Ex. 10.3
LOAN AGREEMENT
dated as of December 17, 2001
among
T-3 ENERGY SERVICES, INC.
as Borrower
and
XXXXX FARGO ENERGY CAPITAL, INC.
as Lender
and as Agent for the Lenders
and
the Lenders
ARTICLE I Definitions ................................................. 1
Section 1.1 Definitions ................................................. 1
Section 1.2 Other Definitional Provisions ............................... 14
ARTICLE II The Loan .................................................... 14
Section 2.1 Commitment .................................................. 14
Section 2.2 The Notes ................................................... 14
Section 2.3 Repayment of Advance ........................................ 14
Section 2.4 Interest .................................................... 14
Section 2.5 Use of Proceeds ............................................. 15
Section 2.6 Funding Procedure ........................................... 15
Section 2.7 Method of Payment ........................................... 15
Section 2.8 Voluntary Prepayment ........................................ 16
Section 2.9 Mandatory Prepayment ........................................ 16
Section 2.10 Pro Rata Treatment .......................................... 17
Section 2.11 Non-Receipt of Funds by the Agent ........................... 17
Section 2.12 Withholding Tax Exemption ................................... 17
Section 2.13 Computation of Interest ..................................... 17
Section 2.14 Capital Adequacy ............................................ 18
ARTICLE III Security .................................................... 18
Section 3.1 Collateral .................................................. 18
Section 3.2 Setoff ...................................................... 19
ARTICLE IV Conditions Precedent ........................................ 20
ARTICLE V Representations and Warranties .............................. 24
Section 5.1 Corporate Existence ......................................... 24
Section 5.2 Projections; Financial Statements ........................... 24
Section 5.3 Corporate Action: No Breach ................................. 24
Section 5.4 Operation of Business ....................................... 25
Section 5.5 Litigation and Judgments .................................... 25
Section 5.6 Rights in Properties: Liens ................................. 25
Section 5.7 Enforceability .............................................. 25
Section 5.8 Approvals ................................................... 25
Section 5.9 Debt ........................................................ 25
Section 5.10 Taxes ....................................................... 25
Section 5.11 Use of Proceeds: Margin Securities .......................... 26
Section 5.12 ERISA ....................................................... 26
Section 5.13 Disclosure .................................................. 26
Section 5.14 Subsidiaries ................................................ 26
Section 5.15 Agreements .................................................. 27
Section 5.16 Compliance with Laws ........................................ 27
Section 5.17 Investment Company Act ...................................... 27
Section 5.18 Public Utility Holding Company Act .......................... 27
Section 5.19 Environmental Matters ....................................... 27
Table of Contents
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(continued)
Page
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ARTICLE VI Affirmative Covenants ....................................... 29
Section 6.1 Reporting Requirements ...................................... 29
Section 6.2 Maintenance of Existence: Conduct of Business ............... 31
Section 6.3 Maintenance of Properties ................................... 31
Section 6.4 Taxes and Claims ............................................ 32
Section 6.5 Insurance ................................................... 32
Section 6.6 Inspection Rights ........................................... 32
Section 6.7 Keeping Books and Records ................................... 32
Section 6.8 Compliance with Laws ........................................ 32
Section 6.9 Compliance with Agreements .................................. 32
Section 6.10 Further Assurances .......................................... 33
Section 6.11 ERISA ....................................................... 33
Section 6.12 Additional Material Subsidiaries as Guarantors: ............. 33
Additional Designated Subsidiaries as Guarantors;
Execution of Additional Security Agreements-Guarantors
Section 6.13 Continuity of Operations .................................... 34
Section 6.14 Intercompany Note ........................................... 34
Section 6.15 Additional Appraisals ....................................... 34
ARTICLE VII Negative Covenants .......................................... 34
Section 7.1 Debt ........................................................ 34
Section 7.2 Limitation on Liens ......................................... 36
Section 7.3 Mergers, Dissolutions, Etc .................................. 37
Section 7.4 Loans and Investments ....................................... 37
Section 7.5 Transactions With Affiliates ................................ 38
Section 7.6 Disposition of Assets ....................................... 38
Section 7.7 Sale and Leaseback .......................................... 39
Section 7.8 Nature of Business .......................................... 39
Section 7.9 Environmental Protection .................................... 39
Section 7.10 Accounting .................................................. 39
Section 7.11 Changes to Subordinated Debt ................................ 39
ARTICLE VIII Financial Covenants ......................................... 40
Section 8.1 Fixed Charge Coverage Ratio ................................. 40
Section 8.2 Funded Debt to EBITDA Ratio ................................. 40
ARTICLE IX Default ..................................................... 41
Section 9.1 Events of Default ........................................... 41
Section 9.2 Remedies Upon Default ....................................... 42
Section 9.3 Performance by the Agent .................................... 43
ARTICLE X The Agent ................................................... 43
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Table of Contents
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(continued)
Page
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Section 10.1 Appointment, Powers and Immunities .......................... 43
Section 10.2 Rights of Agent as a Lender ................................. 45
Section 10.3 Sharing of Payments, Etc .................................... 45
Section 10.4 Indemnification ............................................. 45
Section 10.5 Independent Credit Decisions ................................ 46
Section 10.6 Several Commitments ......................................... 47
Section 10.7 Successor Agent ............................................. 47
ARTICLE XI Miscellaneous ............................................... 47
Section 11.1 Expenses .................................................... 47
Section 11.2 Indemnification ............................................. 48
Section 11.3 Limitation of Liability ..................................... 48
Section 11.4 No Duty ..................................................... 48
Section 11.5 Lender Not Fiduciary ........................................ 49
Section 11.6 No Waiver; Cumulative Remedies .............................. 49
Section 11.7 Successors and Assigns ...................................... 49
Section 11.8 Survival .................................................... 52
Section 11.9 ENTIRE AGREEMENT; AMENDMENTS ................................ 52
Section 11.10 Maximum Interest Rate ....................................... 53
Section 11.11 Notices ..................................................... 53
Section 11.12 GOVERNING LAW; VENUE; SERVICE OF PROCESS .................... 53
Section 11.13 Counterparts ................................................ 54
Section 11.14 Severability ................................................ 54
Section 11.15 Headings .................................................... 54
Section 11.16 Non-Application of Chapter 346 of Texas Finance Code ........ 54
Section 11.17 Construction ................................................ 54
Section 11.18 Independence of Covenants ................................... 54
Section 11.19 Waiver of Trial By Jury ..................................... 55
ARTICLE XII Arbitration ................................................. 55
Section 12.1 Arbitration ................................................. 55
Section 12.2 Governing Rules ............................................. 55
Section 12.3 No Waiver; Provisional Remedies, Self-Help and Foreclosure .. 55
Section 12.4 Arbitrator Qualifications and Powers Awards ................. 56
Section 12.5 Judicial Review ............................................. 56
Section 12.6 Miscellaneous ............................................... 56
iii
Table of Contents
(continued)
Schedules
---------
4.1 Existing Debt to be Repaid
5.5 Litigation
5.10 Tax Matters
5.14 Subsidiaries
5.19 Environmental Matters
7.1 Existing Permitted Debt
7.2 Existing Permitted Liens
7.5 Transaction with Affiliates
Exhibits
--------
A Note
B Compliance Certificate
C Guaranty Agreement -- Domestic
D Pledge and Security Agreement
E Assignment and Acceptance
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of December 17, 2001 (this "Agreement"),
is among T-3 ENERGY SERVICES, INC., a Delaware corporation (the "Borrower"),
each of the banks or other lending institutions which is or which may from time
to time become a signatory hereto or any successor or assignee thereof
(individually, a "Lender" and, collectively, the "Lenders"), and XXXXX FARGO
ENERGY CAPITAL, INC., a Texas corporation, as agent for itself and the other
Lenders (in such capacity, together with its successors in such capacity, the
"Agent").
RECITALS:
The Borrower has requested the Lenders to extend credit in the form of
a single advance term loan in the original principal amount of $12,000,000. The
Lenders are willing to extend such credit to the Borrower upon the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:
"AAA" has the meaning given to such term in Section 12.2 of this
Agreement.
"Advance" means the advance of funds by the Agent on behalf of the
Lenders to the Borrower pursuant to Section 2.1.
"Affiliate" means, as to any Person, any other Person (a) that directly
or indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds 10% or more of any class of voting stock of such
Person; or (c) 10% or more of the voting stock of which is directly or
indirectly beneficially owned or held by the Person in question. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise; provided,
however, in no event shall any of the Agent and the Lenders be deemed an
Affiliate of the Borrower or any of its Subsidiaries.
"Agent" has the meaning given to such term in the first paragraph of
this Agreement.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction)
(collectively, a "transfer") by the Borrower or any of its Subsidiaries,
directly or indirectly, in one or a series of related transactions, to any
Person other than the Borrower or any of its Subsidiaries of (a) any Capital
Stock of any of Borrower's Subsidiaries, (b) all or substantially all of the
properties and assets of the Borrower and its Subsidiaries representing a
division or line of business or (c) any other properties or assets of the
Borrower or any of its Subsidiaries, other than in the ordinary course of
business. For purposes of this definition, the term "Asset Sale" does not
include any transfer of properties or assets between or among the Borrower and
the Guarantors pursuant to transactions that do not violate any provision of
this Agreement.
"Assignee" has the meaning given to such term in Section 11.7 (b).
"Assignment and Acceptance" means an Assignment and Acceptance, in
substantially the form attached hereto as Exhibit "E" with appropriate
completions.
"Authorized Representative" means any officer or employee of the
Borrower who has been designated in writing by the Borrower to the Agent to be
an Authorized Representative.
"Basle Accord" means the proposals for risk-based capital framework
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as amended, supplemented and
otherwise modified and in effect from time to time, or any replacement thereof.
"Borrower" has the meaning given to such term in the first paragraph of
this Agreement.
"Business Day" means any day on which commercial banks are not
authorized or required to close in Houston, Texas.
"Calculation Period" means, as of the last day of any Fiscal Quarter,
(a) beginning with the Fiscal Quarter ending March 31, 2002, and continuing
through and including the Fiscal Quarter ending September 30, 2002, the period
beginning on January 1, 2002 and ending on such last day of such Fiscal Quarter,
and (b) at all times after September 30, 2002, the period of four Fiscal
Quarters ended as of such date or, if a calculation is performed on a date other
than the last day of any Fiscal Quarter, the period of twelve months ending on
such date.
"Capital Expenditures" means, for any Person, all expenditures for
assets which, in accordance with GAAP, are properly classified as equipment,
real property, improvements, fixed assets or a similar type of capitalized asset
and which would be required to be capitalized and shown on the balance sheet of
such Person.
"Capital Lease Obligations" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP. For purposes of this Agreement,
2
the amount of such Capital Lease Obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Capital Stock" of any Person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents (however
designated) of such Person's equity interest (however designated).
"Cash Equivalent Investment" means, at any time, (a) any evidence of
Debt, maturing not more than one year after such time, issued or guaranteed by
the United States government or any agency thereof, (b) commercial paper,
maturing not more than one year from the date of issue, corporate demand notes
or other debt securities having a maturity or tender right less than one year
from the date of issuance thereof, in each case (unless issued by a Senior
Lender or its holding company) rated in one of the two highest rating categories
by Standard & Poor's Ratings Group or Xxxxx'x Investors Service, Inc., (c) any
certificate of deposit (or time deposits represented by such certificates of
deposit) or bankers acceptance, maturing not more than one year after such time,
or overnight Federal Funds transactions that are issued or sold by a commercial
banking institution that is a member of the Federal Reserve System and has a
combined capital and surplus and undivided profits of not less than
$500,000,000, (d) any repurchase agreement entered into with any Senior Lender
(or other commercial banking institution of the stature referred to in clause
(c) which (i) is secured by a fully perfected security interest in any
obligation of the type described in any of clauses (a) through (c) and (ii) has
a market value at the time such repurchase agreement is entered into of not less
than 100% of the repurchase obligation of such Senior Lender (or other
commercial banking institution) thereunder and (e) investments in short-term
asset management accounts offered by any Senior Lender for the purpose of
investing in investment grade loans to any corporation (other than the Borrower
or an Affiliate of the Borrower) , state or municipality, in each case organized
under the laws of any state of the United States or of the District of Columbia.
"Cash Reserves" means for any Person amounts held by such Person in
cash or Cash Equivalent Investments.
"Cash Taxes" means, for any Person, the sum of all cash income taxes
paid or required to be paid during the period in question, as determined in
accordance with GAAP applied consistently.
"Change of Control" means the occurrence of any transaction or event by
which any Person, or two or more Persons acting in concert, acquire beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Act
of 1934, as amended) of 50% or more of the outstanding shares of the Borrower's
voting stock.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"Collateral" has the meaning given to such term in Section 3.1.
3
"Commitment" means as to each Lender the obligation of such Lender to
make its portion of the Advance pursuant to Section 2.1 in the principal amount
set forth opposite the name of such Lender on the signature pages hereto or to
the most recent amendment hereto under the heading "Commitment" or on the
signature pages of an Assignment and Acceptance, as the case may be.
"Compliance Certificate" means a certificate, in substantially the form
of Exhibit "B" attached hereto, properly completed and signed by the Borrower in
connection with Section 6.1(c).
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) determined in conformity with GAAP of the Borrower and its
Subsidiaries.
