given pursuant hereto shall survive
the execution and delivery of this Agreement and the other Credit Documents, and
shall continue in full force and effect with respect to the date as of which
they were made as long as the Borrower has any Obligation hereunder or any
Commitment hereunder is in effect.
Section 10.5 Survival of Indemnities. All indemnities and all other
-----------------------
provisions relative to reimbursement to the Agent and the Lenders of amounts
sufficient to protect the yield of the Lenders or the Agent with respect to the
Loans or the Agent Loans, as applicable, shall survive the termination of this
Agreement and the other Credit Documents and the payment of the Loans and all
other Obligations or Agent Obligations, as applicable, for a period of one (1)
year.
Section 10.6 Setoff. In addition to any rights now or hereafter granted
------
under applicable law and not by way of limitation of any such rights, upon the
occurrence of, and throughout the continuance of, any Default or Event of
Default, the Agent and each of the Lenders and each subsequent holder of any of
the Notes is hereby authorized by the Borrower at any time or from time to time,
without notice to the Borrower, to any Subsidiary of the Borrower or to any
other Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts, and in whatever currency
denominated) and any other Indebtedness at any time held or owing by the Agent
or the Lenders or that subsequent holder to or for the credit or the account of
the Borrower, whether or not matured, against and on account of the obligations
and liabilities of the Borrower to the Agent or the Lenders or that subsequent
holder under the Credit Documents, including, but not limited to, all claims of
any nature or description arising out of or connected with the Credit Documents,
irrespective of whether or not (i) the Agent or any of the Lenders or that
subsequent holder shall have made any demand hereunder or (ii) the principal of
or the interest on the Loans, the Notes and other amounts due
53
hereunder shall have become due and payable hereunder and although said
obligations and liabilities, or any of them, may be contingent or unmatured. The
Agent and the Lenders agree, if there shall be any other Lenders pursuant to
Section 10.10(b), that if a Lender receives and retains any payment, whether by
setoff or application of deposit balances or otherwise, on any of the Loans or
L/C Obligations in excess of its ratable share of payments on all such
Obligations then owed to the Lenders hereunder, then such Lender shall purchase
for cash at face value, but without recourse, ratably from each of the other
Lenders such amount of the Loans or L/C Obligations, or participations therein,
held by such Lender (or interest therein) as shall be necessary to cause such
Lender to share such excess payment ratably with all the other Lenders;
provided, however, that if any such purchase is made by any Lender, and if such
excess payment or part thereof is thereafter recovered from such purchasing
Lender, the related purchases from the other Lenders shall be rescinded ratably
and the purchase price restored as to the portion of such excess payment so
recovered, with interest pro rata, to the extent the purchasing Lender is
required to pay interest on the amount restored.
Section 10.7 Notices. Except as otherwise specified herein, all notices
-------
under the Credit Documents shall be in writing (including cable, telecopy or
telex) and shall be given to a party hereunder at its address, telecopier number
or telex numbers set forth below or such other address, telecopier number or
telex as such party may hereafter specify by notice to the Lenders or the
Borrower, as applicable, given by courier, by United States certified or
registered mail, by telegram or by other telecommunication device capable of
creating a written record of such notice and its receipt. Notices under the
Credit Documents shall be addressed to the Agent and the Lenders as set forth on
the signature pages hereto and to the Borrower as follows:
PalEx, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Fax No.: (000) 000-0000
with a copy to
PalEx, Inc.
0000 Xxxx Xxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxx Xxxxx
Telephone: (000) 000-0000
Fax No.: (000) 000-0000
Each such notice, request or other communication shall be effective (i) if
given by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section 10.7 and a confirmation of receipt of such telecopy
has been received by the sender, (ii) if given by telex, when such telex is
transmitted to the telex number specified in this Section 10.7 and the answer
back is received by sender, (iii) if given by courier, when delivered, (iv) if
given by mail, five (5) days after
54
such communication is deposited in the mail, registered with return receipt
requested, addressed as aforesaid or (v) if given by any other means, when
delivered at the addresses specified in this Section 10.7; provided that any
notice given pursuant to Section 2 shall be effective only upon receipt and,
provided further, that any notice that but for this provision would be effective
after the close of business on a Business Day or on a day that is not a Business
Day shall be effective at the opening of business on the next Business Day.
