Exhibit 10.3
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Agreement is between the undersigned Borrowers, YALE E. KEY, INC.
("Yale"), KEY ENERGY DRILLING, INC. D/B/A XXXXX XXXX DRILLING ("Hurt") and KEY
ENERGY GROUP, INC. ("Key") and the undersigned Lender, THE CIT GROUP/CREDIT
FINANCE, INC., concerning loans and other credit accommodations to be made by
Lender to Borrowers.
SECTION 1. PARTIES; BACKGROUND
1.1 The "Borrowers" are the persons, firms, corporations or other
entities, identified as the Borrowers in Section 10.6(c) and their successors
and assigns. All references to "Borrower" shall mean each of them individually,
and all references to "Borrowers" shall mean each of them, jointly, severally
and collectively, and the successors and assigns of each.
1.2 The "Lender" is The CIT Group/Credit Finance, Inc. and its
successors and assigns.
1.3 (i) Yale (the "Original Borrower"), Xxxxx, Inc. (the "Original
Guarantor"), and Fidelcor Business Credit Corporation ("Fidelcor") entered into
a loan transaction (the "Original Loan Transaction") on December 29, 1988, and,
in connection therewith, Yale executed a Promissory Note in favor of Fidelcor
(the "Original Note"), and Yale delivered to Fidelcor a Security Agreement (the
"Security Agreement") and certain related agreements and documents. As part of
the Original Loan Transaction, Xxxxx, Inc. executed a Corporate Continuing
Guaranty (the "Original Guaranty") in favor of Fidelcor, guaranteeing
unconditionally Yale's obligations to Fidelcor. The Original Note, the Security
Agreement, the Original Guaranty, and all documents related thereto are referred
to herein as the "1988 Agreements".
(ii) On June 29, 1990, Yale and Fidelcor entered into an Amended and
Restated Loan and Security Agreement (the Security Agreement as amended by the
Amended and Restated Loan and Security Agreement, being referred to herein as
the "Original Loan Agreement"); Yale executed a Restated Promissory Note which
amended and restated the Original Note; and Xxxxx, Inc. reaffirmed its
obligations under the Original Guaranty by executing the Reaffirmation and
Amendment of Guaranty and Subordination Agreement; all of the foregoing being
referred to as the "Amendment Agreements". On July 25, 1990, Skeeter Well
Service, Inc. ("Skeeter") executed a Guaranty in favor of Lender and entered
into a Security Agreement with Lender (the "Skeeter Agreements"). The Amendment
Agreements and the Skeeter Agreements, along with all documents executed in
connection therewith, are referred to as the "1990 Agreements".
(iii) On February 4, 1991, Fidelcor sold and assigned to CIT the
Original Loan Transaction, including all of its right, title, and interest in
and to the 1988 Agreements and the 1990 Agreements.
(iv) On or about December 8, 1992, pursuant to a plan of
reorganization, Key Energy Group, Inc., a newly formed wholly-owned subsidiary
of National Environmental Group, Inc. ("XXXX"), and XXXXX, Inc., a wholly-owned
subsidiary of XXXX, merged with XXXX. XXXX was the surviving corporation and its
name was changed to Key Energy Group, Inc.
(v) In March 1991, Yale, a wholly-owned subsidiary of Key, merged with
Skeeter Well Service, Inc. and Yale was the surviving corporation. In July 1993,
OEI Acquisition Corp., a wholly-owned subsidiary of Key, merged with Odessa
Exploration Incorporated. OEI Acquisition Corp. was the surviving corporation
and its name was changed to "Odessa Exploration Incorporated" ("Odessa"). In
March 1995, Key Energy Drilling, Inc., a wholly-owned subsidiary of Key,
acquired the assets of Xxxxx Xxxx & Associates, Inc. and the right to use the
name "Xxxxx Xxxx Drilling."
(vi) On May 19, 1994, Yale executed a Second Amended and Restated
Promissory Note (the "Second Amended Note") in favor of CIT in the principal
amount of $4,326,666.69. On December 27, 1994, Yale executed a Promissory Note
(Term Note) (the "Term Note") in favor of CIT in the principal amount of
$2,500,000.00. The Second Amended Note and the Term Note are referred to as the
"1994 Notes".
(vii) The 1988 Agreements, the 1990 Agreements, and the 1994 Notes are
referred to herein as the "Original Loan Documents". Yale and Key are from
time-to-time referred to as the "Original Obligors".
(viii) On November 18, 1995, Key and WellTech entered into an
"Agreement and Plan of Merger" (the "Merger Agreement") evidencing their intent
to merge WellTech with and into Key in accordance with the general corporation
laws of the states of Delaware and Maryland (the "Merger"). It is anticipated
that the Merger will not be concluded and become effective until March 31, 1996.
In the interim, Key and WellTech have entered into an "Interim Operations
Agreement" dated November 18, 1995 whereby Key has assumed responsibility for
operating and managing the affairs of WellTech.
1.4 Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with generally accepted accounting principles ("GAAP"), and all
financial computations hereunder shall be computed, unless otherwise
specifically provided herein, in accordance with GAAP as consistently applied
and using the same method for inventory valuation as used in the preparation of
a Borrower's financial statements.
1.5 Capitalized terms not otherwise defined herein shall, unless the
context indicates otherwise, have the meanings provided for by the Uniform
Commercial Code to the extent the same are used or defined therein. Wherever
appropriate in the context, terms used herein in the singular also include the
plural, and vice versa, and each masculine, feminine, or neuter pronoun shall
also include the other genders.
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1.6 The terms "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision. The section titles, and list of exhibits
appear as a matter of convenience only and shall not affect the interpretation
of this Agreement. All references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations. All
references to any instruments or agreements, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
SECTION 2. LOANS AND OTHER CREDIT ACCOMMODATIONS
2.1 Revolving Loans. Lender shall, subject to the terms and conditions
contained herein, make revolving loans to each of the Borrowers ("Revolving
Loans") in amounts requested by such Borrower from time to time, but not in
excess of such Borrower's Net Availability existing immediately prior to the
making of the requested loan and provided the requested loan would not cause the
outstanding Obligations of all Borrowers in the aggregate to exceed the Maximum
Credit; provided further, however, that Lender shall be under no obligation to
make Revolving Loans to any Borrower following the filing of an involuntary
petition, action or proceeding against any Borrower or guarantor (and for so
long thereafter as such involuntary petition, action, or proceeding remains
undismissed or unstayed, and subject to the terms and provisions of Section
7.1(h)) seeking reorganization, arrangement or readjustment of such Borrower's
or guarantor's debts or for any other relief under the bankruptcy laws of the
United States now or hereafter in effect.
(a) The " Maximum Credit" is set forth in Section 10.1(a) hereof.
(b) "Accounts Availability" equals the product obtained by multiplying
the outstanding amounts of a Borrower's separate Eligible Accounts, net of
taxes, discounts, allowances, and credits given or claimed by the Eligible
Accounts Percentage set forth in Section 10.1(b), and deducting therefrom any
Reserves.
(c) The "Net Availability" shall be calculated at any time as an amount
equal to the Maximum Credit minus the aggregate amount of all then-outstanding
Obligations by the Borrowers to Lender.
(d) "Yale's Net Availability" shall be calculated as the lesser of
(i) the Maximum Credit, less the Obligations; and
(ii) Yale's Accounts Availability, less Yale's Revolving Loans.
(e) "Hurt's Net Availability" shall be calculated as the lesser of:
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(i) the Maximum Credit, less the Obligations; or
(ii) $2,000,000, less the sum of Hurt's Term Loan, Hurt's Capital
Expenditures Loan, and Hurt's Revolving Loans; and
(iii) Hurt's Accounts Availability, less Hurt's Revolving Loans.
(f) "Key's Net Availability" shall be calculated as the lesser of:
(i) the Maximum Credit, less the Obligations; and
(ii) Key's Accounts Availability, less Key's Revolving Loans.
(g) "Eligible Accounts" are accounts created by a Borrower in the
ordinary course of its business which are and remain acceptable to Lender for
lending purposes. General criteria for Eligible Accounts are set forth below but
may be revised from time to time, by Lender, in its sole judgment, on fifteen
(15) days prior written notice to the Borrowers. Lender shall, in general, deem
accounts to be Eligible Accounts if: (1) such accounts arise from bona fide
completed transactions and have not remained unpaid for more than the number of
days after the invoice date set forth in Section 10.1(c); (2) the amounts of the
accounts reported to Lender are absolutely owing to a Borrower and do not arise
from sales on consignment, guaranteed sale or other terms under which payment by
the account debtors may be conditional or contingent; (3) the account debtor's
chief executive office or principal place of business is located in the United
States; (4) such accounts do not arise from progress xxxxxxxx or retainages or
xxxx and hold sales; (5) there are no contra relationships, setoffs,
counterclaims or disputes existing with respect thereto (but that portion of the
account for which no contras, setoffs, counterclaims or disputes are applicable
may be deemed an Eligible Account) and there are no other facts existing or
threatened which would impair or delay the collectibility of all or any portion
thereof; (6) the goods giving rise thereto were not at the time of the sale
subject to any liens except those permitted in this Agreement; (7) such accounts
are not accounts with respect to which the account debtor or any officer or
employee thereof is an officer, employee or agent of or is affiliated with any
Borrower, directly or indirectly, whether by virtue of family membership,
ownership, control, management or otherwise; (8) such accounts are not accounts
with respect to which the account debtor is the United States or any State or
political subdivision thereof or any department, agency or instrumentality of
the United States, any State or political subdivision, unless there has been
compliance with the Assignment of Claims Act or any similar State or local law,
if applicable; (9) the Borrowers have delivered to Lender or Lender's
representative such original documents as Lender may have reasonably requested
pursuant to Section 5.8 hereof in connection with such accounts and Lender shall
have received a verification of such account, reasonably satisfactory to it, if
sent to the account debtor or any other obligor or any bailee pursuant to
Section 5.4 hereof; (10) there are no facts existing or threatened which are
reasonably likely to result in any adverse change in the account debtor's
financial condition; (11) such accounts owed by a single account debtor or its
affiliates do not represent more than twenty percent (20%) of all otherwise
Eligible Accounts of all Borrowers, provided, however, that with respect to the
Eligible Accounts of Xxxxxx & Xxxxxxx, Inc., such accounts may not represent
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more than thirty-two percent (32%) of all otherwise Eligible Accounts of all
Borrowers (accounts excluded from Eligible Accounts solely by reason of this
subsection (11) shall nevertheless be considered Eligible Accounts to the extent
of the amount of such accounts which does not exceed twenty percent (20%) or in
the case of Xxxxxx & Parsley, Inc. thirty-two percent (32%), of all otherwise
Eligible Accounts); (12) such accounts are not owed by an account debtor who is
or whose affiliates are "past due" (i.e. where more than 90 days have elapsed
since the invoice date of such accounts) upon other accounts owed to Borrowers
comprising more than fifty percent (50%) of the accounts of such account debtor
or its affiliates owed to such Borrower; (13) such accounts are owed by account
debtors whose total indebtedness to a Borrower does not exceed the amount of any
customer credit limits as established, and changed, from time to time by Lender
upon notice to such Borrower (accounts excluded from Eligible Accounts solely by
reason of this subsection (13) shall nevertheless be considered Eligible
Accounts to the extent the amount of such accounts does not exceed such customer
credit limit); (14) with respect to which the account debtor is located in the
states of New Jersey, Minnesota, West Virginia, or any other state requiring the
filing of a Business Activity Report or similar document in order to bring suit
or otherwise enforce its remedies against such account debtor in the courts or
through any judicial process of such state, unless such Borrower has qualified
to do business in such states, or has filed a Notice of Business Activities
Report or similar document with such states, as appropriate, for the then
current year; and (15) such accounts are owed by account debtors deemed
creditworthy at all times by Lender.