"Consolidated Tangible Net Worth" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as Stockholders'
Equity on a consolidated balance sheet of the Borrower and its Subsidiaries;
provided, however, there shall be excluded therefrom intangible assets,
including: (a) any amount at which shares of capital stock of the Borrower
appear as an asset on the Borrower's balance sheet, (b) goodwill, including any
amounts, however designated, that represent the excess of the purchase price
paid for assets or stock over the value assigned thereto, and (c) loans (to the
extent that such are not fully secured) to any stockholder, director, officer,
or employee of the Borrower or any Affiliate of the Borrower.
"Contingent Liabilities" means, as applied to any Person, those direct
or indirect liabilities of that Person which, in conformity with GAAP, would be
included as liabilities of that Person on a consolidated balance sheet of the
Borrower and its Subsidiaries, with respect to any Debt, lease, dividend, letter
of credit or other obligation (the "primary obligations") of another Person (the
"primary obligor") including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, or (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof. The amount of any Contingent
Liabilities shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Liabilities
are made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the Borrower in good faith.
"Current Maturities" means as to any Person, at any date, the current
maturities of Funded Debt determined in accordance with GAAP.
4
"Debt" means as to any Person at any time (without duplication as to
such Person and as to such Person's Subsidiaries): (a) all obligations of such
Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, notes, debentures, or other similar instruments, (c) all obligations of
such Person to pay the deferred purchase price of property or services, except
trade accounts payable of such Person arising in the ordinary course of business
that are not past due by more than ninety (90) days or which are being contested
in good faith and for which adequate reserves have been established, (d) all
Capital Lease Obligations of such Person, (e) all obligations secured by a Lien
existing on property owned by such Person, whether or not the obligations
secured thereby have been assumed by such Person or are non-recourse to the
credit of such Person, (f) all reimbursement obligations of such Person (whether
contingent or otherwise and whether or not a request for funding has been made)
in respect of letters of credit, bankers' acceptances, surety or other bonds and
similar instruments, (g) all liabilities of such Person in respect of unfunded
vested benefits under any Plan, (h) all Contingent Liabilities and (i) all
obligations under any commodity, interest rate or currency swap, cap, floor,
collar, forward agreement or other exchange or protection agreement or any
option with respect to any such transaction.
"Default" means the occurrence of an event or condition which with
notice or lapse of time or both would become an Event of Default.
"Default Rate" means a rate of interest of 11.5% per annum.
"Dollars" and "$" mean lawful money of the United States of America.
"Domestic Guarantors" means (a) all the Material Subsidiaries which are
Domestic Subsidiaries, and (b) all other Domestic Subsidiaries which have been
designated by the Borrower to be Domestic Guarantors pursuant to the Senior
Credit Agreement, and "Domestic Guarantor" means any one of the Domestic
Guarantors.
"Domestic Subsidiary" means any Subsidiary of the Borrower which is
organized and existing under the laws of the United States of America or any
state thereof.
"EBITDA" means as to any Person, for any period, the sum of
Consolidated Net Income for such period plus Interest Expense, Tax Expense,
Non-Cash Charges, and the amount of any write-downs of goodwill, all to the
extent deducted when determining Consolidated Net Income in such period, plus
historical EBITDA of acquired entities for periods included in the applicable
Calculation Period in which such acquired entities were not Subsidiaries of the
Borrower, so long as the financial statements of such acquired entities are in
form and detail satisfactory to the Agent, minus historical EBITDA of sold
entities for periods included in the applicable Calculation Period in which such
sold entities were Subsidiaries of the Borrower.
"XXXXX" means the Electronic Data Gathering, Analysis and Retrieval
program operated by the SEC pursuant to Regulation ST of the General Rules and
Regulations of the SEC under the Securities Act of 1933, and shall include any
successor program.
5
"Effective Date" means the date on which all the conditions precedent
set forth in Article IV have been satisfied or waived in writing by the Agent
and the Lenders.
"Eligible Assignee" means any commercial bank, savings and loan
association; savings bank, finance company, insurance company, pension fund,
mutual fund, or other financial institution (whether a corporation, partnership,
or other entity) acceptable to the Agent, and having combined capital and
surplus of at least $500,000,000.
"Environmental Law" means any and all foreign, federal, state, and
local laws, regulations, and requirements pertaining to health, safety, or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et.
seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901
et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Clean Water Act, 33
U.S.C. Section 1251 et seq., and the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., as such laws, regulations, and requirements may be amended
or supplemented from time to time.
"Environmental Liabilities" means, as to any Person, all liabilities,
obligations, responsibilities, Remedial Actions, losses, damages, punitive
damages, consequential damages, treble damages, costs, and expenses (including,
without limitation, all reasonable fees, disbursements and expenses of counsel,
expert and consulting fees and costs of investigation and feasibility studies),
fines, penalties, sanctions, and interest incurred as a result of any claim or
demand, by any Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including any
Environmental Law, permit, order or agreement with any Governmental Authority or
other Person, arising from environmental, health or safety conditions or the
Release or threatened Release of a Hazardous Material into the environment,
resulting from the past, present, or future operations of such Person or its
Affiliates.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is
or has been a member of the same controlled group of corporations (within the
meaning of Section 414 (b) of the Code) as the Borrower or is or has been under
common control (within the meaning of Section 414 (c) of the Code) with the
Borrower.
"Event of Default" has the meaning specified in Section 9.1.
"Excess Cash Flow" means, for the Borrower and its Subsidiaries on a
consolidated basis for any Fiscal Year, an amount equal to (a) EBITDA for such
period, minus (b) the sum of (without duplication) (i) scheduled payments made
on Debt during such period, plus (ii) Interest Expense for such period, plus
(iii) Tax Expense for such period, plus (iv) actual non-financed Maintenance
Capital Expenditures for such period, plus (v) mandatory prepayments paid in
cash.
"Facility Rate" means a rate of interest of 9.5% per annum.
6
"Federal Funds Rate" means, for any day, the rate per annum, (rounded
upwards, if necessary, to the nearest 1/16 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if such rate is not so published on such next
succeeding Business Day, the Federal Funds Rate for any day shall be the average
rate charged to the Agent on such day on such transactions as determined by the
Agent.
"Fee Letter" means that certain letter agreement dated as of November
13, 2001, executed by and among T-3 Energy Services, Inc., First Reserve and
Xxxxx Fargo Bank, setting forth certain fees to be paid by the Borrower to Xxxxx
Fargo Bank.
"First Reserve" means First Reserve Fund VIII, Limited Partnership, a
Delaware limited partnership.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of the Borrower and its
Subsidiaries, which period is the 12 month period ending on December 31 of each
year.
"Fixed Charge Coverage Ratio" means as to any Person, at any date (a)
EBITDA for the Calculation Period, divided by (b) the sum of (i) Current
Maturities as of such date (except, with respect to periods ending after
December 12, 2003, 88.89% of the final scheduled installment of the Term Loan
Advances (as defined in the Senior Credit Agreement) and with respect to periods
ending after December 12, 2004, 100% of the final scheduled installment of the
Advance), plus (ii) cash Interest Expense for the Calculation Period, plus (iii)
Cash Taxes for the Calculation Period, plus (iv) actual cash Maintenance Capital
Expenditures for the Calculation Period; provided that, for purposes of
determining the Fixed Charge Coverage Ratio for the Fiscal Quarters ending on or
prior to September 30, 2002, EBITDA, cash Interest Expense, Cash Taxes, and
actual cash Maintenance Capital Expenditures for the Calculation Period shall be
multiplied by a fraction, the numerator of which shall be 4 and the denominator
of which shall be the number of Fiscal Quarters having occurred during the
period beginning January 1, 2002 and ending on the date of determination.
"Foreign Guarantors" means (a) all of the Material Subsidiaries and
which have executed a Guaranty Agreement, which are Foreign Subsidiaries,
provided that, no Foreign Subsidiary shall become a Foreign Guarantor under this
clause (a) if delivery of a Guaranty Agreement - Foreign by such Foreign
Subsidiary would result in material increased tax or similar liabilities for the
Borrower and its Subsidiaries on a consolidated basis, and (b) all other Foreign
Subsidiaries which have been designated by the Borrower to be Foreign Guarantors
pursuant to the Senior Credit Agreement and which have executed a Guaranty
Agreement, and "Foreign Guarantor" means any one of the Foreign Guarantors.
7
"Foreign Subsidiary" means any Subsidiary of the Borrower which is
organized and existing under the laws of a jurisdiction other than the United
States of America or any state thereof.
"Funded Debt" means, at any time, the aggregate obligations of the
Borrower and its Subsidiaries (determined on a consolidated basis) for Debt for
borrowed money (including Capital Lease Obligations).
"Funded Debt to EBITDA Ratio" means, at any time, (a) Funded Debt as of
the last day of the Calculation Period divided by (b) EBITDA for the Calculation
Period, provided that, for purposes of determining the Funded Debt to EBITDA
Ratio for the Fiscal Quarters ending on or prior to September 30, 2002, EBITDA
for the Calculation Period shall be multiplied by a fraction, the numerator of
which shall be 4 and the denominator of which shall be the number of Fiscal
Quarters having occurred during the period beginning January 1, 2002 and ending
on the date of determination.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
applied in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Governmental Authority" means any nation or government, any state or
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"Guarantors" means the Domestic Guarantors and the Foreign Guarantors.
"Guaranty Agreement" means a Guaranty Agreement-Domestic or a Guaranty
Agreement-Foreign, and "Guaranty Agreements" means the Guaranty
Agreements-Domestic and the Guaranty Agreements-Foreign.
"Guaranty Agreement-Domestic" means a General Continuing Guaranty
executed by a Domestic Guarantor in favor of the Agent, in substantially the
form attached hereto as Exhibit "C" with appropriate completions, as the same
may be amended, supplemented, or modified from time to time, and "Guaranty
Agreements-Domestic" means more than one Guaranty Agreement-Domestic.
"Guaranty Agreement-Foreign" means a guarantee agreement in form and
substance satisfactory to the Agent executed by a Foreign Guarantor in favor of
the Agent, as the same may be amended, supplemented, or modified from time to
time, and "Guaranty Agreements-Foreign" means more than one Guaranty
Agreement-Foreign.
8
"Hazardous Material" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law, including,
without limitation, asbestos, petroleum, and polychlorinatedbiphenyls.
"IHI" means Industrial Holdings, Inc., a Texas corporation.
"IHI Merger" means the merger of T-3 Energy Services, Inc., a Delaware
corporation, into IHI, the subsequent merger of IHI into a wholly owned
subsidiary of IHI, and the subsequent name change of such subsidiary to T-3
Energy Services, Inc., which is the Borrower hereunder, all pursuant to the
Merger Agreements.
"Institutional Debt" means unsecured Debt for borrowed money which may
be raised by the Borrower or any of its Subsidiaries in the private placement or
public debt markets pursuant to terms satisfactory to the Required Lenders, but
which shall exclude Subordinated Debt.
"Intercompany Note" means that certain T-3 Energy Services, Inc.
Omnibus Intercompany Revolving Credit Note dated as of the date of this
Agreement, made by Borrower and each Subsidiary to which Borrower or any
Subsidiary has made loans or other advances, payable to the order of Borrower
and each Subsidiary from which Borrower or any Subsidiary has obtained loans or
other advances, in the stated principal amount of the Revolving Credit
Commitments (as defined in the Senior Credit Agreement).
"Intercreditor Agreement" means an intercreditor agreement among the
Borrower, the Agent, the Lenders, Xxxxx Fargo Bank, as agent for the Senior
Lenders, and the Senior Lenders in form and substance satisfactory to the Agent,
the Lenders and the Borrower, setting forth the relative rights of the Agent and
Lenders hereunder and the Senior Lenders, as providers of the Senior Debt.
"Interest Expense" means the sum of all interest expense (whether cash
or non-cash) paid or required by its terms to be paid during the period in
question, as determined in accordance with GAAP applied consistently, with
respect to the Funded Debt of a Person or any portion thereof.
"Lender" has the meaning given to such term in the first paragraph of
this Agreement.
"Lien" means any lien, mortgage, security interest, tax lien, financing
statement, pledge, charge, hypothecation, assignment, preference, priority, or
other encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or title retention agreement), whether arising
by contract, operation of law, or otherwise.
"Loan Documents" means this Agreement, the Intercreditor Agreement and
all promissory notes, security agreements, deeds of trust, assignments,
guaranties, and other instruments, documents, and agreements executed and
delivered pursuant to or in connection with this Agreement (but excluding the
Merger Agreements), as such instruments, documents,
9
and agreements may be amended, modified, renewed, extended, or supplemented from
time to time.
"Maintenance Capital Expenditures" means all Capital Expenditures other
than those made for the original purchase of equipment, real property,
improvements, fixed assets or similar type of capitalized asset.
"Material Adverse Effect" means (a) a material adverse effect on (i)
the business, condition (financial or otherwise), operations, prospects, or
properties of the Borrower and its Subsidiaries, taken as a whole, (ii) the
ability of the Borrower and its Subsidiaries, taken as a whole, to perform their
respective obligations under this Agreement or any of the other Loan Documents,
or (iii) the validity or enforceability of this Agreement or any of the other
Loan Documents, or the rights or remedies of the Agent or the Lenders hereunder
or thereunder or (b) civil or criminal liability for the Agent or the Lenders
under Environmental Laws.
"Material Subsidiary" means any Subsidiary which constitutes a
"significant subsidiary" under Regulation SX of the Securities Exchange Act of
1934, as amended.
"Maturity Date" means December 17, 2005, or such earlier date on which
the Advance is accelerated as provided in this Agreement.