Section 10.8 Counterparts. This Agreement may be executed in any number
------------
of counterparts, and by the different parties on different counterpart signature
pages, each of which when executed shall be deemed an original but all such
counterparts taken together shall constitute one and the same Agreement.
Section 10.9 Successors and Assigns. This Agreement shall be binding
----------------------
upon the Borrower, the Agent and the Lenders and their respective successors and
assigns, and shall inure to the benefit of the Borrower, the Agent and the
Lenders and their respective successors and assigns, including any subsequent
holder of the Notes. The Borrower may not assign any of its rights or
obligations under any Credit Document without the consent of the Agent and all
of the Lenders.
Section 10.10 Sales and Transfers of Borrowings and Notes; Participations
-----------------------------------------------------------
in Borrowings and Notes.
-----------------------
(a) Any Lender may at any time sell to one or more banks ("Participants"),
participating interests in any Borrowing owing to such Lender, any Note held by
such Lender, any Commitment of such Lender or any other interest of such Lender
hereunder, provided that no Lender may sell any participating interests in any
such Borrowing, Note, Commitment or other interest hereunder without also
selling to such Participant the appropriate pro rata share of its Borrowings,
Notes, Commitments and other interests hereunder, and provided further that no
Lender shall transfer, grant or assign any participation under which the
Participant shall have rights to vote upon or consent to any matter to be
decided by the Lender or the Majority Lenders hereunder or under any Credit
Document or approve any amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or waiver would (i) increase
the amount of such Lender's Commitment and such increase would affect such
Participant, (ii) reduce the principal of, or interest on, any of such Lender's
Borrowings, or any fees or other amounts payable to such Lender hereunder and
such reduction would affect such Participant, (iii) postpone any date fixed for
any scheduled payment of principal of, or interest on, any of such Lender's
Borrowings, or any fees or other amounts payable to such Lender hereunder, or
(iv) release any Collateral for any Obligation (including, without limitation,
any Subsidiary Guaranty or any Stock Pledge Agreement), except as otherwise
specifically provided in any Credit Document. In the event of any such sale by
a Lender of participating interests to a Participant, such Lender's obligations
under this Agreement to the other parties to this Agreement shall remain
unchanged, such Lender shall remain solely responsible for the performance
thereof, such Lender shall remain the holder of any such Note for all purposes
under this Agreement and the Borrower and the Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. The Borrower agrees that if amounts
outstanding under this Agreement and the Notes are due and unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of an
Event of
55
Default, each Participant shall be deemed to have the right of setoff in respect
of its participating interest in amounts owing under this Agreement and any Note
to the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement or any Note, provided that such
right of setoff shall be subject to the obligation of such Participant to share
with the Lenders, and the Lenders agree to share with such Participant, as
provided in Section 10.6. The Borrower also agrees that each Participant shall
be entitled to the benefits of Sections 2.12 and 8.3 with respect to its
participation in the Commitments and the Borrowings outstanding from time to
time, provided that no Participant shall be entitled to receive any greater
amount pursuant to such Sections than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred.
(b) Any Lender may at any time sell to any Lender or any Affiliate thereof,
and, with the consent of the Agent and the Borrower (which shall not be
unreasonably withheld or delayed), to one or more banks or other financial
institutions (a "Purchasing Lender"), all or any part of its rights and
obligations under this Agreement and the Notes, pursuant to an Assignment
Agreement in the form attached as Exhibit 10.10 hereto, executed by such
Purchasing Lender and such transferor Lender (and, in the case of a Purchasing
Lender which is not then a Lender or an Affiliate thereof, by the Borrower and
the Agent) and delivered to the Agent; provided that, each such sale to a
Purchasing Lender shall be in an amount of $5,000,000 or more, or if in a lesser
amount, such sale shall be of all of the Lender's rights and obligations under
this Agreement and all of the Notes payable to it to one eligible assignee.