(h) Lender shall have a continuing right to deduct reserves in
determining Accounts Availability and each individual Borrower's Net
Availability ("Reserves"), and to increase and decrease such Reserves from time
to time, if and to the extent that, in Lender's sole judgement, such Reserves
are necessary to protect Lender against any state of facts which does, or would,
with notice or passage of time or both, constitute an Event of Default or have a
material adverse effect on any Collateral. Lender may, at its option, implement
Reserves by designating as ineligible a sufficient amount of accounts which
would otherwise be Eligible Accounts so as to reduce Net Availability and/or
each individual Borrower's Accounts Availability by the amount of the intended
Reserve.
(i) Subject to the terms and conditions hereof, including but not
limited to the existence of sufficient Net Availability and Accounts
Availability, each Borrower agrees to borrow amounts from time to time such that
the aggregate outstanding Revolving Loans and Term Loans to both Borrowers shall
at all times equal or exceed the principal amount set forth in Section 10.1(d)
as the Minimum Borrowing. Each Borrower covenants, represents and warrants to
Lender that they will jointly and severally maintain Net Availability at all
times in amounts sufficient to permit Borrowers to comply with the Minimum
Borrowing requirement. In the event Borrowers do not borrow sufficient amounts
to continuously meet or exceed the Minimum Borrowing requirement, or in the
event Borrowers fail to maintain Net Availability at all times at amounts
sufficient to permit Borrowers to comply with the Minimum Borrowing requirement,
then, in either of such events, Borrowers shall be deemed to have borrowed from
Lender jointly such additional sums from time to time as may be necessary in
order for Borrowers to continuously meet the Minimum Borrowing requirement. Such
sums shall be added to the principal amount of the outstanding Revolving Loans
for the sole purpose of computing interest due under this Agreement.
Notwithstanding the provisions of the immediately preceding sentence, Lender
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shall have no obligation to disburse to Borrowers, or any of them, any amount
deemed to have been borrowed for purposes of meeting the Minimum Borrowing
requirement unless Borrowers actually requested such disbursement from Lender
and unless the Net Availability is sufficient to support such disbursement.
2.2 Term Loan.
(a) The amount of any term loans being made by Lender to any Borrower
on the date hereof is set forth in Section 10.2(a) (the "Initial Term Loans").
Such Initial Term Loans shall be evidenced by a promissory note delivered by
each Borrower receiving an Initial Term Loan to Lender and shall be repaid,
together with interest and other amounts, in accordance with this Agreement and
such promissory notes.
(b) The amount of any additional term loans which may be available to
any Borrower at Lender's discretion after the date hereof is set forth in
Section 10.2(b) ("Additional Term Loans" and together with the Initial Term
Loans, the "Term Loans"). Such Additional Term Loans shall be evidenced by
promissory notes delivered by such Borrower to Lender, in form and substance
reasonably acceptable to Lender, and shall be repaid together with interest and
other amounts in accordance with this Agreement and such promissory notes. All
promissory notes evidencing such Additional Term Loans, together with the
promissory notes evidencing the Initial Term Loans, shall be referred to as the
"Promissory Notes."
(c) All appraisals conducted in connection with the Term Loans shall be
conducted at Borrowers' expense by an independent appraiser reasonably
acceptable to Lender. In addition, with respect to the Additional Term Loans,
(i) Lender shall have received such appraisal at least thirty (30) days prior to
the date of the requested advance for such Additional Term Loan, (ii) Lender
shall have received from Borrower evidence reasonably satisfactory to Lender
that the machinery and equipment has been purchased by Borrower and delivered to
such Borrower at one of its locations set forth in Section 10.6(e) and that such
machinery and equipment is in place and operational and (iii) Lender shall have
received invoices and such other documentation as reasonably requested by
Lender.
2.3 Accommodations.
(a) Lender may, in its sole discretion, issue or cause to be issued,
from time to time at any Borrower's request and on terms and conditions and for
purposes satisfactory to Lender, credit accommodations consisting of letters of
credit, bankers' acceptances, merchandise purchase guaranties or other
guaranties or indemnities for such Borrower's account ("Accommodations"). Each
such Borrower shall execute and perform additional agreements relating to the
Accommodations in form and substance reasonably acceptable to Lender and the
issuer of any Accommodations, all of which shall supplement the rights and
remedies granted herein. Any payments made by Lender or any affiliate of Lender
in connection with the Accommodations shall constitute additional Revolving
Loans to such Borrower.
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(b) In addition to the fees and costs of any issuer in connection with
issuing or administering Accommodations, the Borrower requesting the
Accommodation shall pay monthly to Lender, on the first day of each month, a
charge on such Borrower's open Accommodations at the rate per annum set forth in
Section 10.3(a) (the "Accommodation Charges").
(c) No Accommodation will be issued (i) unless the full amount of the
Accommodation requested, plus fees and costs for issuance (unless paid by
Borrower), is less than the Net Availability existing immediately prior to the
issuance of the requested Accommodation, or (ii) if the requested Accommodation
would cause the outstanding Obligations to exceed the Maximum Credit, or (iii)
if the requested Accommodation would cause the open amount of Accommodations
issued to all Borrowers to exceed, at any time, the Accommodation sublimit set
forth in Section 10.3(b), or (iv) if the expiry date of the requested
Accommodation extends beyond the initial term (or any renewal terms if
applicable) of this Agreement.
(d) All indebtedness, liabilities and obligations of any sort
whatsoever, however arising, whether present or future, fixed or contingent,
secured or unsecured, due or to become due, paid or incurred, arising or
incurred in connection with any Accommodation shall be included in the term
"Obligations," as defined herein, and shall include, without limitation, (i) all
amounts due or which may become due under any Accommodation; (ii) all amounts
charged or chargeable to any Borrower or to Lender by any bank, other financial
institution or correspondent bank which opens, issues, or is involved with such
Accommodations; (iii) Lender's Accommodation Charges and all fees, costs and
other charges of any issuer of any Accommodation; and (iv) all duties, freight,
taxes, costs, insurance and all such other charges and expenses which may
pertain directly or indirectly to any Obligations or Accommodations or to the
goods or documents relating thereto.
(e) Each Borrower unconditionally agrees to indemnify and hold Lender
harmless from any and all loss, claim or liability (including reasonable
attorneys' fees) arising from any transactions or occurrences relating to any
Accommodation established or opened for such Borrower's account, the Collateral
relating thereto and any drafts or acceptances thereunder, including any such
loss or claim due to any action taken by an issuer of any Accommodation. Each
Borrower further agrees to indemnify and hold Lender harmless for any errors or
omissions other than gross negligence, bad faith, or willful misconduct in
connection with the Accommodations, whether caused by Lender, by the issuer of
any Accommodation or otherwise. Each Borrower's unconditional obligation to
indemnify and hold Lender harmless under this provision shall not be modified or
diminished for any reason or in any manner whatsoever, except for Lender's gross
negligence, bad faith, or willful misconduct. Each Borrower agrees that any
charges made to Lender by any issuer of any Accommodation shall be conclusive on
such Borrower and may be charged to such Borrower's account.
(f) Lender shall not be responsible for (i) the conformity of any goods
to the documents presented; (ii) the validity or genuineness of any documents;
or (iii) delay, default, or fraud by any Borrower or shipper and/or anyone else
in connection with the Accommodations or any underlying transaction.
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(g) Each Borrower agrees that any action taken by Lender, if taken in
good faith, or any action taken by an issuer of any Accommodation, under or in
connection with any Accommodation, shall be binding on such Borrower and shall
not create any resulting liability to Lender. In furtherance thereof, Lender
shall have the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute for each Borrower's account any
and all applications for steamship or airway guarantees, indemnities or delivery
orders; to grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications or Accommodations. All of
the foregoing actions may be taken in Lender's sole name, and the issuer thereof
shall be entitled to comply with and honor any and all such documents or
instruments executed by or received solely from Lender, all without any notice
to or any consent from any Borrower. None of the foregoing actions described in
this subsection (g) may be taken by any Borrower without Lender's express
written consent.
2.4 Certain Amounts Due on Demand. Lender may, in its sole discretion,
make or permit Revolving Loans, Accommodations, or other Obligations in excess
of the Maximum Credit, Accounts Availability or Net Availability or applicable
formulas or sublimits. All or any portion of such excess(es) shall become
immediately due and payable upon Lender's demand.
SECTION 3. INTEREST AND FEES
3.1 (a) Interest on the Revolving Loans shall be payable by the
Borrowers on the first day of each month, calculated upon the closing daily
balances in the loan account of the Borrowers for each day during the
immediately preceding month, at the per annum rate (the "Annual Rate") set forth
as the Interest Rate in Section 10.4(a). The Annual Rate shall increase or
decrease by an amount equal to each increase or decrease, respectively, in the
Prime Rate (as herein defined), effective as of the date of each such change, On
and after any Event of Default or termination or non-renewal hereof, interest on
all unpaid matured obligations shall accrue at a rate equal to two percent (2%)
per annum in excess of the Annual Rate otherwise payable until such time as all
Obligations are indefeasibly paid in full (notwithstanding entry of any judgment
against any Borrower or the exercise of any other right or remedy by Lender),
and all such interest shall be payable on demand. Notwithstanding the foregoing
provisions of this Section 3.1(a) regarding the rates of interest applicable to
Revolving Loans and any rate of interest applicable to any Term Loan:
(i) If at any time the amount of interest computed on the
basis of either the Annual Rate or the rate provided by any Promissory
Note pursuant to Section 2.2 of this Agreement (the "Note Rate") would
exceed the amount of interest computed upon the basis of the maximum
rate of interest (the "Maximum Legal Rate") permitted by applicable
state or federal law in effect from time to time hereafter, after
taking into account, to the extent required by applicable law, any and
all fees, payments, charges and calculations provided for in this
Agreement or in any other agreement between Borrowers or any individual
Borrower and Lender, the interest payable under this Agreement shall
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be computed on the basis of the Maximum Legal Rate, but any subsequent
reduction in the Annual Rate or the Note Rate (if applicable) shall not
reduce such interest thereafter payable hereunder below the amount
computed on the basis of the Maximum Legal Rate until the aggregate
amount equals the total amount of interest which would have accrued if
such interest had been at all times computed solely on the basis of the
Annual Rate and the Note Rate (if applicable).
(ii) No agreements, conditions, provisions or stipulations
contained in this Agreement or any other instrument, document or
agreement between Borrowers, or any of them, and the Lender, or default
of any Borrower, or the exercise by the Lender of the right to
accelerate the maturity of the payment of the principal and interest or
to exercise any option whatsoever contained in this Agreement or any
other agreement among Borrowers, or any of them, and the Lender, or the
arising of any contingency whatsoever, shall entitle the Lender to
collect, in any event, interest exceeding the Maximum Legal Rate and in
no event shall any Borrower be obligated to pay interest exceeding such
Maximum Legal Rate and all agreements, conditions or stipulations, if
any, which may in any event or contingency whatsoever operate to bind,
obligate or compel any Borrower to pay a rate of interest exceeding the
Maximum Legal Rate, shall be without binding force or effect, at law or
in equity, to the extent only of the excess of interest over such
Maximum Legal Rate. In the event that any interest is charged in excess
of the Maximum Legal Rate ("Excess"), each Borrower acknowledges and
stipulates that any such charge shall be the result of an accidental
and bona fide error, and such Excess shall be, first, applied to reduce
the principal amount of indebtedness then unpaid hereunder; second,
applied to reduce such Borrower's other Obligations hereunder; and
third, returned to such Borrower, it being the intention of the parties
hereto not to enter at any time into a usurious or otherwise illegal
relationship. Each Borrower recognizes that, with fluctuations in the
Annual Rate, the Note Rate, and the Maximum Legal Rate, such an
unintentional result could inadvertently occur. By the execution of
this Agreement, each Borrower covenants that (x) the credit or return
of any Excess shall constitute the acceptance by each Borrower of such
Excess, and (y) no Borrower shall seek or pursue any other remedy,
legal or equitable, against Lender, based in whole or in part upon the
charging or receiving of any interest in excess of the maximum
authorized by applicable law. For the purpose of determining whether or
not any Excess has been contracted for, charged, or received by Lender,
all interest at any time contracted for, charged or received by the
Lender in connection with this Agreement shall be amortized, prorated,
allocated and spread in equal parts during the entire term of this
Agreement.