"Maximum Rate" means, with respect to any Lender, the maximum
nonusurious interest rate, if any, that at any time, or from time to time, may
be contracted for, taken, reserved, charged or received on the indebtedness
created under this Agreement, the Notes, or any other Loan Document under the
laws which are presently in effect in the United States and the State of Texas
applicable to the Lenders, such holders and such indebtedness or, to the extent
permitted by law, under such applicable laws of the United States and the State
of Texas which may hereafter be in effect and which allow a higher maximum
nonusurious interest rate than applicable laws now allow. To the extent that
Chapter 303 of the Texas Finance Code (the "Finance Code"), is relevant to any
Lender or any holder of the Notes for the purposes of determining the Maximum
Rate, each such Person shall determine such applicable legal rate under the
Finance Code pursuant to the "weekly ceiling," from time to time in effect, as
referred to and defined in Chapter 303 of the Finance Code; subject, however, to
the limitations on such applicable ceiling referred to and defined in Chapter
303 of the Finance Code, and further subject to any right such Person may have
subsequently, under applicable law, to change the method of determining the
Maximum Rate. If no Maximum Rate is established by applicable law, then the
Maximum Rate shall be equal to 18% per annum.
"Merger Agreements" means the Agreement and Plan of Merger, as amended,
dated as of May 7, 2001, among Borrower, IHI and First Reserve, as amended
through the date hereof, and any agreements, documents or instruments executed
or delivered in connection therewith and any renewals, extensions, amendments,
restatements or other modifications of any of the above.
"Mortgages" means mortgages or deeds of trust, as appropriate, executed
by Borrower or the applicable Subsidiary, as the case may be, in form and
substance satisfactory to Agent,
10
granting a lien, second in priority only to the lien securing the Senior Debt,
to Agent for the ratable benefit of Lenders on all real property owned by
Borrower and each Subsidiary domiciled in the United States.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the Borrower or
any predecessor thereto or any ERISA Affiliate and which is covered by Title IV
of ERISA.
"Net Cash Proceeds" means, with respect to (a) any Asset Sale, (b) any
other transfer or disposition of any asset to a third party, (c) issuance of any
Institutional Debt or Subordinated Debt, or (d) issuance of any Capital Stock,
the aggregate amount of cash and Cash Equivalent Investments received by such
Person in connection with such transaction minus reasonable fees, costs and
expenses and related taxes paid or payable as a result of such transaction.
"Non-Cash Charges" means as to any Person, for any period,
depreciation, amortization and other non-cash charges, determined in accordance
with GAAP.
"Notes" means the promissory notes of the Borrower payable to the order
of the Lenders, in substantially the form attached hereto as Exhibit "A" with
appropriate completions, and all extensions, renewals, replacements,
modifications, supplements or rearrangements thereof from time to time, and
"Note" means any one of the Notes.
"Obligated Party" means each Guarantor or any other Person who is or
becomes party to any agreement pursuant to which such Person guarantees or
secures payment and performance of the Obligations or any part thereof.
"Obligations" means all obligations, indebtedness and liabilities of
the Borrower and its Subsidiaries to the Agent, the Lenders, any of their
respective Affiliates, or any or some of them, arising pursuant to this
Agreement or any of the Loan Documents, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several.
"Payment Date" means the last day of each March, June, September and
December, commencing March 31, 2002.
"Payor" has the meaning given to such term in Section 2.10.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Percentage" means at any time with respect to any Lender, such
Lender's portion, expressed as a percentage, of the aggregate outstanding amount
of the Advance.
"Permitted Liens" has the meaning assigned to it in Section 7.2.
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"Person" means any individual, corporation, business trust,
association, company, partnership, joint venture, Governmental Authority, or
other entity.
"Plan" means any employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate.
"Pledge and Security Agreement " means (a) with respect to Borrower and
each Domestic Guarantor as of the date hereof, a pledge and security agreement
executed by the Borrower and each Domestic Guarantor in favor of the Agent in
substantially the form attached hereto as Exhibit "D" with appropriate
completions, as the same may be amended, supplemented, or modified from time to
time and (b) with respect to each Foreign Guarantor, a pledge and security
agreement executed by such Foreign Guarantor in favor of the Agent in form and
substance satisfactory to the Agent, as the same may be amended, supplemented or
modified from time to time.
"Principal Office" means the respective principal office of the Agent
and the Lenders, presently located for such Persons at the addresses shown under
the signature line of such Persons in this Agreement.
"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code.
"Register" has the meaning assigned to it in Section 11.7(d).
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Regulatory Change" means, with respect to a Lender, any change after
the date of this Agreement in United States federal, state, or foreign laws or
regulations (including Regulation D) or the adoption or making after such date
of any interpretations, directives, or requests applying to a class of banks
including such Lender of or under any United States federal or state, or any
foreign, laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Release" means, as to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, disposal, disbursement, leaching, or
migration of Hazardous Materials into the indoor or outdoor environment or into
or out of property owned by such Person, including, without limitation, the
movement of Hazardous Materials through or in the air, soil, surface water,
ground water, or property.
"Remedial Action" means all actions required to (a) clean up, remove,
treat, or otherwise address Hazardous Materials in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release of Hazardous Materials so that they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
12
environment, or (c) perform pre-remedial studies and investigations in
post-remedial monitoring and care.
"Replacement Financial Covenant Date" means the first day when the
Obligations (as defined in the Senior Credit Agreement) have been repaid in full
(or solely with respect to Letter of Credit Liabilities (as defined in the
Senior Credit Agreement) fully cash collateralized) and the Senior Lenders have
no further commitments to lend under the Senior Loan Agreement.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"Required Lenders" means, (a) while five or fewer Lenders are party to
this Agreement, at any time prior to the Advance being made, Lenders having at
least sixty percent (60%) of the aggregate Commitments and, and (ii) at any time
after the Advance is made, Lenders holding at least sixty percent (60%) of the
outstanding aggregate principal amount of the Advance (without regard to any
sale by a Lender of a participation in any Advance under Section 11.7(a)), and
(b) while more than five Lenders are party to this Agreement, (i) at any time
before the Advance is made, Lenders having at least fifty-one percent (51%) of
the aggregate Commitments, and (ii) at any time after the Advance is made,
Lenders holding at least fifty-one percent (51%) of the outstanding aggregate
principal amount of the Advance (without regard to any sale by a Lender of a
participation in the Advance under Section 11.7(a)).
"SEC" means the Securities and Exchange Commission of the United States
of America, and includes any successor agency.
"Senior Credit Agreement" means that certain Credit Agreement dated of
even date herewith by and among the Borrower, as borrower, Xxxxx Fargo Bank, as
lender and agent, and the other lenders thereto, as such Credit Agreement may be
amended from time to time.
"Senior Debt" means the Debt of the Borrower governed by the Senior
Credit Agreement.
"Senior Lenders" means from time to time the Persons who are party to
and lenders under the Senior Credit Agreement.
"Stockholders Equity" has the meaning given to such term under GAAP.
"Subordinated Debt" means Debt of a Person which has been subordinated
to the Obligations in form and substance and upon terms satisfactory to the
Agent and the Required Lenders.
"Subsidiary" means any Person of which or in which the Borrower and its
other Subsidiaries own or control, directly or indirectly, 50% or more of (a)
the combined voting power of all classes having general voting power under
ordinary circumstances to elect a majority of the directors or equivalent body
of such Person, if it is a corporation, (b) the capital interest or profits
interest of such Person, if it is a partnership, limited liability company,
joint
13
venture or similar entity, or (c) the beneficial interest of such Person, if it
is a trust, association or other unincorporated association or organization.
"Tax Expense" means, for any period, all expenses incurred during such
period by the Borrower and its subsidiaries, on a consolidated basis, in
connection with income tax obligations, all as determined in accordance with
GAAP applied consistently.
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas from time to time.
"Xxxxx Fargo Bank" means Xxxxx Fargo Bank Texas, National Association,
a national banking association.
Section 1.2 Other Definitional Provisions. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein", and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless otherwise
specified, all Article and Section references pertain to this Agreement. All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP. Terms used herein that are defined in the UCC, unless
otherwise defined herein, shall have the meanings specified in the UCC.
ARTICLE II
The Loan
Section 2.1 Commitment. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to fund its Commitment to the Borrower
on the Effective Date in the full amount of such Lender's Commitment. The
Borrower may not borrow, repay, and reborrow the Advance. Immediately upon a
Lender fully funding its Commitment, its Commitment shall be automatically
terminated. The portion of the Advance made by each Lender shall be made and
maintained at such Lender's Principal Office.
Section 2.2 The Notes. The obligation of the Borrower to repay the
Advance and interest thereon shall be evidenced by a Note executed by the
Borrower, payable to the order of each Lender, in the principal amount of such
Lender's Commitment and dated the date hereof or such later date as may be
required with respect to transactions contemplated by Section 11.7.
Section 2.3 Repayment of Advance. To the extent not otherwise required
to be paid earlier as provided herein, the principal amount of the Advance shall
be repaid on the Maturity Date.
Section 2.4 Interest. The unpaid principal amount of the Advance shall
bear interest prior to maturity at the lesser of (a) the Maximum Rate or (b) the
Facility Rate. Accrued and
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unpaid interest on the Advance shall be due and payable (a) on each Payment Date
and (b) on the Maturity Date.
Notwithstanding the foregoing, after an Event of Default and during any
continuance thereof, at the Agent's election or at the request of the Required
Lenders, the Obligations shall bear interest at a rate per annum equal to the
Default Rate. Such interest shall be payable on the earlier of demand or the
Maturity Date, as appropriate, and shall accrue until the earlier of (i) waiver
or cure of the applicable Event of Default, (ii) agreement by the Required
Lenders to rescind the charging of interest at the Default Rate, or (iii)
payment in full of the Obligations. The Lenders shall not be required to
accelerate the maturity of the Advance or to exercise any other rights or
remedies under the Loan Documents.
Section 2.5 Use of Proceeds. The proceeds of the Advance shall be used
by the Borrower (a) to refinance certain existing Debt, and (b) for general
corporate purposes (including the financing, in part, of the IHI Merger and
payment of post-closing expenses in connection therewith) in the ordinary course
of business.
Section 2.6 Funding Procedure. On the Effective Date, the Agent shall
notify each Lender of the effectiveness of this Agreement. Promptly thereafter,
each Lender will make available to the Lender at the Principal Office in
immediately available funds, for the account of the Borrower, the full amount of
its Commitment. After the Agent's receipt of such funds and subject to the other
terms and conditions of this Agreement, the Agent will make the Advance
available to the Borrower by either (i) depositing the same, in immediately
available funds, in an account of the Borrower (designated by the Borrower)
maintained with Xxxxx Fargo Bank at Xxxxx Fargo Bank's Principal Office, or (ii)
transmitting the funds by wire transfer according to instructions provided by
the Borrower.
Section 2.7 Method of Payment. All payments of principal, interest, and
other amounts to be made by the Borrower under this Agreement and the other Loan
Documents shall be made to the Agent at its Principal Office for the account of
each Lender's Principal Office in Dollars and in immediately available funds,
without setoff, deduction, or counterclaim, not later than 11:00 A.M., Houston,
Texas time on the date on which such payment shall become due (each such payment
made after such time on such due date to be deemed to have been made on the next
succeeding Business Day). The Borrower shall, at the time of making each such
payment, specify to the Agent the sums payable by the Borrower under this
Agreement and the other Loan Documents to which such payment is to be applied
(and in the event that the Borrower fails to so specify, or if an Event of
Default has occurred and is continuing, the Agent may apply such payment to the
Obligations in such order and manner as it may elect in its sole discretion,
subject to Section 2.10 hereof). Each payment received by the Agent under this
Agreement or any other Loan Document for the account of a Lender shall be paid
promptly to such Lender, in immediately available funds, for the account of such
Lender's Principal Office. Whenever any payment under this Agreement or any
other Loan Document shall be stated to be due on a day that is not a Business
Day, such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of the
payment of interest and commitment fee, as the case may be.
15
Section 2.8 Voluntary Prepayment. The Borrower may prepay the Advance
in whole at any time or from time to time in part without premium or penalty.
Section 2.9 Mandatory Prepayment.
(a) At any time after the Senior Debt is repaid in full, the
Senior Lenders have no obligations to make further loans to the
Borrower pursuant to the Senior Credit Agreement and all letters of
credit issued pursuant to the Senior Credit Agreement have been cash
secured on a dollar for dollar basis, promptly upon receipt of the Net
Cash Proceeds from any Asset Sale or sale/leaseback transaction with
respect to the Borrower's or its Subsidiaries' motor vehicles, or
receipt of any insurance proceeds with respect to properties or assets
of the Borrower or any of its Subsidiaries, the Borrower shall prepay
the Advance in accordance with Section 2.9(e) in an amount equal to
100% of the amount by which aggregate Net Cash Proceeds received from
such Asset Sales or insurance proceeds during any twelve month period
exceeds $250,000, and 100% of the amount of Net Cash Proceeds received
from any such sale/leaseback transaction.
(b) At any time after the Senior Debt is repaid in full, the
Senior Lenders have no obligations to make further loans to the
Borrower pursuant to the Senior Credit Agreement and all letters of
credit issued pursuant to the Senior Credit Agreement have been cash
secured on a dollar for dollar basis, promptly upon receipt of Net Cash
Proceeds from the issuance of Institutional Debt or Subordinated Debt
(other than the Energy Capital Subordinated Debt) by Borrower or any of
its Subsidiaries, the Borrower shall prepay the Advance in accordance
with Section 2.9(e) in an amount equal to 100% of the amount by which
aggregate Net Cash Proceeds received from such issuances during any
twelve month period exceeds $250,000.