Notwithstanding the above, any Lender may sell to one or more eligible assignees
all or any part of their rights and obligations under this Agreement and the
Notes with only the consent of the Agent (which shall not be unreasonably
withheld) if an Event of Default shall have occurred and be continuing. No
Lender may sell any Loans to a Purchasing Lender without also selling to such
Purchasing Lender the appropriate pro rata share of its Borrowings, Notes,
Commitments and other interests hereunder, including participations in Letters
of Credit hereunder; provided that, the Agent shall not be required to sell its
Agent Loans at such time as it may sell any other portion of its Borrowings,
Notes, Commitments and other interests hereunder. Upon such execution,
delivery, acceptance and recording, from and after the effective date of the
transfer determined pursuant to such Assignment Agreement (x) the Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such
Assignment Agreement, have the rights and obligations of a Lender hereunder with
a Commitment as set forth therein and (y) the transferor Lender thereunder
shall, to the extent provided in such Assignment Agreement, be released from its
obligations under this Agreement (and, in the case of an Assignment Agreement
covering all or the remaining portion of a transferor Lender's rights and
obligations under this Agreement, such transferor Lender shall cease to be a
party hereto). Such Assignment Agreement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of Commitments
and Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender under this
Agreement, the Notes and the other Credit Documents. On or prior to the
effective date of the transfer determined pursuant to such Assignment Agreement,
the Borrower, at its own expense, shall execute and deliver to the Agent in
exchange for any surrendered Notes, new Notes as appropriate to the order of
such Purchasing Lender in an amount equal to the Commitments assumed by it
pursuant to such Assignment Agreement, and, if the transferor Lender has
retained a Commitment or Borrowing hereunder, new Notes to the order of the
transferor Lender
56
in an amount equal to the Commitments or Borrowings retained by it hereunder.
Such new Notes shall be dated the Initial Borrowing Date and shall otherwise be
in the form of the Notes replaced thereby. The Notes surrendered by the
transferor Lender shall be returned by the Agent to the Borrower marked
"canceled."
(c) Upon its receipt of an Assignment Agreement executed by a transferor
Lender, a Purchasing Lender and the Agent (and, in the case of a Purchasing
Lender that is not then a Lender or an Affiliate thereof, by the Borrower),
together with payment to the Agent hereunder of a registration and processing
fee of $3,500 (unless the transfer is from a Lender to an Affiliate of such
Lender), the Agent shall (i) promptly accept such Assignment Agreement, and (ii)
on the effective date of the transfer determined pursuant thereto give notice of
such acceptance and recordation to the Lenders and the Borrower.
(d) The provisions of the foregoing clauses (b) and (c) shall not apply to
or restrict, or require the consent of or any notice to any Person to
effectuate, the pledge or assignment by any Lender of its rights under this
Agreement and its Notes to any Federal Reserve Bank.
(e) If, pursuant to this Section 10.10 any interest in this Agreement or
any Note is transferred to any transferee which is organized under the laws of
any jurisdiction other than the United States of America or any State thereof,
the transferor Lender shall cause such transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Lender (for
the benefit of the transferor Lender, the Agent and the Borrower) that under
applicable law and treaties no taxes will be required to be withheld by the
Agent, the Borrower or the transferor Lender with respect to any payments to be
made to such transferee in respect of the Loans or the L/C Obligations, (ii) to
furnish to the transferor Lender (and, in the case of any Purchasing Lender, the
Agent and the Borrower) either U.S. Internal Revenue Service Form 4224 or U.S.