(iii) The provisions of Section 3.1(a)(ii) shall be deemed to
be incorporated into every document or communication relating to the
Obligations which sets forth or prescribes any account, right or claim
or alleged account, right or claim of the Lender with respect to each
Borrower (or any other obligor in respect of the Obligations), whether
or not any provision of Section 3.1 is referred to therein. All such
documents and communications and all figures set forth therein shall,
for the sole purpose of computing the extent of the liabilities and
obligations of each Borrower (or any other obligor) asserted by the
Lender thereunder, be automatically recomputed by such Borrower or
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obligor, and by any court considering the same, to give effect to the
adjustments or credits required by Section 3.1(a)(ii).
(iv) If the applicable state or federal law is amended in the
future to allow a greater rate of interest to be charged under this
Agreement or any other loan documents than is presently allowed by
applicable state or federal law, then the limitation of interest
hereunder shall be increased to the maximum rate of interest allowed by
applicable state or federal law as amended, which increase shall be
effective hereunder on the effective date of such amendment, and all
interest charges owing to the Lender by reason thereof shall be payable
upon demand.
(b) The "Prime Rate" is the per annum rate of interest publicly
announced by Chemical Bank of New York, or the applicable rate of its successors
or assigns, from time to time as its prime rate (the prime rate is not intended
to be the lowest rate of interest charged by Chemical Bank of New York, or its
successors or assigns, to its borrowers).
3.2 The Borrowers collectively shall pay Lender on the date hereof a
Closing Commitment Fee in the amount set forth in Section 10.4(b), which fee is
fully earned as of the date hereof.
3.3 The Borrowers collectively shall pay Lender monthly, on the first
day of each month, in arrears, an Unused Line Fee for each month during the
initial and each renewal Term at the rate per annum set forth in Section
10.4(c), calculated upon the amount, if any, by which the Maximum Credit exceeds
the average outstanding daily principal balance during the preceding month of
all Revolving Loans, Accommodations and any Term Loan and Capex Term Loan.
3.4 At Lender's option, all principal, interest (other than unmatured
accrued interest), fees, costs, expenses and other charges provided for in this
Agreement, or in any other agreement now or hereafter existing between Lender
and any Borrower, may be charged to any loan account of such Borrower maintained
by Lender. Interest, fees for Accommodations, the Unused Line Fee and any other
amounts payable by the Borrowers, or any of them, to Lender based on a per annum
rate shall be calculated on the basis of actual days elapsed over a 360-day
year.
3.5 If as a result of any regulatory change directly or indirectly
affecting Lender or any of Lender's affiliated companies there shall be imposed,
modified or deemed applicable any tax excluding any tax on or measured by
income, gross receipts, charges, or rates of Lender, reserve, special deposit,
minimum capital, capital ratio, or similar requirement against or with respect
to or measured by reference to loans made or to be made hereunder or
participations therein, or to Accommodations, and the result shall be to
increase the cost to Lender or to any of Lender's affiliated companies of making
or maintaining any loan or Accommodation hereunder or to any other party
maintaining any participation therein, or reduce any amount receivable in
respect of any such loan (which increase in cost, or reduction in amount
receivable, shall be the result of Lender's or Lender's affiliated companies'
reasonable allocation among all affected customers of the aggregate of such
increases or reductions resulting from such event), then, within ten (10) days
after receipt by the Borrowers of a certificate from Lender containing the
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information described in this Section 3.5, each Borrower agrees, jointly and
severally, from time to time to pay Lender such additional amounts as shall be
sufficient to compensate Lender or any of Lender's affiliated companies for such
increased costs or reductions in amounts which Lender determines in its sole
discretion are material. Notwithstanding the foregoing, all such amounts shall
be subject to the provisions of Section 3.1. The certificate requesting
compensation under this Section 3.5 shall identify the regulatory change which
has occurred, the requirements which have been imposed, modified or deemed
applicable, the amount of such additional cost or reduction in the amount
receivable and the way in which such amount has been calculated.
SECTION 4. GRANT OF SECURITY INTEREST
4.1 To secure the payment and performance in full of all Obligations,
each Borrower hereby grants to Lender a continuing security interest in and lien
upon, and a right of setoff against, and each Borrower hereby assigns and
pledges to Lender, all of the Collateral, including any Collateral not deemed
eligible for lending purposes.
4.2 "Obligations" shall mean any and all Revolving Loans, Term Loans,
Accommodations and all other indebtedness, liabilities and obligations of every
kind, nature and description owing by any Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under this Agreement or otherwise, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal Term or after the commencement of any case with respect to any Borrower
under the United States Bankruptcy Code or any similar statute, whether direct
or indirect, absolute or contingent, joint or several, due or not due, primary
or secondary, liquidated or unliquidated, secured or unsecured, original,
renewed or extended and whether arising directly or howsoever acquired by Lender
including from any other entity outright, conditionally or as collateral
security, by assignment, merger with any other entity, participations or
interests of Lender in the obligations of such Borrower to others, assumption,
operation of law, subrogation or otherwise and shall also include all amounts
chargeable to the Borrowers under this Agreement or in connection with any of
the foregoing.
4.3 "Collateral" shall mean all of the following property of each
Borrower:
All now owned and hereafter acquired right, title and interest of each
Borrower in, to and in respect of all: accounts, interests in goods represented
by accounts, returned, reclaimed or repossessed goods with respect thereto and
rights as an unpaid vendor; contract rights; chattel paper; general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, choses in
action and other claims, and existing and future leasehold interests in
equipment, real estate and fixtures); documents; instruments; letters of credit,
bankers' acceptances or guaranties; cash monies, deposits, securities, bank
accounts, deposit accounts, investment property, credits and other property now
or hereafter held in any capacity by Lender, its affiliates, or any entity
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which, at any time, participates in Lender's financing of such Borrower, or at
any other depository or other institution; agreements or property securing or
relating to any of the items referred to above;
All now owned and hereafter acquired right, title and interest of each
Borrower in, to and in respect of goods, including, but not limited to:
All inventory, wherever located, whether now owned or hereafter
acquired, of whatever kind, nature or description, including all raw materials,
work-in-process, finished goods, and materials to be used or consumed in each
Borrower's business; and all names or marks affixed to or to be affixed thereto
for purposes of selling same by the seller, manufacturer, lessor or licensor
thereof;
All equipment and fixtures, wherever located, whether now owned or
hereafter acquired, including, without limitation, all machinery, equipment,
motor vehicles, furniture and fixtures, and any and all additions,
substitutions, replacements (including spare parts), and accessions thereof and
thereto;
All consumer goods, farm products, crops, timber, minerals or the like
(including oil and gas), wherever located, whether now owned or hereafter
acquired, of whatever kind, nature or description;
All now owned and hereafter acquired right, title and interests of each
Borrower in, to and in respect of any real or other personal property in or upon
which Lender has or may hereafter have a security interest, lien or right of
setoff;
All present and future books and records relating to any of the above
including, without limitation, all computer programs, printed output and
computer readable data in the possession or control of any Borrower, any
computer service bureau or other third party;
All products and proceeds of the foregoing in whatever form and
wherever located, including, without limitation, all insurance proceeds and all
claims against third parties for loss mr destruction of or damage to any of the
foregoing.
4.4 To the extent not completed by the date hereof, each Borrower
covenants to deliver to the Lender, as soon as possible after the date hereof,
each of the following with respect to each parcel of real property owned by such
Borrower and each parcel of real property leased by such Borrower and deemed by
the Lender to be material, all in form and substance reasonably satisfactory to
the Lender: (a) a deed of trust and/or mortgage; (b) a survey certified to the
Lender (unless such requirement is waived in writing by Lender); (c) a mortgagee
policy of title insurance in an amount acceptable to the Lender; (d) an
environmental audit addressed to the Lender; and (e) such other due diligence
items as the Lender may reasonably request.
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SECTION 5. COLLECTION AND ADMINISTRATION
5.1 Borrowers are authorized to collect the accounts and any other
proceeds of Collateral, on behalf of and in trust for Lender, at the Borrowers'
expense, but such authority shall automatically terminate upon an Event of
Default. Lender may modify or terminate such authority at any time whether or
not an Event of Default has occurred and directly collect the accounts and other
monetary obligations included in the Collateral. Each Borrower shall, at such
Borrower's expense and in the manner requested by Lender from time to time,
direct that remittances and all other proceeds of accounts and other Collateral
shall be (a) sent to a post office box designated by and/or in the name of
Lender or in the name of such Borrower, but as to which access is limited to
Lender and/or (b) deposited into a bank account maintained in the name of Lender
and/or a blocked bank account under arrangements with the depository bank under
which all funds deposited to such blocked bank account are required to be
transferred solely to Lender. Regardless whether such account is maintained in
the name of the Borrowers, or any of them, or the Lender, the Borrowers shall
bear the risk of loss of all funds in such account. In connection therewith,
each Borrower shall execute such post office box and/or blocked bank account
agreements as Lender shall specify.
5.2 All Obligations shall be payable at Lender's office set forth below
or at Lender's bank designated in Section 10.6(b) or at such other bank or place
as Lender may expressly designate from time to time for purposes of this
Section. Lender shall apply all proceeds of accounts or other Collateral
received by Lender and all other payments in respect of the Obligations to the
Revolving Loans whether or not then due or to any other Obligations then due, in
whatever order or manner Lender shall determine. Lender shall have the
continuing and exclusive right to apply and reverse and reapply any and all such
proceeds and payments to any portion of the Obligations. For purposes of
determining Accounts Availability and Net Avail ability, remittances and other
payments with respect to the Collateral and Obligations will be treated as
credited to the loan account of the Borrowers maintained by Lender and
Collateral balances to which they relate, upon the date of Lender's receipt of
advice from Lender's bank that such remittances or other payments have been
credited to Lender's account or in the case of remittances or other payments
received, directly in kind by Lender, upon the date of Lender's deposit thereof
at Lender's bank, subject to final payment and collection. In computing interest
charges, the loan account of the Borrowers maintained by Lender will be credited
with remittances and other payments two (2) Business Days after Lender's receipt
of advice of deposit of remittances and other payments in Lender's account at
Lender's bank designated in Section 10.6(b) or at such other financial
institution as Lender may designate. "Business Day" shall mean any day other
than a Saturday or Sunday or any other day on which Lender or banks in Chicago,
Illinois or New York, New York are authorized to close.
5.3 Lender shall render to Borrowers monthly a loan account statement.
Each statement shall be considered correct and binding upon each Borrower as an
account stated, except to the extent that Lender receives, within ninety (90)
days after the mailing of such statement, written notice from any Borrower of
any specific exceptions by such Borrower to that statement.
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5.4 Lender may, at any time, whether or not an Event of Default has
occurred, without notice to or assent of any Borrower, (a) notify any account
debtor that the accounts and other Collateral which includes a monetary
obligation have been assigned to Lender by any such Borrower and that payment
thereof is to be made to the order of and directly to Lender, (b) send, or cause
to be sent by its designee, requests (which may identify the sender by a
pseudonym) for verification of accounts and other Collateral directly to any
account debtor or any other obligor or any bailee with respect thereto, and (c)
demand, collect or enforce payment of any accounts or such other Collateral, but
without any duty to do so, and Lender shall not be liable for any, failure to
collect or enforce payment thereof. At Lender's request, all invoices and
statements sent to any account debtor, other obligor or bailee, shall state that
the accounts and such other Collateral have been assigned to Lender and are
payable directly and only to Lender.