(c) At any time after the Senior Debt is repaid in full, the
Senior Lenders have no obligations to make further loans to the
Borrower pursuant to the Senior Credit Agreement and all letters of
credit issued pursuant to the Senior Credit Agreement have been cash
secured on a dollar for dollar basis, promptly upon receipt of Net Cash
Proceeds from the issuance of Capital Stock by Borrower or any of its
Subsidiaries, the Borrower shall prepay the Advance in accordance with
Section 2.9(e) in an amount equal to 100% of the amount by which
aggregate Net Cash Proceeds received from such issuances during any
twelve month period exceeds $250,000.
(d) At any time after the Senior Debt is repaid in full, the
Senior Lenders have no obligations to make further loans to the
Borrower pursuant to the Senior Credit Agreement and all letters of
credit issued pursuant to the Senior Credit Agreement have been cash
secured on a dollar for dollar basis, and commencing on March 31, 2003
and on each March 31 thereafter, the Borrower shall prepay the Advance
in accordance with Section 2.9(e) in an amount equal to 50% of Excess
Cash Flow, if any, for the Fiscal Year ending immediately preceding
each such March 31 so long as the Funded Debt to EBITDA Ratio for such
Fiscal Year is 2.25 to 1.00 or greater.
16
(e) Any prepayment made under Sections 2.9(a), (b), (c) and
(d) shall (i) be applied first to accrued interest and the remainder to
principal and (ii) not be subject to any minimum payment provisions
contained in this Agreement.
Section 2.10 Pro Rata Treatment. Each payment and prepayment of
principal of or interest on the Advance by the Borrower shall be made to the
Agent for the account of the Lenders pro rata in accordance with the respective
unpaid principal amounts of the Advance.
Section 2.11 Non-Receipt of Funds by the Agent. Unless the Agent shall
have been notified by the Borrower prior to the date on which the Borrower is to
make a payment to the Agent for the account of one or more of the Lenders (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Borrower does not intend to make the Required
Payment to the Agent, the Agent may assume that the Required Payment has been
made and may, in reliance upon such assumption (but shall not be required to),
make the amount thereof available to the intended Lender on such date and, if
the Borrower has not in fact made the Required Payment to the Agent, the
recipient of such payment shall, on demand, pay to the Agent the amount made
available to it together with interest thereon in respect of the period
commencing on the date such amount was so made available by the Agent until the
date the Agent recovers such amount at a rate per annum equal to the Federal
Funds Rate for such period.
Section 2.12 Withholding Tax Exemption. Each Lender that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to the Borrower and the Agent two duly completed
copies of Form W-8BEN or W-8ECI, certifying in either case that such Lender is
entitled to receive payments from the Borrower under any Loan Document without
deduction or withholding of any United States federal income taxes. Each Lender
which so delivers a Form W-8BEN or W-8ECI further undertakes to deliver to the
Borrower and the Agent two additional copies of such form (or a successor form)
on or before the date such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form so delivered
by it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by the Borrower or the Agent, in each case certifying that
such Lender is entitled to receive payments from the Borrower under any Loan
Document without deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change in treaty, law
or regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender advises the Borrower and the Agent that it is not
capable of receiving such payments without any deduction or withholding of
United States federal income tax. Notwithstanding any provisions of this
agreement to the contrary, the Borrower shall make payments net of, and after
deductions for, taxes and shall not be required to increase any such amount
payable to any non-U.S. Lender that fails to comply with this section.
Section 2.13 Computation of Interest. Interest on the Advance and all
other amounts payable by the Borrower hereunder shall be computed on the basis
of a year of 360 days and the actual number of days elapsed (including the first
day but excluding the last day) unless such
17
calculation would result in a usurious rate, in which case interest shall be
calculated on the basis of a year of 365 or 366 days, as the case may be.
Section 2.14 Capital Adequacy. If after the date hereof, any adoption
or implementation of any applicable law, rule, or regulation regarding capital
adequacy (including, without limitation, any law, rule, or regulation
implementing the Basle Accord), or any change therein, or any change in the
interpretation or administration thereof by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or compliance by a Lender (or its parent) with any guideline, request,
or directive regarding capital adequacy (whether or not having the force of law)
of any such central bank or other Governmental Authority (including, without
limitation, any guideline or other requirement implementing the Basle Accord),
has or would have the effect of reducing the rate of return on such Lender's (or
its parent's) capital as a consequence of its obligations hereunder or the
transactions contemplated hereby to a level below that which such Lender (or its
parent) could have achieved but for such adoption, implementation, change, or
compliance (taking into consideration such Lender's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, within ten Business Days after demand by such Lender (with a copy
to the Agent), the Borrower agrees to pay to such Lender (or its parent) such
additional amount or amounts as will compensate such Lender for such reduction.
Any such demand shall be accompanied by a certificate of such Lender claiming
compensation under this Section and setting forth in reasonable detail the
calculation of the additional amount or amounts to be paid to it hereunder shall
be conclusive (absent manifest error), provided that the determination thereof
is made on a reasonable basis. In determining such amount or amounts, such
Lender may use any reasonable averaging and attribution methods.
ARTICLE III
Security
Section 3.1 Collateral. To secure full and complete payment and
performance of the Obligations, the Borrower shall execute and deliver or cause
to be executed and delivered the documents described below covering the property
and collateral described in this Section 3.1 each in form and substance
satisfactory to the Agent (which, together with any other property and
collateral which may now or hereafter secure the Obligations or any part
thereof, is sometimes herein called the "Collateral"):
(a) The Borrower and the Domestic Guarantors shall
respectively execute the Pledge and Security Agreement pursuant to
which such Persons shall grant to the Agent for the benefit of the
Lenders a security interest, subordinate in priority to Liens securing
the Senior Debt, in (i) all of such Persons' accounts accessions,
chattel paper, commercial tort claims, commodity accounts, commodity
contracts, deposit accounts, documents, equipment, financial assets,
fixtures, general intangibles, goods, instruments, intellectual
property, inventory, investment property, letters of credit, letter of
credit rights, payment intangibles, licenses, permits, securities,
securities accounts, security entitlements,
18
software, supporting obligations, cash and cash accounts, (ii) 100% of
the Capital Stock issued to such Persons by any Domestic Subsidiary or
Foreign Guarantor, (iii) 65% of the Capital Stock issued to such
Persons by any Foreign Subsidiary that is not a Foreign Guarantor, (iv)
promissory notes made by any Subsidiary payable to the order of the
Borrower or such Domestic Guarantor, and (v) all products and proceeds
related to any of the above.
(b) The Foreign Guarantors shall respectively execute a Pledge
and Security Agreement, pursuant to which such Persons shall, grant to
the Agent for the benefit of the Lenders a security interest,
subordinate in priority to Liens securing the Senior Debt, in (i) all
of such Persons' accounts accessions, chattel paper, commercial tort
claims, commodity accounts, commodity contracts, deposit accounts,
documents, equipment, financial assets, fixtures, general intangibles,
goods, instruments, intellectual property, inventory, investment
property, letters of credit, letter of credit rights, payment
intangibles, licenses, permits, securities, securities accounts,
security entitlements, software, supporting obligations, cash and cash
accounts, (ii) 100% of the Capital Stock issued to such Persons by any
Subsidiary, (iii) promissory notes made by the Borrower or any other
Subsidiary payable to the order of such Foreign Guarantor and (iv) all
products and proceeds related to any of the above.
(c) The Borrower and the Domestic Guarantors shall
respectively execute the Mortgages pursuant to which such Persons
shall, grant to the Agent for the benefit of the Lenders a lien,
subordinate in priority to the Liens securing the Senior Debt, on all
unencumbered real property owned by such Persons.
(d) The Borrower and the Guarantors shall execute or
authenticate and cause to be executed or authenticated, such further
documents and instruments, including without limitation, as applicable,
financing statements under the UCC, as the Agent, in its sole
discretion, deems necessary or desirable to create, preserve, evidence,
and perfect its liens and security interests in the Collateral.
Section 3.2 Setoff. If an Event of Default shall have occurred and is
continuing, the Agent and each Lender are hereby authorized at any time and from
time to time, without notice to the Borrower (any such notice being hereby
expressly waived by the Borrower), to set off and apply any and all deposits
(general, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Agent or such Lender to or for the credit
or the account of the Borrower against any and all of the obligations of the
Borrower now or hereafter existing under this Agreement, the Notes or any other
Loan Document, irrespective of whether or not the Agent or such Lender shall
have made any demand under this Agreement, the Notes or any other Loan Document
and although such Obligations may be unmatured. The Agent and each Lender agree
promptly to notify the Borrower (with a copy to the Agent) after any such setoff
and application, provided that the failure to give such notice shall not affect
the validity of such setoff and application. The rights and remedies of the
Agent and each Lender hereunder are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which the Agent and such
Lender may have.
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ARTICLE IV
Conditions Precedent
This Agreement is not effective, and the obligation of each Lender to
fund its Commitment pursuant to Section 2.1 is subject to the condition
precedent that the Agent shall have received (or waived or postponed in writing
the requirement that it receive or to the extend the same is received by Xxxxx
Fargo Bank as agent for the Senior Lenders as indicated) on or before the day of
the Advance all of the items set forth below in form and substance satisfactory
to the Agent.
(a) Certificate - Borrower. A certificate of the Secretary or
an Assistant Secretary or other appropriate officer of the Borrower
certifying (i) resolutions of the Board of Directors of the Borrower
which authorize the execution, delivery and performance by the Borrower
of this Agreement and the other Loan Documents to which the Borrower is
or is to be a party hereunder, and (ii) the names and signatures of the
officers of the Borrower authorized to sign this Agreement and each of
the other Loan Documents to which the Borrower is or is to be a party
hereunder.
(b) Certificate - Guarantors. A certificate of the Secretary
or an Assistant Secretary or other appropriate officer of each
Guarantor certifying (i) resolutions of the Board of Directors of such
Guarantor or actions of any other body which authorize the execution,
delivery and performance by such Guarantor of the Loan Documents to
which such Guarantor is or is to be a party hereunder, and (ii) the
names and signatures of the officers of such Guarantor authorized to
sign the Loan Documents to which such Guarantor is or is to be a party
hereunder.
(c) Organizational Documents - Borrower and Guarantors. The
articles of incorporation, certificate of limited partnership, articles
of organization, or such other applicable formation documents of the
Borrower and each Guarantor certified by the Secretary of State of
state of formation of such Person, or with respect to Foreign
Guarantors, the appropriate governmental authority of the jurisdiction
of such Person's formation.
(d) Governing Documents - Borrower and Guarantors. The bylaws,
partnership agreement, regulations, management agreement, operating
agreement or such other applicable governing documents of the Borrower
and each Guarantor, certified by the Secretary or an Assistant
Secretary or such other appropriate officer of such Person.
(e) Governmental Certificates - Borrower. Certificates of the
appropriate government officials of the state of organization of the
Borrower as to the existence and good standing of the Borrower.
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(f) Governmental Certificates - Guarantors. Certificates of
the appropriate government officials of the jurisdiction of
organization of each Guarantor as to the existence and good standing of
such Guarantor.
(g) Notes. The Notes executed by the Borrower.
(h) Pledge and Security Agreement. A Pledge and Security
Agreement executed by the Borrower and each Domestic Guarantor.
(i) Financing Statements. UCC or other applicable financing
statements or documents evidencing the Liens granted in the Pledge and
Security Agreements executed by the Borrower and the Guarantors and
covering the Collateral.
(j) UCC Searches. Uniform Commercial Code searches showing all
financing statements on file against the Borrower and the Domestic
Guarantors in such filing offices in which Agent deems necessary or
appropriate to conduct searches.
(k) Guaranty Agreements-Domestic Guarantors. A Guaranty
Agreement - Domestic executed by each Domestic Guarantor.
(l) Intercompany Note. The Intercompany Note executed by the
Borrower and each applicable Subsidiary, accompanied by a fully
executed acknowledgement of the collateral assignment to the Agent of
such Intercompany Note which shall be taken by Xxxxx Fargo Bank as
agent for the Senior Lenders with respect to the senior lien position
securing the Senior Debt.
(m) Landlord Waivers. Landlord lien waivers or subordinations,
as the case may be, with respect to each location of equipment and
inventory of Borrower and the Guarantors which is leased by Borrower or
any such Guarantor and for which a landlord lien waiver or
subordination is required by the Agent in its sole discretion.
(n) Stock Certificates. Stock certificates and blank stock
powers with respect to the Capital Stock being pledged pursuant to the
Pledge and Security Agreements which shall be taken by Xxxxx Fargo Bank
as agent for the Senior Lenders with respect to the senior lien
position securing the Senior Debt.
(o) Motor Vehicle Titles. Original certificates of title with
respect to each motor vehicle owned by the Borrower and its
Subsidiaries as of the date hereof and not encumbered by a Lien granted
to any Person other than the Agent or the Senior Lenders and taken by
Xxxxx Fargo Bank as agent for the Senior Lenders.
(p) Mortgages. With respect to each parcel of real estate
owned by Borrower or any Domestic Guarantor, a Mortgage executed by
Borrower or the applicable Guarantor, and any other party indicated on
such Mortgage as a party for whom execution thereof is provided.
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(q) Real Estate Appraisal. Satisfactory appraisals of the real
estate secured by the Mortgages, other than the appraisal of the real
property located at 000 Xxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxx.