Internal Revenue Service Form 1001 or such successor forms as shall be adopted
from time to time by the relevant United States taxing authorities (wherein such
transferee claims entitlement to complete exemption from U.S. federal
withholding tax on all interest payments hereunder), and (iii) to agree (for the
benefit of the transferor Lender, the Agent and the Borrower) to provide the
transferor Lender (and, in the case of any Purchasing Lender, the Agent and the
Borrower) a new Form 4224 or Form 1001 upon the expiration or obsolescence of
any previously delivered form and comparable statements in accordance with
applicable U.S. laws and regulations and amendments dully executed and completed
by such transferee, and to comply from time to time with all applicable U.S.
laws and regulations with regard to such withholding tax exemption.
Section 10.11 Amendments. Any provision of the Credit Documents may be
----------
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by (a) the Borrower, (b) the Majority Lenders (in the case of a consent
or waiver, the Borrower may rely on the consent or waiver of the Agent on behalf
of the Majority Lenders, the Agent agreeing to obtain the necessary consents or
waivers from the Majority Lenders before providing such consent or waiver), and
(c) if the rights or duties of the Agent are affected thereby, the Agent;
provided that:
(i) no amendment or waiver shall (A) increase the Commitment Amount
without the consent of all Lenders or increase any Commitment of any Lender
without the consent
57
of such Lender, (B) postpone the Maturity Date without the consent of all
Lenders (and the Agent in the case of Agent Loans) or reduce the amount of
or postpone the date for any scheduled payment of any principal of or
interest on any Loan, Reimbursement Obligation or of any fee or any other
amounts payable hereunder without the consent of each Lender owed such
Obligation or (C) release any Collateral or any Subsidiary Guaranty without
the consent of all the Lenders and the Agent; and
(ii) no amendment or waiver shall, unless signed by each Lender,
change the provisions of this Section 10.11 or the definition of Majority
Lenders or affect the number of Lenders required to take any action under
any other provision of the Credit Documents.
Section 10.12 Headings. Section headings used in this Agreement are for
--------
reference only and shall not affect the construction of this Agreement.
Section 10.13 Legal Fees, Other Costs and Indemnification. Subject to the
-------------------------------------------
limitations set forth in Section 4.1(a)(v), the Borrower, upon demand by the
Agent or any of the Lenders, agrees to pay the reasonable fees and disbursements
of legal counsel to Agent or any Lender in connection with the preparation and
execution of the Credit Documents, any amendment, waiver or consent related
thereto, whether or not the transactions contemplated therein are consummated,
any Default or Event of Default by the Borrower hereunder and any enforcement
(including, without limitation, all workout and bankruptcy proceedings) of any
of the Credit Documents or collection of any Obligations; provided that the
Borrower shall only have to pay the reasonable fees and disbursements of one law
firm in connection therewith unless the Agent, any Lender or their counsel is of
the reasonable opinion that representation by one law firm would not be feasible
or that a conflict of interest would exist. The Borrower further agrees to
indemnify the Agent and each Lender and its respective directors, officers,
shareholders, employees and attorneys (collectively, the "Indemnified Parties"),
against all losses, claims, damages, penalties, judgments, liabilities and
expenses (including, without limitation, all reasonable attorneys' fees and
other reasonable expenses of litigation or preparation therefor, whether or not
the Indemnified Party is a party thereto) which any of them may pay or incur
arising out of or relating to (a) any Credit Document, the Loans, the Letters of
Credit or the application or proposed application by the Borrower of the
proceeds of any Loan, REGARDLESS OF WHETHER SUCH CLAIMS OR ACTIONS ARE FOUNDED
IN WHOLE OR IN PART UPON THE ALLEGED SIMPLE OR CONTRIBUTORY NEGLIGENCE OF ANY OF
THE INDEMNIFIED PARTIES AND/OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
SHAREHOLDERS, EMPLOYEES OR ATTORNEYS, (b) any investigation of any third party