5.5 Each Borrower hereby appoints Lender and any designee of Lender as
such Borrower's attorney-in-fact and authorizes Lender or such designee, at such
Borrower's sole expense, to exercise at any times in Lender's or such designee's
discretion all or any of the following powers, which powers of attorney, being
coupled with an interest, shall be irrevocable until all Obligations have been
paid in full: (a) receive, take, endorse, assign, deliver, accept and deposit,
in the name of Lender or such Borrower, any and all cash, checks, commercial
paper, drafts, remittances and other instruments and documents relating to the
Collateral or the proceeds thereof, (b) transmit to account debtors, other
obligors or any bailees notice of the interest of Lender in the Collateral or
request from account debtors or such other obligors or bailees at any time, in
the name of such Borrower or Lender or any designee of Lender, information
concerning the Collateral and any amounts owing with respect thereto, (c) notify
account debtors or other obligors to make payment directly to Lender, or notify
bailees as to the disposition of Collateral, (d) after an Event of Default has
occurred and has not been waived or cured to Lender's satisfaction, take or
bring, in the name of Lender or such Borrower, all steps, actions, suits or
proceedings deemed by Lender necessary or desirable to effect collection of or
other realization upon the accounts and other Collateral, (e) after an Event of
Default has occurred and has not been waived or cured to Lender's satisfaction,
change the address for delivery of mail to such Borrower and to receive and open
mail addressed to any such Borrower, (f) after an Event of Default has occurred
and has not been waived or cured to Lender's satisfaction, extend the time of
payment of, compromise or settle for cash, credit, return of merchandise, and
upon any terms or conditions, any and all accounts or other Collateral which
includes a monetary obligation and discharge or release the account debtor or
other obligor, without affecting any of the Obligations, and (g) execute in the
name of such Borrower and file against such Borrower in favor of Lender
financing statements or amendments with respect to the Collateral.
5.6 Each Borrower hereby releases and exculpates Lender, its officers,
employees and designees, from any liability arising from any acts under this
Agreement or in furtherance thereof, whether as attorney-in-fact or otherwise,
whether of omission or commission, and whether based upon any error of judgment
or mistake of law or fact, except for willful misconduct, gross negligence, or
bad faith. In no event will Lender have any liability to any Borrower for lost
profits or other special or consequential damages.
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5.7 After written notice by Lender to the Borrowers and automatically,
without notice, after an Event of Default which has not been waived or cured to
Lender's satisfaction, no Borrower shall, without the prior written consent of
Lender in each instance, (a) grant any extension of time of payment of any of
the accounts or any other Collateral which includes a monetary obligation, (b)
compromise or settle any of the accounts or any such other Collateral for less
than the full amount thereof, (c) release in whole or in part any account debtor
or other person liable for the payment of any of the accounts or any such other
Collateral, or (d) grant any credits, discounts, allowances, deductions, return
authorizations or the like with respect to any of the accounts or any such other
Collateral.
5.8 At such times as Lender may reasonably request and in the manner
specified by Lender, each Borrower shall deliver to Lender or Lender's
representative true and correct copies of original invoices, agreements, proofs
of rendition of services and delivery of goods and other documents evidencing or
relating to the transactions which gave rise to accounts or other Collateral,
together with customer statements, schedules describing the accounts or other
Collateral and/or statements of account and confirmatory assignments to Lender
of the accounts or other Collateral, in form and substance reasonably
satisfactory to Lender and duly executed by such Borrower. After an Event of
Default has occurred, each Borrower shall deliver to Lender the originals of the
foregoing documents upon Lender's request therefor. Without limiting the
provisions of Section 5.7, a Borrower's granting of credits, discounts,
allowances, deductions, return authorizations or the like will be promptly
reported to Lender in writing. In no event shall any such schedule or
confirmatory assignment (or the absence thereof or omission of any of the
accounts or other Collateral therefrom) limit or in any way be construed as a
waiver, limitation or modification of the security interests or rights of Lender
or the warranties, representations and covenants of any Borrower under this
Agreement. Any documents, schedules, invoices or other paper delivered to Lender
by the Borrowers may be destroyed or otherwise disposed of by Lender six (6)
months after receipt by Lender, unless such Borrower requests their return in
writing in advance, and makes prior arrangements for their return, at such
Borrower's expense.
5.9 From time to time as requested by Lender, at the sole expense of
the Borrowers, Lender or its designee shall have access, prior to an Event of
Default during reasonable business hours and on or after an Event of Default at
any time, to all of the premises where Collateral is located for the purposes of
inspecting the Collateral and all Borrowers' books and records, and each
Borrower shall permit Lender or its designee to make such copies of such books
and records or extracts therefrom as Lender may reasonably request. Without
expense to Lender, Lender may use such of any Borrower's personnel, equipment,
including computer equipment, programs, printed output and computer readable
media, supplies and premises for the collection of accounts and realization on
other Collateral as Lender, in its sole discretion, deems appropriate. Each
Borrower hereby irrevocably authorizes all accountants and third parties to
disclose and deliver to Lender at such Borrower's expense all financial
information, books and records, work papers, management reports and other
information in their possession regarding such Borrower.
5.10 If after receipt of any payment of, or proceeds applied to the
payment of, all or any part of the Obligations, the Lender is for any reason
required to surrender such payment or proceeds because such payment or proceeds
15
is invalidated, declared fraudulent, set aside, determined to be void or
voidable as a preference, or a diversion of trust funds, or for any other
reason, then: the Obligations or any part thereof intended to be satisfied shall
be revived and continue and this Agreement shall continue in full force as if
such payment or proceeds had not been received by the Lender, and each Borrower
shall be jointly and severally liable to pay to the Lender, and hereby does
indemnify the Lender and hold the Lender harmless, for the amount of such
payment or proceeds surrendered. The provisions of this Section 5.10 shall be
and remain effective notwithstanding any contrary action which may have been
taken by the Lender in reliance upon such payment or proceeds, and any such
contrary action so taken shall be without prejudice to the Lender's rights under
this Agreement and shall be deemed to have been conditioned upon such payment or
proceeds having become final and irrevocable. The provisions of this Section
5.10 shall survive the termination of this Agreement.
SECTION 6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Borrower hereby represents, warrants and covenants to Lender the
following, the truth and accuracy of which, and compliance with which, shall be
continuing conditions of the making of loans or other credit accommodations by
Lender to any Borrower:
6.1 Each Borrower shall keep and maintain its books and records in
accordance with generally accepted accounting principles, consistently applied.
The Borrowers shall on a consolidated basis, at each Borrower's expense, on or
before the fifteenth (15th) day of each month, deliver to Lender true and
complete monthly agings of its accounts receivable and, on or before the
twentieth (20th) day of each month, deliver to Lender true and complete agings
of its accounts and notes payable, monthly inventory reports and monthly
internally prepared interim financial statements including consolidating
financial statements of the Borrowers and any of the Borrowers' subsidiaries,
all in such form, and together with such other information with respect to the
business of each Borrower or any guarantor, as Lender may reasonably request.
Annually, the Borrowers shall deliver consolidated audited financial statements
of Key accompanied by the report and opinion thereon of independent certified
public accountants reasonably acceptable to Lender and consolidating financial
statements of Borrowers and any of Borrowers' subsidiaries, as soon as
available, but in no event later than ninety (90) days after the end of the
Borrowers' fiscal year. Additionally, promptly upon the filing thereof, Borrower
shall deliver to Lender true and complete copies of any 10-Q Report, 10-K Report
and any other report or document filed by Borrowers, or any of them, with the
Securities and Exchange Commission, or any other governmental agency.
6.2 Each Borrower may from time to time render invoices to account
debtors under its trade names set forth in Section 10.6(f) after Lender has
received prior written notice from such Borrower of the use of such trade names
and as to which, such Borrower agrees that: (a) each trade name does not refer
to another corporation or other legal entity, (b) all accounts and proceeds
thereof (including any returned merchandise) invoiced under any such trade names
are owned exclusively by such Borrower and are subject to the security interest
of Lender and the other terms of this Agreement, and (c) all schedules of
accounts and confirmatory assignments including any sales made or services
rendered using the trade name shall show such Borrower's name as assignor and
Lender is authorized to receive, endorse and deposit to any loan account of
16
such Borrower maintained by Lender all checks or other remittances made payable
to any trade name of such Borrower representing payment with respect to such
sales or services.
6.3 Each Borrower shall promptly notify Lender in writing of any loss,
damage, investigation, action, suit, proceeding or claim relating to a material
portion of the Collateral or which may result in any material adverse change in
such Borrower's business, assets, liabilities or condition, financial or
otherwise.
6.4 Each Borrower's books and records concerning accounts and its chief
executive office are and shall be maintained only at the address set forth in
Section 10.6(d). Each Borrower's only other places of business and the only
other locations of Collateral, if any, are and shall be the addresses set forth
in Section 10.6(e) hereof, except any Borrower may change such locations in the
ordinary course of business or open a new place of business after thirty (30)
days prior written notice to Lender. Prior to any change in location or opening
of any new place of business, each Borrower shall execute and deliver or cause
to be executed and delivered to Lender such financing statements, financing
documents, mortgages, and security and other agreements as Lender may reasonably
require, including, without limitation, those described in Section 6.14. Without
otherwise limiting the effect of the foregoing, Borrower may change the location
of its well servicing rigs and drilling rigs without prior approval of Lender;
provided, however, such well servicing rigs and drilling rigs may not be removed
from the state where they are located as of the date hereof, and Borrowers shall
within five (5) days of Lender's request, provide Lender with a listing of the
current locations of all well servicing rigs and drilling rigs.
6.5 Each Borrower has and at all times will continue to have good and
marketable title to all of the Collateral, free and clear of all liens, security
interests, claims or encumbrances of any kind except those, if any, set forth on
Schedule A hereto.
6.6 No Borrower shall directly or indirectly: (a) sell, lease,
transfer, assign, abandon or otherwise dispose of any part of the Collateral or
any material portion of its other assets (other than sales of inventory to
buyers in the ordinary course of business) or (b) consolidate with or merge with
or into any other entity, or permit any other entity to consolidate with or
merge with or into such Borrower except pursuant to the Merger or (c) form or
acquire any interest in any firm, corporation or other entity.
6.7 Each Borrower shall at all times maintain, with financially sound
and reputable insurers, casualty insurance with respect to the Collateral and
other assets. All such insurance policies shall be in such form, substance,
amounts and coverage as may be reasonably satisfactory to Lender and shall
provide for thirty (30) days prior written notice to Lender of cancellation or
reduction of coverage. Each Borrower hereby irrevocably appoints Lender and any
designee of Lender as, attorney-in-fact for such Borrower to obtain at such
Borrower's expense, any such insurance should such Borrower fail to do so and,
after an Event of Default that is continuing, to adjust or settle any claim or
other matter under or arising pursuant to such insurance or to amend or cancel
such insurance. Each Borrower shall deliver to Lender evidence of such insurance
and a lender's loss payable endorsement satisfactory to Lender as to all
existing and future insurance policies with respect to the Collateral. Each
17
Borrower shall deliver to Lender, in kind, all instruments representing proceeds
of insurance received by such Borrower. Prior to an Event of Default, Lender may
permit Borrowers to apply any insurance proceeds received at any time to the
cost of repairs to or replacement of any portion of the Collateral and/or, at
Lender's option, payment of or as security for any of the Obligations, whether
or not due; provided, however, that if Lender elects to apply the insurance
proceeds to the then outstanding Obligations, Lender will apply the proceeds (i)
first to reduce the Capital Expenditures Loans, (ii) second, to reduce other
Term Loans, and (iii) third, to reduce the Revolving Loans. After the occurrence
of an Event of Default which has not been cured to Lender's satisfaction, Lender
may permit Borrowers to apply any insurance proceeds received at any time to the
cost of repairs to or replacement of any portion of the Collateral and/or, at
Lender's option, to payment of or as security for any of the Obligations,
whether or not due, in any order or manner as Lender determines.
6.8 Each Borrower is and at all times will continue to be in compliance
with the requirements of all material laws, rules, regulations and orders of any
governmental authority relating to its business (including laws, rules,
regulations and orders relating to taxes, payment and withholding of payroll
taxes, employer and employee contributions and similar items, securities,
employee retirement and welfare benefits, employee health and safety, or
environmental matters) and all material agreements or other instruments, binding
on such Borrower or its property. All of each Borrower's inventory shall be
produced in accordance with the requirements of the Federal Fair Labor Standards
Act of 1938, as amended and all rules, regulations and orders related thereto.