(r) Title Insurance. With respect to each parcel of real
estate secured by the Mortgages, a binding commitment to issue a
Mortgagee Policy of Title Insurance in form and substance satisfactory
to Agent in an amount not less than the appraised value of the
applicable real estate, insuring Agent's Lien on such real estate to be
second in priority to only the lien of the Senior Lenders, which
commitment shall be issued by Commonwealth Land Title Company and
contain such endorsements as Agent may require, and shall be subject
only to such exceptions as Agent shall approve in its sole discretion,
with all costs thereof to be paid by Borrower.
(s) Survey. With respect to each parcel of real estate secured
by the Mortgages, a survey with such certification as the Agent may
require.
(t) Environmental Site Assessment. With respect to each parcel
of real estate secured by the Mortgages, a satisfactory Phase I and/or
Phase II Environmental Site Assessment.
(u) Environmental Verification. Verification from an
independent environmental engineer that estimated environmental clean
up costs on all real estate secured by the Mortgages is approximately
$500,000.
(v) Merger Agreements. Evidence satisfactory to Agent that all
conditions precedent to the closing of the IHI Merger have been
satisfied, except for payment of the portion of the consideration being
provided hereunder, including without limitation (i) certified executed
copies of the Merger Agreement, (ii) evidence that First Reserve has
made the capital injection into the Borrower described in the Merger
Agreement and (iii) the Certificate of Merger issued by the Secretary
of State of the appropriate state or states.
(w) Opinion of Borrower's Counsel. A favorable opinion of
legal counsel to the Borrower and the Guarantors in such form as the
Agent may request, including without limitation opinions relating to
the Loan Documents and the Merger Agreements.
(x) Opinion of IHI's Counsel. A favorable opinion of legal
counsel to IHI in such form as the Agent may request, including without
limitation opinions relating to the Merger Agreements, including
language permitting the Agent and the Lenders to rely thereon.
(y) Repayment of Existing Debt and Lien Releases. Such
documentation as the Agent may require to evidence that existing debt
to the parties listed on Schedule 7.1 hereto will be repaid in full on
the date hereof after giving effect to the Advance and the
contemporaneous advances made by the Senior Lenders pursuant to the
Senior Credit
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Agreement, together with UCC-3 Termination Statements executed by such
parties with respect to existing Liens securing such debt.
(z) Asset Sales. Evidence that the Borrower or IHI, as
applicable, has consummated the sale of EPG, Xxxxxx and GHX and
received aggregate cash proceeds from such sales or an assumption of
Debt in connection with such sales of at least $21,500,000, together
with evidence satisfactory to the Agent that the Borrower or IHI, as
applicable, is no longer liable on such assumed Debt.
(aa) Financial Statements. Projected consolidated financial
statements of Borrower and its Subsidiaries after giving effect to the
IHI Merger, including income statements, statements of cash flow, and
balance sheets.
(bb) Insurance Certificates. Certificates showing the
existence of all insurance policies required by Section 6.5, naming the
Agent as loss payee and additional insured.
(cc) Senior Credit Agreement. The Senior Credit Agreement
shall have been executed and delivered by all parties thereto and all
conditions precedent to the effectiveness of the Senior Credit
Agreement and the initial loans thereunder have been satisfied or
waived in writing by Xxxxx Fargo Bank as agent for the Senior Lenders.
(dd) Intercreditor Agreement. The Intercreditor Agreement
executed by the Agent, the Lenders, Xxxxx Fargo Bank as agent for the
Senior Lenders, the Senior Lenders and the Borrower.
(ee) Fees. Payment of all fees payable to Xxxxx Fargo Bank
required by the Fee Letter to be paid on or prior to the Effective
Date.
(ff) No Default. No Default or Event of Default shall have
occurred and be continuing, or would result from the Advance.
(gg) Representations and Warranties. All of the
representations and warranties contained in Article V hereof and in the
other Loan Documents shall be true and correct on and as of the date of
the Advance, as applicable with the same force and effect as if such
representations and warranties had been made on and as of such date
except for those that relate solely to a specific date.
(hh) Additional Documentation. The Agent shall have received
such additional approvals, opinions, or documents as the Agent or its
legal counsel may request.
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ARTICLE V
Representations and Warranties
To induce the Agent and the Lenders to enter into this Agreement, the
Borrower represents and warrants to each such Person that:
Section 5.1 Corporate Existence. The Borrower and each Subsidiary (a)
is a corporation, partnership or limited liability company duly organized,
validly existing, and in good standing to the extent applicable under the laws
of the jurisdiction of its incorporation or organization; (b) has all requisite
organizational power and authority to own its assets and carry on its business
as now being or as proposed to be conducted; and (c) is qualified to do business
in all jurisdictions in which the nature of its business makes such
qualification necessary and where failure to so qualify would have a Material
Adverse Effect. The Borrower and each Guarantor has the corporation, partnership
or limited liability company, as applicable, power and authority to execute,
deliver and perform its obligations under this Agreement and the other Loan
Documents to which it is or may become a party.
Section 5.2 Projections; Financial Statements. All financial
information delivered by the Borrower to the Agent before the date of this
Agreement, including without limitation all projections of the financial
performance of the Borrower after the IHI Merger, has been prepared by the
Borrower in good faith based upon reasonable assumptions consistent with each
other and all facts then known to the Borrower. The Borrower has delivered to
the Agent audited consolidated financial statements of the Borrower and its
Subsidiaries as at and for the fiscal year ended December 31, 2000 and its
unaudited consolidated and consolidating financial statements for the nine month
period ended September 30, 2001. Such financial statements have been prepared in
accordance with GAAP except as expressly noted therein, and fairly present, on a
consolidated basis, the financial condition of the Borrower and its Subsidiaries
as of the respective dates indicated therein and the results of operations for
the respective periods indicated therein. Neither the Borrower nor any of its
Subsidiaries has any material contingent liabilities, liabilities for taxes,
unusual forward or long-term commitments, or unrealized or anticipated losses
from any unfavorable commitments except as referred to or reflected on such
financial statements. Since September 30, 2001, there has been no event,
occurrence or circumstance that has had a Material Adverse Effect.
Section 5.3 Corporate Action: No Breach. The execution, delivery, and
performance by the Borrower and its Subsidiaries of the Loan Documents to which
such Persons are or may become a party and compliance with the terms and
provisions hereof and thereof have been duly authorized by all requisite
organizational action on the part of such Persons and do not (a) violate or
conflict with, or result in a breach of, or require any consent under (i) the
articles of incorporation or bylaws or other organizational documents of such
Persons, (ii) any applicable law, rule, or regulation or any order, writ,
injunction, or decree of any Governmental Authority or arbitrator, or (iii) any
material agreement or instrument to which the Borrower or any of its
Subsidiaries is a party or by which any of them or any of their property is
bound or subject, or (b) constitute a default under any such agreement or
instrument, or result in the creation or
24
imposition of any Lien (except as provided in Article VI) upon any of the
revenues or assets of the Borrower or any Subsidiary.
Section 5.4 Operation of Business. The Borrower and each of its
Subsidiaries possess (and after consummation of the IHI Merger will possess) all
material licenses, permits, franchises, patents, copyrights, trademarks, and
trade names, or rights thereto, material necessary to conduct their respective
businesses substantially as now conducted and as presently proposed to be
conducted, and the Borrower and each of its Subsidiaries are not in violation of
any valid rights of others with respect to any of the foregoing in any respect
that could reasonably be expected to have a Material Adverse Effect.
Section 5.5 Litigation and Judgments. Except as disclosed on Schedule
5.5 hereto, there is no action, suit, investigation, or proceeding before or by
any Governmental Authority or arbitrator pending (in respect of which process
has been served on the Borrower or any of its Subsidiaries) , or to the
knowledge of the President, Chief Executive Officer or any Vice President of the
Borrower, threatened against or affecting the Borrower or any Subsidiary, that
would, if adversely determined, have a Material Adverse Effect. There are no
outstanding judgments against the Borrower or any Subsidiary, except as
disclosed on Schedule 8.5 hereto.
Section 5.6 Rights in Properties: Liens. The Borrower and each
Subsidiary have (and after consummation of the IHI Merger, will have) good and
indefeasible title to or valid leasehold interests in all material respects in
their respective properties and assets, real and personal, including the
properties, assets and leasehold interests reflected in the financial statements
described in Section 5.2, and none of the properties, assets or leasehold
interests of the Borrower or any Subsidiary is subject to any Lien, except as
permitted by Section 7.2.
Section 5.7 Enforceability. This Agreement constitutes, and the other
Loan Documents to which the Borrower and its Subsidiaries are party, when
delivered, shall constitute legal, valid, and binding obligations of the
Borrower and its Subsidiaries as applicable, enforceable against the Borrower
and its Subsidiaries as applicable, in accordance with their respective terms,
except as limited by bankruptcy, insolvency, or other laws of general
application relating to the enforcement of creditors' rights and by general
equitable principles.
Section 5.8 Approvals. No authorization, approval, or consent of, and
no filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by the Borrower
and its Subsidiaries of the Loan Documents to which the Borrower and its
Subsidiaries are or may become a party or the validity or enforceability
thereof, except for filings and recordings in respect of the Liens created
pursuant to Loan Documents and appropriate filings with the SEC.
Section 5.9 Debt. The Borrower and its Subsidiaries have no Debt,
except Debt permitted by Section 7.1.
Section 5.10 Taxes. The Borrower and each Subsidiary have filed all tax
returns (federal, state, local and foreign) required to be filed, including all
income, franchise,
25
employment, property, and sales tax returns, and have paid all of their
respective liabilities for taxes, assessments, governmental charges and other
levies that are due and payable, in each case except for those contested in good
faith by appropriate proceedings and for which appropriate reserves in
accordance with GAAP are being maintained. Except as set forth on Schedule 5.10,
the Borrower knows of no pending investigation of the Borrower or any Subsidiary
by any taxing authority or of any pending but unassessed tax liability of the
Borrower or any Subsidiary.
Section 5.11 Use of Proceeds: Margin Securities. Neither the Borrower
nor any Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations U, or X of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Advance will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying margin stock.
Section 5.12 ERISA. The Borrower and each Subsidiary are in compliance
with all applicable provisions of ERISA and the applicable provisions of the
Code relating thereto. No Reportable Event which is required to be reported to
the PBGC pursuant to Section 4043(b) of ERISA or Prohibited Transaction which
could reasonably be expected to have a Material Adverse Effect has occurred and
is continuing with respect to any Plan. No notice of intent to terminate a Plan
has been filed, nor has any Plan been terminated. No circumstances exist which
constitute grounds entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings. Neither the Borrower nor any ERISA Affiliate (nor any predecessor
to the Borrower or any ERISA Affiliate) has completely or partially withdrawn
from a Multiemployer Plan. The Borrower and each ERISA Affiliate have met their
minimum funding requirements under ERISA with respect to all of their Plans, and
the present value of all vested benefits under each Plan do not exceed the fair
market value of all Plan assets allocable to such benefits, as determined on the
most recent valuation date of the Plan and in accordance with ERISA. Neither the
Borrower nor any ERISA Affiliate has incurred any liability to the PBGC under
ERISA.
Section 5.13 Disclosure. No statement, information, report,
representation, or warranty made by the Borrower or any of its Subsidiaries in
this Agreement or in any other Loan Document or furnished to the Agent or any
Lender in connection with this Agreement or any of the transactions contemplated
hereby (but excluding all projections and proforma financial statements which
shall have been prepared in good faith and based upon reasonable assumptions)
contains any untrue statement of a material fact and all such statements,
information, reports, representations and warranties, taken as a whole, do not
omit to state any material fact necessary to make the statements herein or
therein not materially misleading. There is no fact known to the Borrower or any
of its Subsidiaries which has a Material Adverse Effect, or which could
reasonably be expected to have, in the reasonable judgment of the Borrower, in
the future a Material Adverse Effect, that has not been disclosed in writing to
the Agent.
Section 5.14 Subsidiaries. The Borrower has no Subsidiaries other than
those listed on Schedule 5.14 hereto, and Schedule 5.14 lists the jurisdiction
of organization or incorporation of each Subsidiary and the percentage of the
Borrower's and its Subsidiaries' ownership of the
26
outstanding voting stock or other similar interests of each such Subsidiary. All
of the outstanding Capital Stock of each Subsidiary has been validly issued, is
fully paid, and is nonassessable.
Section 5.15 Agreements. Except as disclosed in SEC filings, neither
the Borrower nor any Guarantor is a party to any indenture, loan, or credit
agreement, or to any lease or other agreement or instrument, or subject to any
charter or corporate restriction which could reasonably be expected to have a
Material Adverse Effect. Neither the Borrower nor any Guarantor is in default in
any respect in the performance, observance, or fulfillment of any of the
obligations, covenants, or conditions contained in any agreement or instrument
material to its business to which it is a party where such default or the effect
thereof could reasonably be expected to result in a Material Adverse Effect.
Section 5.16 Compliance with Laws. Neither the Borrower nor any
Subsidiary is in violation of any law, rule, regulation, order, or decree of any
Governmental Authority or arbitrator except where such Person's failure to do so
could not reasonably be expected to result in a Material Adverse Effect.
Section 5.17 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" within the meaning of , or "controlled by"
an "investment company" within the meaning of, the Investment Company Act of
1940, as amended.
Section 5.18 Public Utility Holding Company Act. Neither the Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or a "public utility"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
Section 5.19 Environmental Matters. Except as disclosed on Schedule
5.19 hereto:
(a) The Borrower, each Subsidiary, and all of their respective
properties, assets, and operations are (and after consummation of the
IHI Merger, will be) in full compliance with all Environmental Laws,
except for occurrences of noncompliance which could not in the
aggregate, reasonably be expected to have a Material Adverse Effect.