or any governmental authority involving the Agent or any Lender and related to
any use made or proposed to be made by the Borrower of the proceeds of the
Borrowings, or any transaction financed or to be financed in whole or in part,
directly or indirectly with the proceeds of any Borrowing, and (c) any
investigation of any third party or any governmental authority, litigation or
proceeding, related to any environmental cleanup, audit, compliance or other
matter relating to any Environmental Law or the presence of any Hazardous
Material (including, without limitation, any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any Environmental
Law) with respect to the Borrower or any of its Subsidiaries, regardless of
whether caused by, or within the control of, the Borrower or any of its
Subsidiaries; provided, however, that the Borrower shall not be obligated to
indemnify any Indemnified Party for
58
any of the foregoing arising out of (i) such Indemnified Party's gross
negligence or willful misconduct, (ii) the Agent's failure to pay under any
Letter of Credit after the presentation to it of a request required to be paid
under applicable law, or (iii) the Agent's or any Lender's breach of any
material provision of any Credit Document. The Borrower, upon demand by the
Indemnified Party at any time, shall reimburse the Indemnified Party for any
legal or other expenses incurred in connection with investigating or defending
against any of the foregoing except if the same is excluded from indemnification
pursuant to the provisions of the foregoing sentence.
Section 10.14 Governing Law; Arbitration; Submission to Jurisdiction;
-------------------------------------------------------
Waiver of Jury Trial.
--------------------
(a) The Credit Agreement, and the other Credit Documents, and the rights
and duties of the parties thereto, shall be construed in accordance with and
governed by the internal laws of the State of Texas.
(b) THE AGENT, EACH LENDER AND THE BORROWER HEREBY WAIVES ITS RIGHT TO
RESOLVE DISPUTES, CLAIMS, AND CONTROVERSIES ARISING FROM THE CREDIT AGREEMENT,
ANY OTHER CREDIT DOCUMENT OR ANY MATTER IN CONNECTION THEREWITH, INCLUDING,
WITHOUT LIMITATION, CONTRACT DISPUTES AND TORT CLAIMS, THROUGH ANY COURT
PROCEEDING OR LITIGATION AND ACKNOWLEDGES THAT ALL SUCH DISPUTES, CLAIMS AND
CONTROVERSIES SHALL BE RESOLVED PURSUANT TO THIS SECTION, EXCEPT THAT EQUITABLE
RELIEF AND CERTAIN OTHER RIGHTS AND REMEDIES SET FORTH BELOW MAY BE SOUGHT FROM
ANY COURT OF COMPETENT JURISDICTION. EACH PARTY REPRESENTS TO THE OTHER PARTIES
THAT THIS WAIVER IS MADE KNOWINGLY AND VOLUNTARILY AFTER CONSULTATION WITH AND
UPON ADVICE OF ITS COUNSEL AND IS A MATERIAL PART OF THIS AGREEMENT. ALL SUCH
DISPUTES, CLAIMS AND CONTROVERSIES SHALL BE RESOLVED BY BINDING ARBITRATION
PURSUANT TO THE COMMERCIAL RULES OF THE AMERICAN ARBITRATION ASSOCIATION
("AAA"). Any arbitration proceeding held pursuant to this arbitration provision
shall be conducted in Houston, Texas or at any other place selected by mutual
agreement of the parties. No act to take or dispose of any collateral shall
constitute a waiver of this arbitration agreement or be prohibited by this
arbitration agreement. This arbitration provision shall not limit the right of
any party during any dispute, claim or controversy to seek, use, and employ
ancillary, or preliminary rights and/or remedies, judicial or otherwise, for the
purposes of realizing upon, preserving, protecting, foreclosing upon or
proceeding under forcible entry and detainer for possession of, any real or
personal property, and any such action shall not be deemed an election of
remedies. Such remedies include, without limitation, obtaining injunctive
relief or a temporary restraining order, invoking a power of sale under any deed
of trust or mortgage, obtaining a writ of attachment or imposition of a
receivership, or exercising any rights relating to personal property, including
exercising the right of set-off, or taking or disposing of such property with or
without judicial process pursuant to the Uniform Commercial Code. Any disputes,
claims or controversies concerning the lawfulness or reasonableness of an act,
or exercise of any right or remedy concerning any collateral, including any
claim to rescind, reform, or otherwise modify any agreement relating to the
collateral, shall also be arbitrated; provided, however that no arbitrator shall
59
have the right or the power to enjoin or restrain any act of either party.