Each Borrower shall pay and discharge all taxes, assessments and governmental
charges against such Borrower or any Collateral prior to the date on which
penalties are imposed or liens attach with respect thereto, unless the, same are
being contested in good faith and, at Lender's option, Reserves are established
for the amount contested and penalties which may accrue thereon.
6.9 With respect to each account deemed an Eligible Account, except as
reported in writing to Lender, (a) Borrower has no knowledge that any of the
criteria for eligibility are not or are no longer satisfied, (b) each is valid
and legally enforceable and represents an undisputed bona fide indebtedness
incurred by the account debtor for the sum reported to Lender, (c) each arises
from an absolute and unconditional sale of goods, without any right of return or
consignment, or from a completed rendition of services, (d) each is not, at the
time such account arises, subject to any defense, offset, dispute, contra
relationship, counterclaim, or any given or claimed credit, allowance or
discount except as disclosed to Lender in writing and approved by Lender in
writing, and (e) all statements made and all unpaid balances and other
information appearing in the invoices, agreements, proofs of rendition of
services and delivery of goods and other documentation relating to the accounts,
and all confirmatory assignments, schedules, statements of account and books and
records with respect thereto, are in all material respects true and correct and
what they purport to be.
6.10 With respect to each Borrower's equipment, each such Borrower
shall maintain equipment having an aggregate value of at least 85% of the then
current appraised forced liquidation value of all of such Borrower's equipment
in good order and repair, and in running and marketable condition, ordinary wear
and tear excepted.
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6.11 Borrowers shall at all times on a consolidated basis maintain cash
flow coverage, tangible net worth, and liabilities to tangible net worth as set
forth in Section 10.5 and no Borrower shall, directly or indirectly, expend or
commit to expend, for fixed or capital assets (including capital lease
obligations) an amount in excess of the capital expenditure limit set forth in
Section 10.5 in any fiscal year of Borrowers. In addition, after the date of
this Agreement no Borrower will enter into any operating or capital lease as
lessee or sublessee if, after giving effect thereto, the aggregate amount of
additional operating or capital lease rentals payable by all Borrowers in any
fiscal year with respect to all such leases entered into in such fiscal year
would exceed $1,500,000.
6.12 Except as set forth on Schedule 6.12 hereto and as otherwise
provided herein, no Borrower will, directly or indirectly: (a) lend or advance
money or property to, guarantee or assume indebtedness of, or invest (by capital
contribution or otherwise) in any person, firm, corporation or other entity; or
(b) declare, pay or make any cash dividend, redemption or other distribution on
account of any shares of any class of stock of such Borrower now or hereafter
outstanding; or (c) make any payment of the principal amount of or interest on
any indebtedness owing to any officer, director, shareholder, or affiliate of
such Borrower; or (d) make any loans or advances to any officer, director,
employee, shareholder or affiliate of such Borrower (including, but not limited
to, any other Borrower) provided, however, that, with respect to advances to
officers and employees, Borrowers may make such advances in the ordinary course
of business as long as all such advances at any time outstanding do not exceed
$25,000 in the aggregate; or (e) enter into any sale or lease or other
transaction with any officer, director, employee, shareholder or affiliate of
such Borrower on terms that are less favorable to such Borrower than those which
might be obtained at the time from persons who are not an officer, director,
employee, shareholder or affiliate of such Borrower. Notwithstanding the
foregoing, each Borrower (each, an "Intercompany Lender") may make loans to any
other Borrower (each, an "Intercompany Borrower") provided however that (i) all
such loans to any Intercompany Borrower shall be evidenced by the Intercompany
Note and Security Agreement executed by such Intercompany Borrower (the "Chattel
Paper") and (ii) Lender retains a properly perfected security interest in the
Chattel Paper at the time of such intercompany loan.
6.13 Each Borrower shall pay, on Lender's demand, all costs, expenses,
filing fees and taxes payable in connection with the preparation, execution,
delivery, recording, administration, collection, liquidation, enforcement and
defense of the Obligations, Lender's rights in the Collateral, this Agreement
and all other existing and future agreements or documents contemplated herein or
related hereto, including any amendments, waivers, supplements or consents which
may hereafter be made or entered into in respect hereof, or in any way involving
claims or defense asserted by Lender or claims or defense against Lender
asserted by such Borrower, any guarantor or any third party directly or
indirectly arising out of or related to the relationship between such Borrower
and Lender or any guarantor and Lender, including, but not limited to the
following, whether incurred before, during or after the initial or any renewal
Term or after the commencement of any case with respect to any such Borrower or
any guarantor under the United States Bankruptcy Code or any similar statute:
(a) all costs and expenses of filing or recording (including Uniform Commercial
Code financing statement filing taxes and fees, documentary taxes, intangibles
taxes and mortgage recording taxes and fees, if applicable); (b) all title
19
insurance and other insurance premiums, appraisal fees, fees incurred in
connection with any environmental report, audit or survey and search fees; (c)
all fees relating to the wire transfer of loan proceeds and other funds and fees
for returned checks; (d) all reasonable expenses and costs heretofore and from
time to time hereafter incurred by Lender during the course of periodic field
examinations of the Collateral and the Borrowers' operations, plus a per diem
charge at the rate of $650 per person, per day for Lender's examiners in the
field and office; and (e) the reasonable costs, fees and disbursements of
in-house and outside counsel to Lender.
6.14 At the request of Lender, at any time and from time to time at
such Borrower's sole expense, each Borrower shall execute and deliver or cause
to be executed and delivered to Lender such agreements, documents and
instruments, including waivers, consents and subordination agreements from
mortgagees or other holders of security interests or liens, landlords or
bailees, and do or cause to be done such further acts as Lender, in its
discretion, deems necessary or desirable to create, preserve, perfect or
validate any security interest of Lender or the priority thereof in the
Collateral and otherwise to effectuate the provisions and purposes of this
Agreement. Each Borrower hereby authorizes Lender to file financing statements
or amendments against such Borrower in favor of Lender with respect to the
Collateral, without such Borrower's signature and to file as financing
statements any carbon, photographic or other reproductions of this Agreement or
any financing statements signed by such Borrower.
6.15 Each Borrower authorizes Lender, at Lender's option, as
attorney-in-fact for such Borrower, to commence, appear in and prosecute, in
Lender's or such Borrower's name and with the participation of such Borrower,
any action or proceeding relating to any condemnation or other taking of any
Collateral comprised of real property and to settle or compromise any claim in
connection with any such condemnation or other taking. Any award for the taking
of, or damage to, all or any part of the Collateral, or any interest therein,
upon the lawful exercise of power of eminent domain shall be payable to Lender
who, after deducting its expenses, including reasonable attorneys' fees, may
apply the sums so received to the portion of the Obligations hereby secured last
falling due or in such other manner as Lender may desire. Each Borrower agrees
to execute such further assignments of any compensations, awards, damages,
claims, rights of action and proceeds as Lender reasonably may require.
6.16 Each Borrower assumes all responsibility and liability arising
from or relating to the use, sale, or other disposition of the Collateral.
Neither the Lender nor any of its officers, directors, employees, and agents
shall be liable or responsible in any way for the safekeeping of any of the
Collateral, or for any act or failure to act with respect to the Collateral, or
for any loss or damage thereto, or for any diminution in the value thereof, or
for any act of default by any warehouseman, carrier, forwarding agency or, other
person whomsoever, all of which shall be at the Borrowers' sole risk. The
Obligations shall not be affected by any failure of the Lender to take any steps
to perfect its security interest in or to collect or realize upon the
Collateral, nor shall loss of or damage to the Collateral release any Borrower
from any of the Obligations. The Lender may (but shall not be required to), to
the extent set forth in this Agreement or applicable law, without notice to or
consent from any Borrower, xxx upon or otherwise collect, extend the time for
payment of, modify or amend the terms of, compromise or settle for cash or
credit, grant other indulgences, extensions, renewals, compositions, or
20
releases, and take or omit to take any other action with respect to the
Collateral, any security therefor, any agreement relating thereto, any insurance
applicable thereto, or any person liable directly or indirectly in connection
with any of the foregoing, without discharging or otherwise affecting the
liability of the Borrower for the Obligations.
6.17 Each Borrower shall notify Lender in writing of the following
matters at the following times:
(a) Immediately after becoming aware of the existence of
any Event of Default.
(b) Immediately after becoming aware that the holder of any
capital stock of such Borrower has given notice or taken any action
with respect to a claimed default.
(c) Immediately after becoming aware of any material adverse
change in the Collateral or in any Borrower's property, business,
operations, or condition (financial or otherwise).
(d) Immediately after becoming aware of any pending or
threatened action, proceeding, or counterclaim by any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, Public Authority, or any other
entity, or any pending or threatened investigation by a Public
Authority, which may materially and adversely affect the Collateral,
the repayment of the Obligations, the Lender's rights under the Loan
Documents, or the Collateral or in any Borrower's property, business,
operations, or condition (financial or otherwise).
(e) Immediately after becoming aware of any pending or
threatened strike, work stoppage, material unfair labor practice claim,
or other material labor dispute affecting any Borrower or any of its
subsidiaries.
(f) Immediately after becoming aware of any violation of any
law, statute, regulation, or ordinance of a Public Authority applicable
to any Borrower, which may materially and adversely affect the
Collateral, the repayment of the Obligations, the Lender's rights under
this Agreement, or the Collateral or any Borrower's property, business,
operations, or condition (financial or otherwise).
(g) Immediately after becoming aware of any violation or any
investigation of a violation by any Borrower of environmental laws
which would materially and adversely affect the Collateral, any
Borrower's property, business, operation or condition (financial or
otherwise).
(h) Thirty (30) days prior to any Borrower changing its name.
Each notice given under this Section 6.17 shall describe the subject matter
thereof in reasonable detail and shall set forth the action that such Borrower
has taken or proposes to take with respect thereto. As used herein, the term
21
"Public Authority" shall mean the government of any country or sovereign state,
or of any state, province, municipality, or other political subdivision thereof,
or any department, agency, public corporation or other instrumentality of any of
the foregoing.
6.18 (a) Except with respect to the matters described in Schedule B
hereto, neither Borrower nor any subsidiary of any Borrower, except in
compliance in all material respects with all laws, ordinances, regulations,
administrative orders, notices and decrees of any governmental authority
pertaining to Borrower or such subsidiary, (i) may own, occupy, or operate a
site or vessel on which any hazardous material or oil is stored, transported or
disposed of; or (ii) may directly or indirectly transport, or arrange for the
transport, of any hazardous material or oil; or (iii) will cause, or have legal
responsibility for, any release, or threat of release, of any hazardous material
or oil on or from the real property identified in Section 10.6 (the "Premises"),
or any other site or vessel presently owned, occupied, or operated either by any
Borrower or any subsidiary or any person for whose conduct any Borrower or any
subsidiary is responsible. Except with respect to the matters described in
Schedule B, neither Borrower nor any subsidiary of any Borrower may cause, or
have legal responsibility for, any release, or threat of release, of any
hazardous material or oil on or from the Premises, or any other site or vessel
presently owned, occupied, or operated by any Borrower, any subsidiary or any
person for whose conduct any Borrower or any subsidiary is responsible, where
any such release or threat of release can reasonably be expected to result in a
material liability of any Borrower or any subsidiary or a lien on the Premises
or other property of any Borrower or any subsidiary.
(b) Except with respect to the matters described in Schedule B hereto,
no Borrower nor any Borrower's subsidiary has, except in compliance in all
material respects with all laws, ordinances, regulations, administrative orders,
notices and decrees of any governmental authority pertaining thereto, (i) owned,
occupied or operated a site or vessel on which any hazardous materials or oil
were stored, transported or disposed of by any Borrower or such subsidiary; (ii)
directly or indirectly transported, or arranged for the transport, of any
hazardous material or oil; or (iii) caused, or become legally responsible for,
any material release or threat of release, of any hazardous material or oil on
or from the Premises or any other site or vessel owned, occupied or operated
either by any Borrower, any subsidiary of any Borrower or any person for whose
conduct any Borrower or any subsidiary of any Borrower is responsible. Except
with respect to the matters described in Schedule B, no Borrower nor its
subsidiaries has caused, or become legally responsible for, any release or
threat of release of any hazardous material or oil on or from the Premises or
any other site or vessel owned, occupied or operated either by any Borrower, any
subsidiary of any Borrower or any person for whose conduct any Borrower or any
subsidiary of any Borrower is responsible, where any such release or threat of
release can reasonably be expected to result in a material liability to any
Borrower or any subsidiary of any Borrower or a lien on the Premises or other
property of any Borrower or any subsidiary of any Borrower.