The Borrower is not aware of, nor has the Borrower received notice of,
any past, present, or future conditions, events, activities, practices,
or incidents which may interfere with or prevent the compliance or
continued compliance of the Borrower and its Subsidiaries with all
Environmental Laws, except for occurrences of noncompliance which could
not in the aggregate, reasonably be expected to have a Material Adverse
Effect;
(b) The Borrower and each Subsidiary have obtained all
permits, licenses, and authorizations that are required under
applicable Environmental Laws, and all such permits are in effect and
the Borrower and its Subsidiaries are in compliance with all of the
terms and conditions of such permits, except where failure to obtain or
comply with
27
such permits, licenses or authorizations could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect;
(c) No Hazardous Materials exist on, about, or within or have
been used, generated, stored, transported, disposed of on, or Released
from any of the properties or assets of the Borrower or any Subsidiary
except (i) in amounts that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect and (ii) for
dynamite and other explosives for which such Person possesses all
licenses and permits necessary to comply with all Environmental Laws
and other federal, state, local and foreign laws, regulations and
requirements pertaining to the use, possession, disposal, storage or
sale thereof, and such use, possession, disposal, storage or sale
thereof is in compliance with Environmental Laws and such other laws,
regulations and requirements except where failure to obtain or comply
with such licenses or permits or to comply with such laws, regulations
or requirements could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect;
(d) Neither the Borrower nor any of its Subsidiaries nor any
of their respective currently or previously owned or leased properties
or operations is subject to any outstanding or, to the best of its
knowledge, threatened order from or agreement with any Governmental
Authority or other Person or subject to any judicial or docketed
administrative proceeding with respect to (i) failure to comply with
Environmental Laws, (ii) Remedial Action, or (iii) any Environmental
Liabilities arising from a Release or threatened Release, which, in the
aggregate, could reasonably be expected to have a Material Adverse
Effect;
(e) There are no conditions or circumstances associated with
the currently or previously owned or leased properties or operations of
the Borrower or any of its Subsidiaries that could reasonably be
expected to have a Material Adverse Effect;
(f) Neither the Borrower nor any of its Subsidiaries is a
treatment, storage, or disposal facility requiting a permit under the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et. seq.
regulations thereunder or any comparable provision of state law. The
Borrower and its Subsidiaries are in compliance with all applicable
financial responsibility requirements of all Environmental Laws except
where failure to be in such compliance could not reasonably be expected
to have a Material Adverse Effect;
(g) Neither the Borrower nor any of its Subsidiaries has filed
or failed to file any notice required under applicable Environmental
Law reporting a Release, which Release or any aggregation thereof, or
failure to file, could reasonably be expected to have a Material
Adverse Effect; and
(h) To the best of the Borrower's knowledge, no Lien arising
under any Environmental Law has attached to any property or revenues of
the Borrower or its Subsidiaries.
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ARTICLE VI
Affirmative Covenants
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Lender has any commitment to lend
hereunder, the Borrower will perform and observe the following affirmative
covenants:
Section 6.1 Reporting Requirements. The Borrower will furnish the items
set forth below to the Agent and the Lenders.
(a) Annual Financial Statements. As soon as available, but no
later than 90 days after the end of the Borrower's Fiscal Year, the
Borrower's Form 10-K Annual Report, including (i) the consolidated
balance sheets of the Borrower and its Subsidiaries, as of the end of
such Fiscal Year and (ii) the consolidated statements of earnings of
the Borrower and its Subsidiaries and consolidated statements of
changes in shareholders' equity of the Borrower and its Subsidiaries,
and statements of changes in cash flows of the Borrower and its
Subsidiaries as of and through the end of such Fiscal Year, all of
which are prepared in accordance with GAAP, and certified by
independent certified public accountants acceptable to the Agent, whose
opinion shall be in scope and substance in accordance with generally
accepted auditing standards and shall be unqualified. Additionally,
concurrent with delivery of the information described above, the
Borrower shall deliver (A) the unaudited consolidating balance sheets
of the Borrower and its Subsidiaries, as of the end of such Fiscal Year
and (B) the unaudited consolidating statements of earnings of the
Borrower and its Subsidiaries and consolidating statements of changes
in shareholders' equity of the Borrower and its Subsidiaries, and
statements of changes in cash flows of the Borrower and its
Subsidiaries as of and through the end of such Fiscal Year, all of
which are prepared in accordance with GAAP, and certified by the chief
financial officer, chief accounting officer, or another officer of the
Borrower acceptable to the Agent.
(b) Quarterly 10-Q of the Borrower. As soon as available, but
in any event no later than 45 days after the end of each Fiscal Quarter
of the Borrower, the Borrower's Form 10-Q Quarterly Report, including
(i) the consolidated and consolidating balance sheets of the Borrower
and its Subsidiaries, as of the end of such Fiscal Quarter and (ii) the
consolidated and consolidating statements of earnings of the Borrower
and its Subsidiaries in consolidated and consolidating statements of
changes in shareholders' equity of the Borrower and its Subsidiaries,
and statements of changes in cash flow of the Borrower and its
Subsidiaries as of and through the end of such Fiscal Quarter, all of
which are prepared in accordance with GAAP, and certified by the chief
financial officer, chief accounting officer, or another officer of the
Borrower acceptable to the Agent.
(c) Compliance Certificate. Concurrently with the delivery of
the Form 10-K's or Form 1O-Q's, as applicable, referred to in
subsections 6.1(a) and 6.1(b), a Compliance Certificate of the chief
financial officer, the chief accounting officer, the treasurer or the
29
assistant treasurer of the Borrower or another officer of the Borrower
acceptable to the Agent (i) stating, among other things, that no
Default or Event of Default has occurred and is continuing, or if a
Default or Event of Default has occurred and is continuing, a statement
as to the nature thereof and the action which is proposed to be taken
with respect thereto, and (ii) showing in reasonable detail the
calculations demonstrating compliance with Article VIII.
(d) Annual Projected Financial Statements and Capital
Expenditure Projections. As soon as available, but in any event no
later than thirty (30) days after the end of each Fiscal Year of the
Borrower, projected financial statements for the upcoming fiscal year
of the Borrower and its Subsidiaries, including projected Capital
Expenditures, in form and detail satisfactory to the Agent and prepared
under the supervision of the chief financial officer or the chief
accounting officer of the Borrower or another officer of the Borrower
acceptable to the Agent.
(e) Borrowing Base Report. Promptly upon request of the Agent
from time to time, a copy of each borrowing base report delivered to
the agent for the Senior Lenders.
(f) Notice of Litigation. Promptly after the service of
process or notice thereof, notice of all actions, suits, and
proceedings before any Governmental Authority or arbitrator affecting
the Borrower or any Subsidiary which could reasonably be expected to
have a Material Adverse Effect.
(g) Notice of Default. As soon as possible and in any event
within two days after any of the chief executive officer, the chief
financial officer, the chief accounting officer, the treasurer or any
other employee serving in a comparable capacity (regardless of title)
of the Borrower or any Guarantor obtains any knowledge, becomes aware
or should have known through the exercise of prudent business judgment
of the occurrence of any Default, a written notice setting forth the
details of such Default and the action that the Borrower has taken and
proposes to take with respect thereto.
(h) ERISA Reports. Upon the request of the Agent from time to
time copies of all reports, including annual reports, and notices which
the Borrower or any Subsidiary files with or receives from the PBGC,
the U.S. Department of Labor under ERISA or the Internal Revenue
Service under the Code; and as soon as possible and in any event within
five days after the Borrower or any Subsidiary knows or has reason to
know that any Reportable Event which is required to be reported to the
PBGC pursuant to Section 4043 (b) of ERISA or Prohibited Transaction
which could be reasonably expected to have a Material Adverse Effect
has occurred with respect to any Plan or that the PBGC or the Borrower
or any Subsidiary has instituted or will institute proceedings under
Title IV of ERISA to terminate any Plan, a certificate of the chief
financial officer of the Borrower setting forth the details as to such
Reportable Event or Prohibited Transaction or Plan termination and the
action that the Borrower proposes to take with respect thereto.
30
(i) Notice of Material Adverse Change. As soon as possible and
in any event within two days after any of the chief executive officer,
the chief financial officer, the chief accounting officer, the
treasurer or any other employee serving in a comparable capacity
(regardless of title) of the Borrower or any Guarantor obtains any
knowledge, becomes aware or should have known through the exercise of
prudent business judgment of the occurrence thereof, written notice of
any matter that could reasonably be expected to have a Material Adverse
Effect.
(j) XXXXX Filings. Promptly following the filing thereof,
written notice of each proxy statement or other document filed with
XXXXX.
(k) Notice of Actual or Contingent Liabilities. As soon as
possible, and in any event within two Business Days after any of the
chief executive officer, the chief financial officer, the chief
accounting officer, the treasurer or any other employee serving in a
comparable capacity (regardless of title) of the Borrower or any
Guarantor obtains any knowledge, becomes aware or should have known
through the exercise of prudent business judgment of the occurrence
thereof, written notice of any actual or contingent liabilities which,
if resolved adversely to such Person could reasonably be expected to
have a Material Adverse Effect.
(l) Vendor and Customer Information. Promptly upon request of
the Agent from time to time, a current list of account debtors' and
vendors' contact information (names, address, contacts and phone
numbers).
(m) Environmental Review. Concurrent with delivery of the
financial statements described in clause (a) of this Section 6.1, an
environmental operational report with respect to all of real property
leased or owned by the Borrower or any of its Subsidiaries, in form and
detail satisfactory to the Agent and prepared by an environmental
engineer satisfactory to the Agent and the Borrower.
(n) General Information. Within such a time period as Agent
may reasonably request, such additional information and statements,
lists of assets and liabilities, tax returns, financial statements,
reporting statements and any other reports with respect to the
Borrower's or any Subsidiary's financial condition, business operations
and properties as the Agent may reasonably request from time to time.
Section 6.2 Maintenance of Existence: Conduct of Business. Except as
provided in Section 7.3, the Borrower will preserve and maintain, and will cause
each Guarantor to preserve and maintain, its corporate existence and all of its
leases, privileges, licenses, permits, franchises, qualifications, and rights
that are necessary or desirable in the ordinary conduct of its business. The
Borrower will conduct, and will cause each Subsidiary to conduct, its businesses
in an orderly and efficient manner in accordance with good business practices.
Section 6.3 Maintenance of Properties. Subject to Sections 7.3 and 7.6,
the Borrower will maintain, keep, and preserve, and cause each Subsidiary to
maintain, keep, and preserve, in
31
all material respects, all of its properties (tangible and intangible) necessary
in the proper conduct of its business in good working order and condition
(ordinary wear and tear excepted).
Section 6.4 Taxes and Claims. The Borrower will pay or discharge, and
will cause each Subsidiary to pay or discharge, at or before maturity or before
becoming delinquent all material taxes, levies, assessments, and governmental
charges imposed on it or its income or profits or any of its property; provided,
however, that neither the Borrower nor any Subsidiary shall be required to pay
or discharge any tax, levy, assessment, or governmental charge which is being
contested in good faith by appropriate proceedings diligently pursued, and for
which adequate reserves have been established to the extent required by GAAP.
Section 6.5 Insurance. The Borrower will maintain, and will cause each
Subsidiary to maintain, insurance with financially sound and reputable insurance
companies in such amounts and covering such risks as is usually carried by
corporations engaged in similar businesses and owning similar properties in the
same general areas in which the Borrower and its Subsidiaries operate, provided
that in any event the Borrower will maintain and will cause each Subsidiary to
maintain workmen's compensation insurance, property insurance, comprehensive
general liability insurance, and business interruption insurance with respect to
processing centers in accordance with the Borrower's and such Subsidiaries'
current practices reasonably satisfactory to the Agent.
Section 6.6 Inspection Rights. At any reasonable time during business
hours and from time to time, provided that so long as no Event of Default
exists, no more than four collateral audits may be performed annually, the
Borrower will permit, and will cause each Subsidiary to permit, representatives
of the Agent and the Lenders to examine, copy, and make extracts from its books
and records, to visit and inspect its properties, and to discuss its business,
operations, and financial condition with its officers, employees, and
independent certified public accountants.
Section 6.7 Keeping Books and Records. The Borrower will maintain, and
will cause each Subsidiary to maintain, proper books of record and account in
which full, true, and correct entries in conformity with GAAP shall be made of
all dealings and transactions in relation to its business and activities.
Section 6.8 Compliance with Laws. The Borrower will comply, and will
cause each Subsidiary to comply with all applicable laws, rules, regulations,
orders, and decrees of any Governmental Authority or arbitrator if its failure
to comply could reasonably be expected to result in a Material Adverse Effect.
Section 6.9 Compliance with Agreements. The Borrower will comply, and
will cause each Subsidiary to comply with all agreements, contracts, and
instruments binding on it or affecting its properties or business if its failure
to comply could reasonably be expected to result in a Material Adverse Effect.
32
Section 6.10 Further Assurances. The Borrower will, and will cause each
Subsidiary to, execute and deliver such further agreements and instruments and
take such further action as may be requested by the Agent or any Lender to carry
out the provisions and purposes of this Agreement and the other Loan Documents
to create, preserve, and perfect the Liens of the Agent in the Collateral.
Section 6.11 ERISA. The Borrower will comply, and will cause each
Subsidiary to comply, with all minimum funding requirements, and all other
material requirements of ERISA and the applicable provisions of the Code
relating thereto, if applicable, so as not to give rise to any liability
thereunder if its failure to comply could reasonably be expected to result in a
Material Adverse Effect.