Judgment upon any award rendered by any arbitrator may be entered in any court
having jurisdiction. The statute of limitations, estoppel, waiver, laches and
similar doctrines which would otherwise be applicable in an action brought by a
party shall be applicable in any arbitration proceeding, and the commencement of
an arbitration proceeding shall be deemed the commencement of any action for
these purposes. The federal arbitration act (Title 9 of the United States Code)
shall apply to the construction, interpretation, and enforcement of this
arbitration provision.
(c) To the fullest extent permitted by applicable law, each party hereto
agrees that any court proceeding or litigation permitted by Section 10.14(b)
may be brought and maintained in the courts of the State of Texas sitting in
Xxxxxx County or the United States District Court for the Southern District of
Texas. To the fullest extent permitted by applicable law, the Borrower hereby
expressly and irrevocably submits to the jurisdiction of the courts of the State
of Texas and the United States District Court for the Southern District of Texas
for the purpose of any such litigation as set forth above and irrevocably agrees
to be bound by any judgment rendered thereby in connection with such litigation.
To the fullest extent permitted by applicable law, the Borrower further
irrevocably consents to the service of process, by registered mail, postage
prepaid, or by personal service within or without the state of Texas. To the
fullest extent permitted by applicable law, the Borrower hereby expressly and
irrevocably waives any objection which it may have or hereafter may have to the
laying of venue of any such litigation brought in any such court referred to
above and any claim that any such litigation has been brought in an inconvenient
forum. To the extent that the Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution or otherwise) with respect to itself or its property, the Borrower
hereby irrevocably waives to the fullest extent permitted by applicable law,
such immunity in respect of its obligations under the Credit Agreement and the
other Credit Documents.
(d) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY (BY ITS ACCEPTANCE
HEREOF) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
PERMITTED BY SECTION 10.14(B) AND WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT
OF THE CREDIT AGREEMENT, ANY OTHER CREDIT DOCUMENT, ANY OTHER RELATED DOCUMENT
OR ANY RELATIONSHIP BETWEEN THE AGENT, ANY LENDER, THE BORROWER AND/OR ANY
GUARANTOR, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR DISPUTE SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT TO
THE LENDERS TO PROVIDE THE LOANS AND THE LETTERS OF CREDIT.
Section 10.15 Confidentiality. The Agent and each Lender agrees it will
---------------
not disclose without the Borrower's consent (other than to its employees,
auditors, counsel or other professional advisors or to its Affiliates) any
information concerning the Borrower or any of its Subsidiaries furnished
pursuant to any of the Credit Documents; provided that the Agent and any Lender
may disclose any such information (i) that has become generally available to the
public other than through
60
the Agent or the Lenders or that was previously known to the Agent or such
Lender or comes from a source other than the Borrower or any of its
Subsidiaries, (ii) if required or appropriate in any examination or audit or any
report, statement or testimony submitted to any federal or state regulatory body
having or claiming to have jurisdiction over the Agent or such Lender, (iii) if
required or appropriate in response to any summons or subpoena or in connection
with any litigation, (iv) in order to comply with any law, order, regulation or
ruling applicable to Agent or such Lender, (v) to any prospective or actual
permitted transferee in connection with any contemplated or actual permitted
transfer of any interest in the Note by such Lender, and (vi) in connection with
the exercise of any remedies by the Agent or any Lender; provided that such
actual or prospective transferee executes an agreement with the applicable
Lender containing provisions substantially identical to those contained in this
Section 10.15 prior to such transferee's receipt of any such information.