(c) Except with respect to the matters described in Schedule B, no
Borrower nor any subsidiary of any Borrower has received notification from any
federal, state, foreign or other governmental authority of: any potential, known
or threat of release of any hazardous material or oil on or from the Premises or
any other site or vessel at any time owned, occupied or operated either by any
Borrower, any subsidiary of any Borrower or any person for whose conduct any
Borrower or any subsidiary of any Borrower is responsible or whose liability may
22
result in a lien on the Premises or any other property of any Borrower or any
subsidiary of any Borrower; or of the incurrence of any expense or loss by such
governmental authority or by any other person, in connection with the
assessment, containment, or removal of any release, or threat of release, of any
hazardous material or oil from the Premises or any such site or vessel.
(d) Each Borrower shall, and shall cause the other Borrowers and each
subsidiary of any Borrower to:
(i) comply with all material laws, ordinances, regulations,
administrative orders, notices and decrees of any governmental
authority pertaining to the storage, transport, release and disposal of
hazardous material or oil;
(ii) except in compliance with all applicable laws,
ordinances, regulations, administrative orders, notices and decrees of
any governmental authority refrain from disposing of hazardous material
or oil on the Premises or on any other site or vessel owned, occupied
or operated either by any Borrower, any subsidiary of any Borrower, or
by any person for whose conduct any Borrower or any subsidiary of any
Borrower is responsible;
(iii) engage in such activity as is reasonable and prudent
under the circumstances (w) to determine whether and to what extent
hazardous materials or oil is present on the Premises or on any other
site or vessel at any time owned, occupied or operated either by any
Borrower, any subsidiary of any Borrower, or by any person for whose
conduct any Borrower or any subsidiary of any Borrower is responsible
or whose liability may result in a lien on the Premises or other
property of any Borrower or any subsidiary of any Borrower, (x) to
determine whether and to what extent containment or removal of such
hazardous material or oil as may then be present is necessary or
appropriate in light of applicable law or potential xxxxx or damages
which may result therefrom, (y) to carry out any activities necessary
or appropriate under clauses (w) and (x), and (y) to qualify for
insurance programs or safe harbors which may be available under
applicable law, ordinances and regulations;
(iv) provide Lender with written notice: (x) upon any
Borrower's obtaining knowledge or any material release, or threat of
release, or any hazardous material or oil at or from the Premises, or
any other site or vessel at any time owned, occupied, or operated by
any Borrower, or any subsidiary of any Borrower, or by any person for
whose conduct any Borrower, or any subsidiary of any Borrower, is
responsible, where such release or threat of release is required to be
reported to any governmental authority by any Borrower or any
subsidiary of any Borrower or any other such person, or may result in a
lien on the Premises or other property of any Borrower or any
subsidiary of any Borrower; (y) upon any Borrower's or any Borrower's
subsidiary's receipt of any notice to such effect from any federal,
state, foreign or other governmental authority; and (z) upon any
Borrower's or any Borrower's subsidiary's obtaining knowledge of any
incurrence of any expense or loss by any such governmental authority in
connection with the assessment, containment, or removal of any
23
hazardous material or oil for which expense or loss any Borrower or
any subsidiary may be liable in any material amount or for which
expense a lien may be imposed on the Premises or any other property
of any Borrower or any subsidiary of any Borrower; and
(v) jointly and severally indemnify, defend and hold Lender
harmless from any claim brought or threatened against Lender by any
Borrower, or any subsidiary of any Borrower, any guarantor or endorser
of the Obligations, or any governmental agency or authority or any
other person (as well as from attorneys' and environmental expert's
reasonable fees and expenses in connection therewith) on account of the
presence of hazardous material or oil on the Premises, or any other
site or vessel at any time owned, occupied or operated by any Borrower
or any subsidiary of any Borrower or any person for whose conduct any
Borrower or any subsidiary of any Borrower may be responsible, or whose
liability may result in a lien on the Premises or other property of any
Borrower or any subsidiary of any Borrower, the past, present or future
release or threat of release of hazardous materials or oil on or from
the Premises, or any other site or vessel at any time owned, occupied
or operated by any Borrower, or any subsidiary of any Borrower, or by
any person for whose conduct any Borrower or any subsidiary of any
Borrower may be responsible or whose liability may result in a lien on
the Premises or other property of any Borrower or any subsidiary of any
Borrower, or the failure by any Borrower to comply with the terms and
provisions of this Section 6.18 (each of which may be defended,
compromised, settled, or pursued by Lender with counsel of Lender's
selection, but at the expense of the Borrowers, on a joint and several
basis, and, in the case of compromise or settlement prior to an Event
of Default, with the consent of any Borrower, which consent shall bind
all Borrowers). The within indemnification shall survive payment of the
Obligations and/or any termination, release, or discharge executed by
Lender in favor of any Borrower or any subsidiary of any Borrower or
other person.
(e) As used in this Section 6.18, the term "oil" shall mean oil and/or
any other petroleum product or by-product.
6.19 At Lender's option, and at each Borrower's expense, Lender may
order appraisals of the forced liquidation value of Borrower's machinery and
equipment, provided, however, that the timing and manner of all such appraisals
shall be commercially reasonable in all respects. If the principal balance of
the Term Loans outstanding to any Borrower, as of the date of the appraisal,
exceeds eighty-two percent (82%) of the appraised forced liquidation value of
such Borrower's machinery and equipment, such Borrower shall make additional
principal payments with respect to the Term Loan in an amount equal to 1/12 of
the amount by which the outstanding principal balance of such Borrower's Term
Loans exceeds eighty-two percent (82%) of the appraised forced liquidation value
of such Borrower's machinery and equipment as of the date of the appraisal, such
payments to be paid concurrently with the monthly Term Loan installments due
under the Term Loans, until the entire excess amount has been fully amortized.
6.20 No Borrower shall directly or indirectly enter into or permit to
exist, any transaction with Odessa as obligor to such Borrower, direct or
contingent, by reason of any loan, advance, lease, sale or other financing
24
transaction, investment or otherwise; provided, however, that Hurt may provide
services from time to time to Odessa as long as the aggregate of all such
accounts outstanding at any time does not exceed $300,000.00.
6.21 Immediately after the Merger becomes effective, Borrowers will
enter into the certain Third Amended and Restated Loan and Security Agreement
containing terms and conditions substantially the same as those set forth in
this Agreement, except that the financial covenants and monetary amounts will,
among other things, also account for WellTech, which by virtue of the Merger,
will have become a party hereto.
6.22 So long as any Obligation of WellTech to Lender under the WellTech
Loan and Security Agreement is outstanding or unpaid, Key shall operate and
manage the affairs of WellTech under and pursuant to the Interim Operations
Agreement and the Interim Operations Agreement shall not be terminated,
modified, amended or superseded without the prior written consent of Lender.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 All Obligations shall be immediately due and payable, without
notice or demand, and any provisions of this Agreement as to future loans and
credit accommodations by Lender shall terminate automatically, upon the
termination or non-renewal of this Agreement or, at Lender's option, upon or at
any time after the occurrence or existence of any one or more of the following
"Events of Default":
(a) Any Borrower fails to pay when due any of the Obligations or fails
to perform any of the terms of this Agreement or any other existing or future
financing, security or other agreement between such Borrower and Lender or any
affiliate of Lender;
(b) Any representation, warranty or statement of fact made by any
Borrower to Lender in this Agreement or any other agreement, schedule,
confirmatory assignment or otherwise, or to any affiliate of Lender, shall prove
inaccurate or misleading in any material respect;
(c) Any guarantor revokes, terminates or fails to perform any of the
terms of any guaranty, endorsement or other agreement of such party in favor of
Lender or any affiliate of Lender;
(d) Any judgment or judgments aggregating in excess of $50,000 or any
injunction or attachment (except statutory liens or attachments for amounts not
yet due and payable) is obtained against any Borrower or any guarantor which
remains unstayed for a period of ten (10) days or is enforced;
(e) Any Borrower or any guarantor or a general partner of a guarantor
or a Borrower (which is a partnership), being a natural person, dies, or any
Borrower or any guarantor which is a partnership or corporation, is dissolved,
or any Borrower or any guarantor which is a corporation fails to maintain its
25
corporate existence in good standing, or Borrower or any guarantor suspends its
usual business or engages in a different line of business from the line of
business it is engaged in as of the date of this Agreement;
(f) Any change in the chief executive officer or president of Key
without Lender's prior written consent;
(g) Any Borrower or any guarantor of any of the Obligations becomes
insolvent, makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a general meeting of its creditors or
principal creditors;
(h) Any petition or application for any relief under the bankruptcy
laws of the United States now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed by any Borrower or any guarantor or, if filed against any
Borrower or any guarantor of any of the Obligations, is not dismissed within
sixty (60) days;
(i) The indictment or threatened indictment of any Borrower or any
guarantor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against any Borrower or any guarantor, pursuant
to which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of such Borrower or such guarantor;
(j) Any event of default under any financing, security or other
agreement, document or instrument at any time executed and/or delivered to, with
or in favor of Lender or any of its affiliates by any affiliate of any Borrower;
(k) Any event of default under the Loan and Security Agreement dated of
even date herewith entered into between Lender and WellTech (the "WellTech Loan
and Security Agreement");
(l) Lender in good faith believes that either (i) the prospect of
payment or performance of the Obligations is impaired or (ii) the Collateral is
not sufficient to secure fully the Obligations;
(m) Any default by any Borrower under any material agreement or
instrument, in favor of any individual or entity other than Lender and such
default continues for thirty (30) days after such breach first occurs; provided,
however, that such grace period shall not apply, and an Event of Default shall
exist, promptly upon such breach, if such breach may not, in Lender's reasonable
determination, be cured by Borrower during such thirty (30) day grace period;
(n) The Merger is not consummated by April 30, 1996, and Lender has
requested that WellTech obtain alternative financing and WellTech has not found
alternative financing within 90 days after Lender's request; or
26
(o) Key fails to operate and manage the affairs of WellTech under and
pursuant to the Interim Operations agreement when any Obligation of WellTech to
Lender under the WellTech Loan and Security Agreement is outstanding or unpaid.
7.2 Upon the occurrence of an Event of Default which has not been
waived by Lender or cured to Lender's satisfaction and at any time thereafter,
Lender shall have all rights and remedies provided in this Agreement, any other
agreements between any Borrower and Lender, the Uniform Commercial Code or other
applicable law, all of which rights and remedies may be exercised without notice
to any Borrower, all such notices being hereby waived, except such notice as is
expressly provided for hereunder or is not waivable under applicable law. All
rights and remedies of Lender are cumulative and not exclusive and are
enforceable, in Lender's discretion, alternatively, successively, or
concurrently on any one or more occasions and in any order Lender may determine.