Section 6.12 Additional Material Subsidiaries as Guarantors: Additional
Designated Subsidiaries as Guarantors; Execution of Additional Security
Agreements-Guarantors.
(a) The Borrower will cause each Material Subsidiary created
or acquired after the Effective Date to execute a Guaranty
Agreement-Foreign if such Material Subsidiary is a Foreign Subsidiary
(and such Subsidiary qualifies as a Foreign Guarantor) or to execute a
Guaranty Supplement in substantially the form of Exhibit A to the
Guaranty Agreement-Domestic if such Material Subsidiary is a Domestic
Subsidiary. The Borrower will cause each such Material Subsidiary to
deliver such Guaranty Agreement to the Agent.
(b) The Borrower will cause each Subsidiary designated by the
Borrower as a "Domestic Guarantor" or a "Foreign Guarantor" pursuant to
the provisions of the Senior Credit Agreement after the Effective Date
to execute a Guaranty Agreement-Foreign if such Subsidiary is a Foreign
Subsidiary (and such Subsidiary qualifies as a Foreign Guarantor) or to
execute a Guaranty Supplement in substantially the form of Exhibit A to
the Guaranty Agreement-Domestic if such Subsidiary is a Domestic
Subsidiary. The Borrower will cause each such Subsidiary to deliver
such Guaranty Agreement to the Agent.
(c) If any Subsidiary which was not determined to be a
Material Subsidiary on the Effective Date or upon its creation or
acquisition becomes a Material Subsidiary, the Borrower will promptly
give the Agent notice of such event and will cause such Material
Subsidiary to execute and deliver to the Agent a Guaranty
Agreement-Foreign (if such Material Subsidiary is a Foreign Subsidiary
and qualifies as a Foreign Guarantor) or a Guaranty Supplement in
substantially the form of Exhibit A to the Guaranty Agreement-Domestic
(if such Material Subsidiary is a Domestic Subsidiary), unless the
Required Lenders determine that such Material Subsidiary is not to be a
Guarantor.
(d) Contemporaneously with the delivery by any Material
Subsidiary of a Guaranty Agreement pursuant to paragraph (a) of this
Section 6.12, such Material Subsidiary will execute and deliver to the
Agent (i) a Pledge and Security Agreement if such Material Subsidiary
is a Foreign Subsidiary, (ii) a Security Agreement Supplement
33
and substantially the form of Exhibit G to the Pledge and Security
Agreement if such Material Subsidiary is a Domestic Subsidiary, and
(iii) uniform commercial code or other applicable financing statements
or documents with respect to security interest granted by the document
executed in connection with clause (i) or (ii) of this Section 6.12(d),
as applicable.
(e) Contemporaneously with the delivery by any Subsidiary of a
Guaranty Agreement pursuant to paragraph (b) of this Section 6.12, such
Subsidiary will execute and deliver to the Agent (i) a Pledge and
Security Agreement if such Subsidiary is a Foreign Subsidiary, (ii) a
Security Agreement Supplement and substantially the form of Exhibit G
to the Pledge and Security Agreement if such Subsidiary is a Domestic
Subsidiary, and (iii) uniform commercial code or other applicable
financing statements or documents with respect to security interest
granted by the document executed in connection with clause (i) or (ii)
of this Section 6.12(e), as applicable.
Section 6.13 Continuity of Operations. Subject to Sections 7.3 and 7.6,
the Borrower will continue to conduct, and will cause each of the Guarantors to
continue to conduct, its primary businesses as conducted as of the Effective
Date and to continue its operations in such businesses.
Section 6.14 Intercompany Note. Except as otherwise provided by Section
7.1, all loans and other advances made by the Borrower or any of its
Subsidiaries to Borrower or any of Borrower's other Subsidiaries shall be
evidenced by the Intercompany Note.
Section 6.15 Additional Appraisals. The Borrower shall promptly pay,
upon demand, the costs and expenses associated with any appraisal on machinery,
equipment, real property and other fixed assets of Borrower and its
Subsidiaries, which appraisals may be required by the Agent in its sole
discretion no more frequently than once during each Fiscal Year.
ARTICLE VII
Negative Covenants
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Lender has any commitment to lend
hereunder, the Borrower will observe the following negative covenants:
Section 7.1 Debt. The Borrower will not incur, create, assume, or
permit to exist, and will not permit any Subsidiary to incur, create, assume, or
permit to exist, any Debt, except:
(a) Debt and Contingent Liabilities pursuant to the Loan
Documents;
(b) unsecured Subordinated Debt and Contingent Liabilities
incurred in connection with a transaction permitted by Section
7.3(d)(iv)(A) in an aggregate principal
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amount (together with the principal amount of any Debt incurred
pursuant to clause (d) of this Section 7.1 to refinance such Debt) not
to exceed $10,000,000 at any time outstanding;
(c) Existing Debt and Contingent Liabilities described on
Schedule 7.1 hereto;
(d) Extensions, renewals, refundings, amendments or
replacements of Debt permitted by clauses (b) and (c) above provided
that no such extension, renewal, refunding or replacement shall (i) if
such Debt is Subordinated Debt, amend or modify any subordination
provisions, if any, contained in the original Debt so that the Debt, as
extended, renewed or replaced, is no longer Subordinated Debt, (ii)
shorten the fixed maturity of the Debt being refinanced, (iii) increase
the principal amount of the Debt being financed by an amount greater
than the lesser of (A) reasonable fees and expenses incurred in
connection with such refinancing and (B) an amount equal to five
percent (5.00%) of the principal amount of the Debt being refinanced,
or (iv) increase the rate of interest to a rate greater than the
current market rate at the time of the extension, renewal, refunding or
replacement of the original Debt;
(e) Subordinated Debt;
(f) Additional purchase money Debt and Capital Lease
Obligations in an aggregate principal amount not to exceed $1,000,000
at any time outstanding;
(g) Debt of the Borrower to a Guarantor or of a Guarantor to
the Borrower, so long as such Debt is evidenced by the Intercompany
Note and does not exceed the Revolving Credit Commitments (as defined
in the Senior Credit Agreement), in the aggregate, outstanding at any
time;
(h) Debt of the Borrower to a Subsidiary which is not a
Guarantor or of a Subsidiary to another Subsidiary which is not a
Guarantor so long as such Debt is evidenced by the Intercompany Note
and does not exceed $2,000,000, in the aggregate, outstanding at any
time;
(i) Obligations of the Borrower or any Subsidiary under real
estate leases entered into in the ordinary course of business;
(j) Contingent Obligations under any guaranty by the Borrower
or any Subsidiary of obligations as lessee under any lease which is
otherwise permitted under this Agreement;
(k) Debt constituting deposits to secure the performance of
bids, trade contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds and performance bonds
and other obligations of a like nature that are incurred in the
ordinary course of business, not to exceed $2,000,000 in the aggregate
at any time outstanding;
35
(l) indemnities arising under agreements entered into by the
Borrower or any Subsidiary in the ordinary course of business;
(m) Debt arising on account of deferred Taxes, deferred
workers compensation liabilities or deferred employee medical
liabilities; and
(n) Additional Debt other than described in Sections 7.1(a)
through 7.1(m) in an aggregate principal amount not to exceed
$2,500,000 at any time outstanding.
Section 7.2 Limitation on Liens. The Borrower will not incur, create,
assume, or permit to exist, and will not permit any Subsidiary to incur, create,
assume, or permit to exist, any Lien upon any of their respective properties,
assets, or revenues, whether now owned or hereafter acquired, except the
following (herein referred to as "Permitted Liens"):
(a) Liens disclosed on Schedule 7.2 hereto;
(b) Liens in favor of the Agent for the benefit of the
Lenders;
(c) Encumbrances consisting of minor easements, zoning
restrictions, or other restrictions on the use of property that do not
(individually or in the aggregate) materially affect the value of the
assets encumbered thereby or materially impair the ability of the
Borrower or its Subsidiaries to use such assets in their respective
businesses;
(d) Liens for taxes, assessments, or other governmental
charges which are not delinquent for longer than ninety (90) days or
which are being contested in good faith and for which adequate reserves
have been established;
(e) Liens of landlords, tenants, vendors, mechanics,
materialmen, warehousemen, carriers, or other similar statutory Liens
securing obligations that are not delinquent for longer than ninety
(90) days and are incurred in the ordinary course of business or which
are being contested in good faith and for which adequate reserves have
been established;
(f) Liens resulting from good faith deposits to secure
payments of workmen's compensation or other social security programs or
to secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, or contracts (other than for payment of Debt), or
leases made in the ordinary course of business;
(g) Liens incurred in connection with Debt permitted under
Section 7.1(f), so long as such Liens only extend to the assets being
acquired with the proceeds of such Debt;
(h) Liens incurred in connection with the Senior Debt;
(i) Inchoate Liens arising under ERISA;
(j) Rights of set-off or banker's liens created by law in
favor of commercial banks;
36
(k) Liens to be discharged and released on the Effective Date;
and
(l) precautionary UCC filings regarding operating leases
entered into in the ordinary course of business.
Section 7.3 Mergers, Dissolutions, Etc. The Borrower will not, and will
not permit any Subsidiary to, be a party to any merger or consolidation, or
purchase or otherwise acquire all or substantially all of the assets or any
stock of any class of, or any partnership or joint venture interest in, any
other Person, or sell, transfer, convey or lease all or any substantial part of
its assets, or sell or assign with or without recourse any receivables, except
for the following:
(a) the IHI Merger;
(b) any other such merger or consolidation, sale, transfer,
conveyance, lease or assignment of or by any Subsidiary of the Borrower
into the Borrower or into, with or to any other Subsidiary of the
Borrower; provided that (i) if such event involves the Borrower, the
Borrower shall be the surviving corporation, (ii) if such event
involves a Guarantor, a Guarantor shall be the surviving corporation
and (iii) no Default or Event of Default shall exist at such time;
(c) any such purchase or other acquisition by the Borrower of
the assets or stock of any Guarantor or any Subsidiary of the Borrower,
or by any Guarantor or any Subsidiary of the Borrower of the assets or
stock of any Subsidiary of the Borrower;
(d) any such merger or consolidation of the Borrower or a
Subsidiary of the Borrower into, with or to any other Person or any
such purchase or other acquisition by the Borrower or any Subsidiary of
the Borrower of the assets or stock of any other Person where (i)
immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; (ii) the Borrower and its Subsidiaries, taken as a whole,
are in pro forma compliance with all the financial covenants set forth
in Article VIII taking into account such purchase or acquisition; (iii)
such Person (or its board of directors or similar body) has approved
such acquisition or other purchase; and (iv) taking into account and
including all such transactions since the Effective Date, (A) the
aggregate consideration to be paid or Funded Debt incurred (or assumed)
by the Borrower and its Subsidiaries in connection with any single
purchase or acquisition is not greater than 10% of Consolidated
Tangible Net Worth and (B) the aggregate consideration to be paid or
Funded Debt incurred (or assumed) by the Borrower and its Subsidiaries
in connection with all such purchases or acquisitions is not greater
than $20,000,000; and
(e) investments in joint ventures, partnerships and other
entities not exceeding in the aggregate $500,000.
Section 7.4 Loans and Investments. The Borrower will not make, and will
not permit any Subsidiary to make, any advance, loan, extension of credit, or
capital contribution to or
37
investment in, or purchase, or permit any Subsidiary to purchase, any stock,
bonds, notes, debentures or other securities of, any Person, except:
(a) advances or loans to, or investments in, Subsidiaries
(other than the Borrower and the Guarantors) not to exceed $1,000,000;
(b) any bonds or other obligations of the United States of
America which, as to principal and interest, constitute direct
obligations or are guaranteed by the United States of America;
(c) any bonds, debentures, participation certificates, notes
or other obligations of any agency or corporation or instrumentality of
the United States of America, the obligations of which are
unconditionally guaranteed by the United States of America;
(d) interest bearing accounts, interest bearing deposits,
Eurodollar investments, or certificates of deposit issued by or bankers
acceptances drawn or accepted by, banks or trust companies, including
the Agent, organized under the laws of the United States or any state
thereof, but only with institutions whose capital and surplus is in
excess of $500,000,000;
(e) investments described in Section 7.3(e); and
(f) advances or loans to any employee of the Borrower or any
Subsidiary (i) in the ordinary course of business consistent with past
practices for travel and entertainment expenses, relocation costs and
similar purposes of up to $50,000 for any employee and up to $150,000
in the aggregate at any one time outstanding, and (ii) to finance the
exercise of stock options up to $100,000 for any employee and up to
$300,000 in the aggregate at any one time outstanding.
Section 7.5 Transactions With Affiliates. Except as disclosed on
Schedule 10.5, the Borrower will not enter into, and will not permit any
Subsidiary to enter into, any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service, with
any Affiliate of the Borrower or any Subsidiary, except in the ordinary course
of and pursuant to the reasonable requirements of the Borrower's or such
Subsidiary 's business and upon fair and reasonable terms no less favorable to
the Borrower or such Subsidiary than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate of the Borrower or such
Subsidiary; provided that the foregoing shall not prohibit the Borrower or the
Subsidiaries from entering into management contracts with Affiliates upon fair
and reasonable terms in the ordinary course of business or from entering into
transactions permitted by this Agreement.