Section 10.16 Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 10.17 Change in Accounting Principles or Tax Laws. If (i) any
-------------------------------------------
change in accounting principles from those used in the preparation of the
financial statements of the Borrower referred to in Section 5.9 is hereafter
occasioned by the promulgation of rules, regulations, pronouncements and
opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accounts (or successors thereto or
agencies with similar functions) and such change materially affects the
calculation of any component of any financial covenant, standard or term found
in this Agreement, or (ii) there is a material change in federal or foreign tax
laws which materially affects the Borrower's ability to comply with the
financial covenants, standards or terms found in this Agreement, the Borrower,
the Agent and the Lenders agree to enter into negotiations in order to amend
such provisions so as to equitably reflect such changes with the desired result
that the criteria for evaluating the Borrower's and its Subsidiaries'
consolidated financial condition shall be the same after such changes as if such
changes had not been made. Unless and until such provisions have been so
amended, the provisions of this Agreement shall govern.
Section 10.18 Loans Under Prior Credit Agreement. On the Initial Borrowing
----------------------------------
Date:
(a) The Borrower shall pay all accrued and unpaid commitment fees
outstanding under the Prior Credit Agreement;
(b) each Revolving Loan under the Prior Credit Agreement shall be
deemed to be repaid with the proceeds of a new LIBOR Loan(s) and each Agent Loan
under the Prior Credit Agreement shall be deemed to be repaid with the proceeds
of a new Base Rate Loan and the Borrower shall pay all breakage fees in
connection therewith as required under the Prior Credit Agreement;
61
(c) each Letter of Credit outstanding under the Prior Credit Agreement
shall be deemed to have been issued under this Agreement without payment of any
further fronting fee (but subject to the other fees set forth in Section
3.1(b));
(d) the Prior Credit Agreement and the commitments thereunder shall be
superseded by this Agreement and the commitments under the Prior Credit
Agreement shall terminate; and
(e) the commitment of The Sumitomo Bank, Limited under the Prior
Credit Agreement shall permanently terminate.
Section 10.19 Effectiveness. This Agreement shall become effective on the
-------------
date (the "Effective Date") on which the Borrower, the Agent and each Lender has
signed and delivered to the Agent a counterparty signature page hereto or, in
the case of a Lender, the Agent has received telex or facsimile notice that such
a counterpart has been signed and mailed to the Agent.
Section 10.20 Notice. The Credit Documents constitute the entire
------
understanding among the Borrower, the Agent and the Lenders and supersede all
earlier or contemporaneous agreements, whether written or oral, concerning the
subject matter of the Credit Documents. THIS WRITTEN AGREEMENT TOGETHER WITH THE
OTHER CREDIT DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the day and
year first above written.
BORROWER:
--------
PALEX, INC.
By: /s/ Xxxxxx Xxxxx
----------------
Name: Xxxxxx Xxxxx
Title: Vice President
62
RIDGE PALLETS, INC.
By: /s/ Xxxxxx Xxxxx
----------------
Name: Xxxxxx Xxxxx
Title: Vice President
63
LENDERS:
-------
Percentage of Commitment before BANK ONE, TEXAS, National Association,
Commitment Step-down as Administrative Agent and as a Lender
Date: 44.0000000000%
Percentage of Commitment on and
after Commitment Step-down
Date: 36.00% By: /s/ Xxxx X. Xxxx, Xx.
---------------------
Name: Xxxx X. Xxxx, Xx.
Title: Vice President
Address for Notices:
Bank One, Texas, NA
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxx, Xx.
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
Telex No.: 6734165
Answerback: BONE DAL
Payment Instructions:
--------------------
Name of Credit Bank: Xxxx Xxx, Xxxxx, XX
Xxxx, Xxxxx: Houston, Texas
Method of Payment: ABA #000000000
For Credit To: Bank One, Texas, NA
Account No.: 0749905618
Reference: PalEx, Inc.