Without limiting the foregoing, Lender may (a) accelerate the payment of all
Obligations and demand immediate payment thereof to Lender, (b) to the extent
permitted by law, with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the Collateral may be
located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion, of the Collateral, (c) require
any Borrower, at such Borrower's expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender, (d) collect, foreclose, receive, appropriate, set off and realize upon
any and all Collateral, (e) extend the time of payment of, compromise or settle
for cash, credit, return of merchandise, and upon any terms or conditions, any
and all accounts or other Collateral which includes a monetary obligation and
discharge or release the account debtor or other obligor, without affecting any
of the Obligations, (f) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all Collateral (including, without limitation, entering into
contracts with respect thereto, by public or private sales at any exchange,
broker's board, any office of Lender or elsewhere) at such prices or terms as
Lender may deem reasonable, for cash, upon credit or for future delivery, with
the Lender having the right to purchase the whole or any part of the Collateral
at any such public sale, all of the foregoing being free from any right or
equity of redemption of any Borrower which right or equity of redemption is
hereby expressly waived and released by each Borrower. If any of the Collateral
is sold or leased by Lender upon credit terms or for future delivery, the
Obligations shall not be reduced as a result thereof until payment therefor is
finally collected by Lender. If notice of disposition of Collateral is required
by law, ten (10) business days prior notice by Lender to the Borrowers
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and each Borrower waives any other
notice. In the event Lender institutes an action to recover any Collateral or
seeks recovery of any Collateral by way of prejudgment remedy, each Borrower
waives to the extent permitted by law the posting of any bond which might
otherwise be required.
7.3 Lender may apply the cash proceeds of Collateral actually received
by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of any of the Obligations, in whole or in part (including
reasonable attorneys' fees and legal expenses incurred by Lender with respect
thereto or otherwise chargeable to the Borrowers) and in such order as Lender
may elect, whether or not then due. Each Borrower shall remain liable to Lender
27
for the payment of any deficiency together with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including reasonable attorneys' fees and legal expenses.
7.4 Lender may, at its option, cure any default by any Borrower under
any agreement with a third party or pay or bond on appeal any judgment entered
against any Borrower, discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and pay any amount, incur any expense or perform any act which, in Lender's sole
judgment, is necessary or appropriate to preserve, protect, insure, maintain or
realize upon the Collateral. Lender may charge the Borrowers' loan account for
any amounts so expended, such amounts to be repayable by the Borrowers on
demand. Lender shall be under no obligation to effect such cure, payment,
bonding or discharge, and shall not by doing so, be deemed to have assumed any
obligation or liability of any Borrower.
SECTION 8. JURY TRIAL WAIVER; CERTAIN OTHER WAIVERS AND CONSENTS
8.1 WAIVER OF JURY TRIAL. LENDER AND EACH BORROWER ACKNOWLEDGE AND
AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREBY WOULD BE BASED UPON DIFFICULT AND COMPLEX
ISSUES, AND THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT GROWING OUT OF ANY
SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE
SITTING WITHOUT JURY. TRIAL BY A JUDGE SITTING WITHOUT A JURY WILL FURTHER
RESULT IN THE AVOIDANCE OF DELAYS, A STREAMLINING OF THE PROCEEDINGS INVOLVED
AND, AS A RESULT, WILL MINIMIZE THE EXPENSE OF ANY SUCH LAWSUIT FOR THE BENEFIT
OF EACH BORROWER AND LENDER. EACH BORROWER HEREBY WAIVES TRIAL BY JURY, RIGHTS
OF SET OFF, AND THE RIGHT TO IMPOSE COUNTERCLAIMS (EXCEPT BY COMPULSORY
COUNTERCLAIMS) IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE
OBLIGATIONS OR THE COLLATERAL, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT
HERETO OR THERETO, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN THE
BORROWERS, OR ANY OF THEM, AND THE LENDER. EACH BORROWER HEREBY CONFIRMS THAT
THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.
8.2 Each Borrower hereby irrevocably submits and consents to the
nonexclusive jurisdiction of the State and Federal Courts located in the State
in which the office of Lender designated in Section 10.6(a) is located and any
other State where any Collateral is located with respect to any action or
proceeding arising out of this Agreement, the Collateral or any matter arising
therefrom or relating thereto. In any such action or proceeding, each Borrower
waives personal service of the summons and complaint or other process and papers
therein and agrees that the service thereof may be made by mail directed to such
Borrower at its chief executive office set forth herein or other address thereof
28
of which Lender has received notice as provided herein, service to be deemed
complete five (5) days after mailing by certified or registered mail, or as
permitted under the rules of either of said Courts. Any such action or
proceeding commenced by any Borrower against Lender will be litigated only in a
Federal Court located in the district, or a State Court in the State and County,
in which the office of Lender designated in Section 10.6(a) is located and each
Borrower waives any objection based on forum non conveniens and any objection to
venue in connection therewith.
8.3 Lender shall not, by any act, delay, omission or otherwise be
deemed to have expressly or impliedly waived any of its rights or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. A waiver by Lender of any right or remedy on any one occasion shall not
be construed as a bar to or waiver of any such right or remedy which Lender
would otherwise have on any future occasion, whether similar in kind or
otherwise.
8.4 Unless otherwise expressly provided herein, each Borrower waives,
to the extent permitted by applicable law, diligence, presentment, protest and
notice of demand or dishonor and protest as to any instrument, notice of intent
to accelerate and notice of acceleration, notice of default, notice of protest,
demand, dishonor or nonpayment, as well as any and all other notices to which it
might otherwise be entitled. No notice to or demand on any Borrower which the
Lender may elect to give shall entitle such Borrower to any further notice or
demand in the same, similar or other circumstances.
8.5 The provisions of Chapter 15 of the Texas Credit Code (Vernon's
Texas Civil Statutes) Article 5069-15 are specifically declared by Lender and
the Borrowers not to be applicable to this Agreement or the transactions
contemplated hereby.
SECTION 9. TERM OF AGREEMENT; MISCELLANEOUS
9.1 Term. This Agreement shall only become effective upon: (a) the
execution and delivery of this Agreement by each Borrower and Lender and (b) the
execution and delivery by WellTech, Inc. and Lender of the WellTech Loan and
Security Agreement and shall continue in full force and effect until either
December 31, 1998, or January 5, 1999, at Lender's option, and shall be deemed
automatically renewed for successive terms of two (2) years thereafter unless
terminated as of the end of the initial or any renewal term (each a "Term") by
the Lender or any Borrower giving the other parties hereto written notice at
least sixty (60) days prior to the end of the then-current Term.
9.2 Any of the Borrowers may also terminate this Agreement by giving
Lender at least thirty (30) days prior written notice at any time upon payment
in full of all of the Obligations as provided herein, including the early
termination fee provided below. Lender shall also have the right to terminate
this Agreement at any time upon or after the occurrence of an Event of Default.
If Lender terminates this Agreement upon or after the occurrence of an Event of
Default, or if any of the Borrowers shall terminate this Agreement as permitted
herein effective prior to the end of the then-current Term, in addition to all
other Obligations, the Borrowers collectively shall pay to Lender, upon the
effective date of termination, in view of the impracticality and extreme
29
difficulty of ascertaining actual damages and by mutual agreement of the parties
as to a reasonable calculation of Lender's lost profits, an early termination
fee equal to:
(a) fifty percent (50%) of the average monthly interest and
fees payable by the Borrowers to Lender with respect to the Revolving
Loans for the immediately preceding six (6) months or from the date of
this Agreement, whichever is the shorter period, multiplied by
(b) either (i) the number of months (or any part thereof)
remaining in the then-current Term, if the Borrowers' written notice of
termination is received by Lender or termination by Lender is effective
more than sixty (60) days prior to the end of the then-current Term or
(ii) the number of months (or any part thereof) remaining in the
then-current Term plus twenty-four (24) if the Borrowers' written
notice of termination is received by Lender or termination by Lender is
effective within sixty (60) days prior to the end of the then-current
Term.
For purposes of calculating the early termination fee, in no event will the
average monthly interest be less than the interest which would have been payable
if the Revolving Loans had equaled the Minimum Borrowing set forth in Section
10.1(d) on each day during the calculation period.
9.3 Borrowers may prepay, in whole or in part, the Term Loans prior to
the end of the then current Term. If such prepayment is made with funds other
than funds obtained from a public offering or private placement of equity or
debt by Borrowers, the Borrowers collectively shall pay to Lender, upon the
effective date of termination, in view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual agreement of the parties
as to a reasonable calculation of Lender's lost profits, an early termination
fee equal to:
(a) fifty percent (50%) of the average monthly interest and
fees payable by the Borrowers to Lender with respect to the Term Loans
for the immediately preceding six (6) months or from the date of this
Agreement, whichever is the shorter period, multiplied by
(b) either (i) the number of months (or any part thereof)
remaining in the then-current Term, if the Borrowers' written notice of
termination is received by Lender or termination by Lender is effective
more than sixty (60) days prior to the end of the then-current Term or
(ii) the number of months (or any part thereof) remaining in the
then-current Term plus twenty-four (24) if the Borrowers' written
notice of termination is received by Lender or termination by Lender is
effective within sixty (60) days prior to the end of the then-current
Term.
If such payment is made with funds obtained from a public offering or
private placement of equity or debt by Borrowers, Borrowers shall collectively
pay to Lender an early termination fee of $50,000.00.
9.4 Upon termination of this Agreement by the Borrowers, as permitted
herein, in addition to payment of all Obligations which are not contingent, each
Borrower shall deposit such amount of cash collateral as Lender reasonably
30
determines is necessary to secure Lender from loss, cost, damage or expense,
including reasonable attorneys' fees, in connection with any open Accommodations
or remittance items or other payments provisionally credited to the Obligations
and/or to which Lender has not yet received final and indefeasible payment.
9.5 Except as otherwise provided, all notices, requests and demands
hereunder shall be (a) made to Lender at its address set forth in Section
10.6(a) and to each Borrower at its chief executive office set forth in Section
10.6(d), or to such other address as either party may designate by written
notice to the other in accordance with this provision, and (b) deemed to have
been given or made: if by hand, immediately upon delivery; if by telex, telegram
or telecopy (fax), immediately upon receipt; if by overnight delivery service,
upon receipt; and if by certified mail, peturn receipt requested five (5) days
after mailing.
9.6 If any provision of this Agreement is held to be invalid or
unenforceable, such provision shall not affect this Agreement as a whole, but
this Agreement shall be construed as though it did not contain the particular
provision held to be invalid or unenforceable.
9.7 Neither this Agreement nor any provision hereof shall be amended,
modified or discharged orally or by course of conduct, but only by a written
agreement signed by an authorized officer of Lender and Borrowers. This
Agreement shall be binding upon and inure to the benefit of each of the parties
hereto and their respective successors and assigns, except that any obligation
of Lender under this Agreement shall not be assignable nor inure to the
successors and assigns of Borrowers.
9.8 No termination of this Agreement shall relieve or discharge any
Borrower of its Obligations, grants of Collateral, duties and covenants
hereunder or otherwise including, without limitation, the continuation and
survival in full force and effect of all security interests and liens of Lender
in and upon all then-existing and thereafter-arising or acquired Collateral and
all warranties and waivers of Borrowers, until such time as all Obligations to
Lender have been indefeasibly paid and satisfied in full.
9.9 The enumeration herein of the Lender's rights and remedies is not
intended to be exclusive, and such rights and remedies are in addition to and
not by way of limitation of any other rights or remedies that the Lender may
have under the Uniform Commercial Code or other applicable law. The Lender shall
have the right, in its sole discretion, to determine which rights and remedies
are to be exercised and in which order. The exercise of one right or remedy
shall not preclude the exercise of any others, all of which shall be cumulative.
The Lender may, without limitation, proceed directly against the Borrowers, or
any of them, to collect the Obligations without any prior recourse to the
Collateral.
9.10 Whenever an Event of Default exists, the Lender is hereby
authorized at any time and from time to time, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Lender or any affiliate of
such Lender to or for the credit or the account of any Borrower against any and
all of the Obligations, whether or not then due and payable.
31
9.11 Lender may grant the right to participate in Loans and to enter
into participation agreements with one or more participating lenders; and, in
the event that Lender does grant such right to participate in Loans, Lender may
do so with such participating lenders, and on such terms and conditions, as
shall be acceptable to Lender. If a participating lender shall at any time with
the Borrowers' knowledge participate with the Lender in the Loans, each Borrower
hereby grants to such participating lender, and the Lender and such
participating lender shall have and are hereby given, a continuing lien on and
security interest in any money, securities and other property of such Borrower
in the custody or possession of the participating lender, including, the right
of set-off, to the extent of such participating lender's participation in the
Obligations, and such participating lender shall be deemed to have the same
right of set-off to the extent of such participating lender's participation in
the Obligations under this Agreement, as it would have if it were a direct
lender.