Attention: Xxxxxx Xxxxxx
Lending Office:
--------------
Bank One, Texas, NA
000 Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxx, Xx.
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
64
Percentage of Commitment before NATIONAL CITY BANK, as Lender
Commitment Step-down
Date: 16.0000000000%
Percentage of Commitment on and
after Commitment Step-down By: /s/ Xxxxxxx X. Xxxxxx
Date: 20.00% ---------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
Address for Notices:
-------------------
National City Bank
000 X. Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
Telex: N/A
Answerback: N/A
Payment Instructions:
--------------------------------
Name of Credit Bank: National City Bank
City, State: Cleveland, Ohio
Method of Payment: ABA #000000000
For Credit To: Columbus Commercial Loan Operations
Account No.: 151804
Reference: PalEx, Inc.
Attention: Xxxxxx Xxxxxxxx (000) 000-0000
Lending Office:
--------------
National City Bank
000 X. Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
65
Percentage of Commitment before XXXXX FARGO BANK, as Lender
Commitment Step-down
Date: 16.0000000000%
Percentage of Commitment on and
after Commitment Step-down By: /s/ Xxxx Xxxxxxx
Date: 20.00% ----------------
Name: Xxxx Xxxxxxx
Title: Assistant Vice President
Address for Notices:
-------------------
Xxxxx Fargo Bank
Santa Xxxxx Valley Region
000 Xxxx Xxxxxx Xxxxx, 0xx. Xx.
X.X. Xxx 000000
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxx
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
Telex No.:
-------------------
Answerback:
------------------
Payment Instructions:
--------------------
Name of Credit Bank: Xxxxx Fargo Bank
City, State: San Jose, California
Method of Payment: ABA #000000000
For Credit To: Xxxxx Fargo Bank
Account No.: 2712507201
Reference: PalEx, Inc., Obligor # , Note #
------- -------
Lending Office:
--------------
Xxxxx Fargo Bank
Santa Xxxxx Valley Region
000 Xxxx Xxxxxx Xxxxx, 0xx. Xx.
X.X. Xxx 000000
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxx
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
66
Percentage of Commitment before COMERICA BANK, as Lender
Commitment Step-down
Date: 12.00%
Percentage of Commitment on and
after Commitment Step-down By: /s/ Xxxx X. Xxxxxx
Date: 12.00% ------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
Address for Notices:
-------------------
0000 Xxxxxx Xxxxxx Xx., Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
Telex No.: N/A
Answerback: N/A
Payment Instructions:
---------------------
Name of Credit Bank: Comerica Bank
City, State: Detroit, Michigan
Method of Payment: ABA #000000000
For Credit To: Commercial Loan Servicing
Account No.: 21585-90010
Reference: PalEx, Inc. #6539608203
Lending Office:
--------------
Comerica Bank
X.X. Xxx 00000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx XxXxxxx
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
67
Percentage of Commitment before PARIBAS, as Lender
Commitment Step-down
Date: 10.00%
Percentage of Commitment on and
after Commitment Step-down By: /s/ Xxxxx X. Xxxxxxxx
Date: 12.00% ---------------------
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
Address for Notices:
-------------------
Paribas
0000 Xxxxx Xx., Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
Telex No.: 166514 or 166343
Answerback: PARIBAS HOU E
with copies to:
Paribas, New York
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxx Xxxxxx - Legal Dept.
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
Payment Instructions:
--------------------
Name of Credit Bank: Bankers Trust Company
City, State: New York, NY
Method of Payment: ABA #000000000
For Credit To: For Account 00000000 - Paribas, New York
Account No.: For Further Credit to A/C #2144-001545 Paribas,
Houston Agency
Reference: PalEx, Inc.
Attention: Xxxx Xxxxx-Xxxxxx
Lending Office:
--------------
Paribas
0000 Xxxxx Xx., Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
68