9.12 All terms used herein which are defined in the Uniform Commercial
Code shall have the meanings given therein unless otherwise defined in this
Agreement and all references to the singular or plural herein shall also mean
the plural or singular, respectively.
9.13 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE IN WHICH THE OFFICE OF LENDER SET FORTH IN SECTION
10.6(a) BELOW IS LOCATED.
9.14 THIS AGREEMENT (AND THE PROMISSORY NOTES REFERRED TO IN SECTION
2.2), ARE INTENDED BY THE BORROWERS AND THE LENDER TO BE THE FINAL, COMPLETE,
AND EXCLUSIVE EXPRESSION OF THE AGREEMENT BETWEEN THEM. THIS AGREEMENT
SUPERSEDES ANY AND ALL PRIOR ORAL OR WRITTEN AGREEMENTS RELATING TO THE SUBJECT
MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. NO MODIFICATION, RESCISSION,
WAIVER, RELEASE, OR AMENDMENT OF ANY PROVISION OF THIS AGREEMENT SHALL BE MADE,
EXCEPT BY A WRITTEN AGREEMENT SIGNED BY THE BORROWERS AND A DULY AUTHORIZED
OFFICER OF LENDER.
9.15 This Agreement may be executed in any number of counterparts, and
by the Lender and the Borrowers in separate counterparts, each of which shall be
an original, but all of which shall together constitute on and the same
agpeement.
9.16 The captions contained in this Agreement are for convenience only,
are without substantive meaning and should not be construed to modify, enlarge,
or restrict any provision.
9.17 This Agreement amends and restates in its entirety the Original
Loan Agreement. The execution of this Agreement, the Promissory Note and the
other loan documents executed in connection herewith does not extinguish the
indebtedness outstanding in connection therewith nor does it constitute a
novation with respect to indebtedness outstanding in connection with the
Original Loan Agreement or the indebtedness evidenced by the Original Loan
Documents. The Borrowers and Lender ratify and confirm each of the Original Loan
32
Documents including each of the security documents executed pursuant to the
Original Loan Agreement, and agree that such Original Loan Documents as amended
and modified hereby continue to be legal, valid, binding and enforceable in
accordance with their respective terms. Without limiting the generality of the
foregoing and notwithstanding any loan document to the contrary, each Borrower
and Lender agree and acknowledge that: (i) the term "Loan Agreement" as used in
each loan document means this Agreement; (ii) the term "Indebtedness,"
"Obligations" or "Secured Obligations" as used in any loan document means the
Obligations; and (iii) the term "Lender" as used in the Loan Documents means the
Lender as defined herein.
9.18 Releases. As a material inducement to Lender to enter into this
Agreement, Yale and Key each hereby represents and warrants that there are no
claims or offsets against, or defenses or counterclaims to, the terms and
provisions of and the other obligations created or evidenced by the Original
Loan Documents. Each of the Original Obligors hereby releases, acquits, and
forever discharges Lender, and its current parent, subsidiaries and affiliated
organizations, and the current offices, employees, attorneys and agents of each
of the foregoing (all of whom are herein jointly and severally referred to as
the "Released Parties") from any and all liability, damages, losses,
obligations, costs, expenses, suits, claims, demands, causes of action for
damages or any other relief, whether or not now known or suspected, of any kind,
nature or character, at law or in equity, that any of them now has or may have
ever had against any of the Released Parties, including, but not limited to,
those relating to (a) usury or penalties or damages therefor, (b) allegations
that a partnership existed between Borrower and the Released Parties, (c)
allegations of unconscionable acts, deceptive trade practices, lack of good
faith or fair dealing, lack of commercial reasonableness or special
relationships, such as fiduciary, trust or confidential relationships, (d)
allegations of dominion, control, alter ego, instrumentality, fraud,
misrepresentation, duress, coercion, undue influence, interference or
negligence, (e) allegations of tortious interference with present or present or
prospective business relationships or of antitrust or (f) slander, libel or
damage to reputation (hereinafter being collectively referred to as the
"Claims"), all of which Claims are hereby waived.
SECTION 10. ADDITIONAL DEFINITIONS AND TERMS
10.1 (a) Maximum Credit: $17,500,000
(b) Eligible Accounts Percentage: Eighty-Five Percent
(85%) so long as the dilution percentage of such
accounts does not exceed Four Percent (4%) whereupon
the Eligible Accounts Percentage shall be reduced to
an amount deemed reasonable by Lender.
(c) Maximum days after Invoice Date for Eligible
Accounts: 90 days; provided, however, that Lender may
make advances up to $250,000.00 in the aggregate at
any given time against Eligible Accounts which are
between 91 days and 120 days past invoice date.
(d) Minimum Borrowing: $8,600,000; provided, however,
that if the Term Loans are repaid in full from either
Borrower's operating income or the proceeds of a
stock offering of Key, then the Minimum Borrowing
will be $5,500,000.
33
(e) Sublimits:
(i) For Yale, $17,500,000 less all Obligations
of Hurt and Key;
(ii) For Hurt, the lesser of $2,000,000 or
$17,500,000 less all Obligations of Yale and
Key; and
(iii) For Key, $17,500,000 less all Obligations of
Hurt and Yale.
10.2 The lesser of eighty-two percent (82%) of the forced
liquidation value of the Borrower's equipment or
(a) Term Loan:
(i) For Yale, $10,004,082; and
(ii) For Hurt, $1,230,000.
(b) Additional Term Loans (ss.2.2(b)): In addition, Lender
will provide Borrowers with a line of credit in the
aggregate amount of up to the amount set forth below
("Capital Expenditures Line") for the equipment
purchased by Borrowers after November 6, 1995, which is
acceptable to Lender for lending purposes ("Acceptable
Capital Expenditures"). Advances, if any, by Lender
against Borrowers' Acceptable Capital Expenditures
("Capital Expenditures Loans") shall be limited to
seventy percent (70%) of the forced liquidation value
of such Capital Expenditures, as set forth in an
appraisal delivered to Lender in accordance with
Section 2.2(c), and such advances will be evidenced by
a Promissory Note and be amortized over 84 months. Any
advances made under the Capital Expenditures Line will
be made at the sole discretion of Lender.
(i) For Yale, up to $2,500,000 less all
outstanding Advances under the
Capital Expenditures Line; and
(ii) For Hurt, up to the lesser of
$2,000,000 or $2,500,000 less all
outstanding Advances under the
Capital Expenditures Line.
34
10.3 Accommodations:
(a) Lender's Charge for
Accommodations: N/A
(b) Sublimit for Accommodations: N/A
10.4 Fees:
(a) Interest Rate: Prime Rate plus 1.25% per annum
(b) Closing Fees:
(i) Yale: $25,000
(ii) Hurt: $25,000
(c) Unused Line Fee Rate: N/A
10.5 Financial Covenants: Unless indicated otherwise, all amounts below
shall be determined in accordance with generally accepted accounting principles,
in effect on the date hereof, consistently applied:
(a) "Consolidated Debt Service (Fixed Charge) Coverage
Ratio" means the ratio of (a) the sum of net income
plus (i) depreciation and amortization expenses plus
(ii) increases in deferred taxes less (iii) decreases
in deferred taxes resulting from tax payments
actually made; divided by (b) the sum of payments on
long term indebtedness plus (i) capital lease
payments plus (ii) any unfunded capital expenditures;
(c) determined on a consolidated basis.
Testing of the following ratio will begin on the
earlier to occur of March 31, 1996 or the Merger.
Borrowers, WellTech and BPI will maintain a
Consolidated Debt Service (Fixed Charge) Coverage
Ratio of not less than 1.30 to 1.00, such ratio to be
tested at the end of each calendar quarter (i.e. as
of March 31, June 30, September 30 and December 31)
based on the prior 12-month period.
(b) "Consolidated Tangible Net Worth" means the amount by
which the sum of (a) Shareholders Equity plus
Subordinated Debt (non-current balance) exceeds (b)
Intangible Assets, determined on a consolidated basis
for all Borrowers. For this purpose: "Shareholders
Equity" means shareholders equity determined
according to GAAP; and "Intangible Assets" means (i)
assets which are treated as intangible pursuant to
GAAP; (ii) obligations owing by any persons that are
officers, directors, shareholders, employees,
35
subsidiaries or affiliates, or any entity in which
any such person owns any interest; and (iii) any
asset which is intangible or lacks intrinsic and
marketable value or collectibility, including without
limitation goodwill, noncompetition agreements,
patents, copyrights, trademarks, franchises or
organization or research and development costs,
prepaid expenses or investments in
subsidiaries/affiliates; and (iv) any other assets
determined to be intangible by Lender in its
reasonable credit judgment.
Testing of the following ratio will begin on the
earlier to occur of March 31, 1996 or the Merger.
Borrowers, WellTech and BPI will maintain a
Consolidated Tangible Net Worth of not less than
$30,000,000, such ratio to be tested as of the end of
each calendar quarter (i.e. as of March 31, June 30,
September 30 and December 31).
(c) Total Liabilities (as defined by GAAP) to
Consolidated Tangible Net Worth:
Testing of the following ratio will begin on the
earlier to occur of March 31, 1996 or the Merger.
Borrowers, WellTech and BPI will not allow the ratio
of Total Liabilities to Consolidated Tangible Net
Worth to be greater than 2.25 to 1.00, such ratio to
be tested as of the end of any calendar quarter (i.e.
as of March 31, June 30, September 30 and December
31).
(d) Maximum Annual Capital Expenditures: Borrowers will
not allow their Capital Expenditures to exceed
$7,000,000 during any Fiscal Year.
10.6 (a) Lender's Office: 00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
(b) Lender's Bank: Bank of America Illinois
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
(c) Borrowers: Yale E. Key, Inc.
Key Energy Drilling, Inc.
d/b/a Xxxxx Xxxx Drilling
Key Energy Group, Inc.
36
(d) Borrowers' Chief Executive Offices:
1. Yale:
0000 Xxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
2. Key Energy Drilling, Inc.
d/b/a Xxxxx Xxxx Drilling:
0000 Xxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
3. Key Energy:
000 Xxxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxx Xxxxxx 00000
(e) Attached hereto as Schedule 10.6(e) is a correct and
complete listing of all of Borrowers' other Offices
and Locations of Collateral identifying each location
by street address, listing the name and address of
each owner of each location and if different from the
owner, the name and address of each lessor of each
location.
(f) Borrowers' Trade Names for Invoicing:
1. Yale: Xxxxxx Xxxxxxx Oil Well Service
Xxxxxxx Xxxxxx Oil Well Service
Key Fishing & Rental Tools
Key Tank Rentals
Key Mud
2. Key Energy Drilling, Inc.
d/b/a Xxxxx Xxxx Drilling: None
3. Key Energy: None
37
IN WITNESS WHEREOF, Borrowers and Lender have duly executed this
Agreement this day of January, 1996.
LENDER: BORROWERS:
THE CIT GROUP/CREDIT YALE E. KEY, INC.
FINANCE, INC.
By: /s/ Xxxxxx Xxxxxxxxx By: /s/ Xxxxxxx X. Xxxx
Name: Xx.Xxxxxx Xxxxxxxxx Name: Xxxxxxx X. Xxxx
Title: Vice President Title: Executive Vice President
KEY ENERGY DRILLING, INC.
D/B/A XXXXX XXXX DRILLING
By: /s/ Xxxxxxx X. Xxxx
Name: Xxxxxxx X. Xxxx
Title: Executive Vice President
KEY ENERGY GROUP, INC.
By: /s/ Xxxxxxx X. Xxxx
Name: Xxxxxxx X. Xxxx
Title: President
38
SCHEDULE A
Permitted Liens
SCHEDULE B
SCHEDULE 6.12
1. Key has guaranteed the obligations of Odessa to Norwest Bank Texas,
Midland.
2. Key will pay the bonuses due to Xxxxxxx X. Xxxx under Mr. John's
Employment Agreement with Key.
SCHEDULE 10.6(e)