Section 7.6 Disposition of Assets. Subject to Sections 6.2, 6.3 and
7.3, the Borrower will not sell, lease, assign, transfer, or otherwise dispose
of any of its assets, nor permit any Subsidiary to do so with any of its assets,
except (a) dispositions of inventory in the ordinary course of business, (b)
transfers of condemned property to the Governmental Authority that has
38
condemned such property, (c) transfers of property that has been subject to
casualty, (d) licenses or sublicenses of software in the ordinary course of
business, and (e) dispositions of personal property of the Borrower and the
Subsidiaries made in the best business judgment of the Borrower, if (i) no Event
of Default has occurred and is continuing, (ii) no Event of Default would arise
as a result of any such disposition, and (iii) the aggregate book value of all
such assets disposed of in connection with such dispositions does not exceed
$1,000,000 in any fiscal year.
Section 7.7 Sale and Leaseback. Other than a sale/leaseback arrangement
with respect to all of the Borrower's and its Subsidiaries' motor vehicles, the
Borrower will not enter into, and will not permit any Subsidiary to enter into,
any arrangement or series of arrangements with any Person pursuant to which any
of them leases from such Person or group of Persons real or personal property
that has been or is to be sold or transferred, directly or indirectly, by any of
them to such Person, except that the Borrower and the Subsidiaries may enter
into such arrangements as long as the aggregate book value of the property sold
and which at any time remains subject to a lease does not exceed $1,000,000.
Section 7.8 Nature of Business. The Borrower will not, and will not
permit any Guarantor to, engage in any business other than the businesses in
which they are engaged as of the date hereof and other businesses reasonably
related thereto.
Section 7.9 Environmental Protection. If, as a result thereof, a
Material Adverse Effect could be reasonably be expected to result therefrom, the
Borrower will not, and will not permit any Subsidiary to, (a) use (or permit any
tenant to use) any of their respective properties or assets for the handling,
processing, storage, transportation, or disposal of any Hazardous Material
except in compliance with Environmental Law, (b) generate any Hazardous Material
except in compliance with Environmental Law, (c) conduct any activity that is
likely to cause a Release or threatened Release of any Hazardous Material, or
(d) otherwise conduct any activity or use any of their respective properties or
assets in any manner that is likely to violate in any material respect any
Environmental Law or create any Environmental Liabilities for which the Borrower
or any of its Subsidiaries would be responsible.
Section 7.10 Accounting. The Borrower will not, and will not permit any
of its Subsidiaries to, make any material change (a) in accounting treatment or
reporting practices, except as required or permitted by GAAP, or (b) in tax
reporting treatment, except as required or permitted by law.
Section 7.11 Changes to Subordinated Debt. The Borrower will not agree,
and will not permit any of its Subsidiaries to agree, to any change or amendment
to the terms of any agreement, document or instrument evidencing or executed in
connection with any Subordinated Debt if the effect of such change or amendment
is to: (a) increase the interest rate on such Subordinated Debt, (b) change the
dates upon which payments of principal or interest are due on such Subordinated
Debt other than to extend such dates, (c) change any default or event of default
or covenant other than to delete or make less restrictive any default or
covenant provision therein, or add any covenant with respect to such
Subordinated Debt, (d) change the redemption
39
or prepayment provisions of such Subordinated Debt other than to extend the
dates therefor or to reduce the premiums payable in connection therewith, (e)
grant any security, collateral or guaranty (or additional security, collateral
or guaranty, as the case may be) to secure payment of such Subordinated Debt,
(f) change any of the terms of subordination thereof, or (g) change or amend any
other term if such change or amendment would materially increase the obligations
of the obligor or confer additional material rights to the holder of such
Subordinated Debt in a manner adverse to the Borrower or the Lenders.
ARTICLE VIII
Financial Covenants
Notwithstanding anything herein or any of the other Loan Documents to
the contrary, at any time after the Replacement Financial Covenant Date the
Required Lenders shall at their sole discretion incorporate any or all of the
financial covenants of the Senior Credit Agreement which the Agent (upon
direction of the Required Lenders) notifies the Borrower as being incorporated
in this Agreement as if such financial covenants were still in full force and
effect, and all such financial covenants shall be deemed to be fully
incorporated herein by reference on receipt by the Borrower of notice from the
Agent such financial covenants are then incorporated herein. The Borrower
covenants and agrees that at all times after receipt of such notice the Borrower
will perform or observe all of such financial covenants and all such financial
covenants shall be deemed to be fully incorporated herein, provided that such
financial covenants may be further amended in accordance with this Agreement.
Further, the Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Lender has any commitment to lend
hereunder, the Borrower will observe and perform the following financial
covenants:
Section 8.1 Fixed Charge Coverage Ratio. The Borrower and its
Subsidiaries will at all times maintain, on a consolidated basis, a Fixed Charge
Coverage Ratio of not less than 1.20 to 1.00. The Fixed Charge Coverage Ratio
shall be calculated and tested quarterly as of the last day of each Fiscal
Quarter for the Calculation Period ending on the last day of such Fiscal
Quarter.
Section 8.2 Funded Debt to EBITDA Ratio. The Borrower and its
Subsidiaries will maintain at all times, on a consolidated basis, a Funded Debt
to EBITDA Ratio of not greater than (a) 3.25 to 1.00 from the effective date
through and including December 31, 2002, (b) 3.00 to 1.00 from January 1, 2003
through and including December 31, 2003, and (c) 2.75 to 1.00 at all times
thereafter. The Funded Debt to EBITDA Ratio shall be calculated and tested
quarterly as of the last day of each Fiscal Quarter for the Calculation Period
ending on the last day of such Fiscal Quarter.
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ARTICLE IX
Default
Section 9.1 Events of Default. Each of the following shall be deemed an
"Event of Default":
(a) The Borrower shall fail to pay (I) any interest or
principal portion of the Obligations when due or (ii) any other portion
of the Obligations.
(b) Any representation or warranty made or deemed made by the
Borrower or any Obligated Party (or any of their respective officers)
in any Loan Document or in any certificate, report, notice, or
financial statement furnished at any time in connection with this
Agreement shall be false, misleading, or erroneous in any material
respect when made or deemed to have been made.
(c) The Borrower or any Obligated Party shall fail to perform,
observe, or comply with (i) any covenant, agreement, or term contained
in Sections 6.2, 6.3, 6.4, 6.7, 6.8, 6.9, 6.11, 6.13 and 6.14 of this
Agreement and such failure shall continue for twenty (20) days after
the occurrence thereof, or (ii) any other covenant, agreement, or term
contained in this Agreement or in any other Loan Document.
(d) The Borrower or any Obligated Party shall commence a
voluntary proceeding seeking liquidation, reorganization, or other
relief with respect to itself or its debts under any bankruptcy,
insolvency, or other similar law nor or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian, or other
similar official of it or a substantial part of its property or shall
consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it or shall make a general assignment for
the benefit of creditors or shall generally fail to pay its debts as
they become due or shall take any corporate action to authorize any of
the foregoing.
(e) An involuntary proceeding shall be commenced against the
Borrower or any Obligated Party seeking liquidation, reorganization, or
other relief with respect to it or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian, or other
similar official for its or a substantial part of its property, and
such involuntary proceeding shall remain undismissed and unstayed for a
period of 60 days.
(f) The Borrower or any Obligated Party shall fail to
discharge within a period of thirty (30) days after the commencement
thereof any attachment, sequestration, or similar proceeding or
proceedings involving an aggregate amount in excess of seven and
one-half percent (7.5%) of the Borrower's Consolidated Tangible Net
Worth against any of its assets or properties.
41
(g) A final judgment or judgments for the payment of money in
excess of seven and one-half percent (7.5%) of the Borrower's
Consolidated Tangible Net Worth in the aggregate shall be rendered by a
court or courts against the Borrower, any of its Subsidiaries, or any
Obligated Party and the same shall not be discharged (or provision
shall not be made for such discharge), or a stay of execution thereof
shall not be procured, within thirty (30) days from the date of entry
thereof and the Borrower or the relevant Subsidiary or Obligated Party
shall not, within said period of 30 days, or such longer period during
which execution of the same shall have been stayed, appealed therefrom
and cause the execution thereof to be stayed during such appeal.
(h) The Borrower, any Subsidiary, or any Obligated Party shall
be in default under any agreement, instrument or other document
evidencing or in any way related to any Debt (other than the
Obligations or the Senior Debt) in excess of seven and one-half percent
(7.5%) of the Borrower's Consolidated Tangible Net Worth, which default
permits any holder of such Debt to accelerate the maturity of such Debt
or require all or any portion of such Debt to be prepaid prior to the
stated maturity thereof, whether or not the maturity of such Debt shall
actually have been accelerated or such prepayment shall actually have
been demanded.
(i) The Senior Lenders or the agent for the Senior Lenders
shall have accelerated the maturity of the Senior Debt or required all
or any portion of such Debt be prepaid prior to the stated maturity
thereof.
(j) This Agreement or any other Loan Document shall cease to
be in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested or challenged by
the Borrower, any Subsidiary, any Obligated Party or any of their
respective shareholders, or the Borrower or any Obligated Party shall
deny that it has any further liability or obligation under any of the
Loan Documents, or any lien or security interest created by the Loan
Documents shall for any reason cease to be a valid, first priority
perfected security interest in and lien upon any of the Collateral
purported to be covered thereby.
(k) The Borrower, any of its Subsidiaries, or any Obligated
Party, or any of their properties, revenues, or assets, shall become
subject to an order of forfeiture, seizure, or divestiture and the same
shall not have been discharged within thirty (30) days from the date of
entry thereof.
(l) A Change of Control shall have occurred.
Section 9.2 Remedies Upon Default. If any Event of Default shall occur
and be continuing, the Agent may (and if directed by Required Lenders, shall)
without notice terminate any commitment to lend hereunder and declare the
Obligations or any part thereof to be immediately due and payable, and the same
shall thereupon become immediately due and payable, without notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, protest, or other formalities of any
kind, all of
42
which are hereby expressly waived by the Borrower; provided, however, that upon
the occurrence of an Event of Default under Section 9.1 (d) or Section 9.1(e),
any commitment of the lenders to lend hereunder shall automatically terminate,
and the Obligations shall become immediately due and payable without notice,
demand, presentment, notice of dishonor, notice of acceleration, notice of
intent to accelerate, notice of intent to demand, protest, or other formalities
of any kind, all of which are hereby expressly waived by the Borrower. Except as
otherwise expressly set forth herein, if any Event of Default shall occur and be
continuing, the Agent may exercise all rights and remedies available to it in
law or in equity, under the Loan Documents, or otherwise.
Section 9.3 Performance by the Agent. If the Borrower shall fail to
perform any covenant or agreement contained in any of the Loan Documents, the
Agent may, at the direction of the Required Lenders, perform or attempt to
perform such covenant or agreement on behalf of the Borrower. In such event, the
Borrower shall, at the request of the Agent, promptly pay any amount expended by
the Agent or the Lenders in connection with such performance or attempted
performance to the Agent, together with interest thereon at the Default Rate
from and including the date of such expenditure to but excluding the date such
expenditure is paid in full. Notwithstanding the foregoing, it is expressly
agreed that neither the Agent nor any Lender shall have any liability or
responsibility for the performance of any obligation of the Borrower under this
Agreement or any other Loan Document except for Agent's gross negligence or
willful misconduct.
ARTICLE X
The Agent
Section 10.1 Appointment, Powers and Immunities. In order to expedite
the various transactions contemplated by this Agreement, the Lenders hereby
irrevocably appoint and authorize Agent to act as their agent hereunder and
under each of the other Loan Documents. The Agent consents to such appointment
and agrees to perform the duties of the Agent as specified herein. The Lenders
authorize and direct the Agent to take such action in their name and on their
behalf under the terms and provisions of the Loan Documents and to exercise such
rights and powers thereunder as are specifically delegated to or required of the
Agent for the Lenders, together with such rights and powers as are reasonably
incidental thereto. The Agent is hereby expressly authorized to act as the Agent
on behalf of the Lenders:
(a) To receive on behalf of each of the Lenders and the Agent
any payment of principal, interest, fees or other amounts paid pursuant
to this Agreement and the Notes, and to distribute to each Lender and
the Agent, or any or some of them its share of all payments so received
as provided in this Agreement;
(b) To receive all documents and items to be furnished under
the Loan Documents;
43
(c) To act as nominee for and on behalf of the Lenders and the
Agent in and under the Loan Documents.
(d) To arrange for the means whereby the funds of the Lenders
are to be made available to the Borrower;
(e) To distribute to the Lenders information, requests,
notices, payments, prepayments, documents and other items received from
the Borrower, the other Obligated Parties, and other Persons;
(f) To execute and deliver to the Borrower, the other
Obligated Parties, and other Persons, all requests, demands, approvals,
notices, and consents received from the Lenders;
(g) To the extent permitted by the Loan Documents, to exercise
on behalf of itself and each Lender all rights and remedies of Lenders
upon the occurrence of any Event of Default;
(h) To enter into the Intercreditor Agreement;
(i) To accept, execute, and deliver any security documents as
the secured party, including, without limitation all financing
statements; and
(j) To take such other actions as may be requested by Required
Lenders.
Neither the Agent nor any of its Affiliates, officers, directors,
employees, attorneys, or agents shall be liable for any action taken or omitted
to be taken by any of them hereunder or otherwise in connection with this
Agreement or any of the other Loan Documents except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
preceding sentence, the Agent (i) may treat the payee of any Note as the holder
thereof until the Agent receives an Assignment and Acceptance signed by such
payee; (ii) shall have no duties or responsibilities except those expressly set
forth in this Agreement and the other Loan Documents, and shall not by reason of
this Agreement or any other Loan Document be a trustee or fiduciary for any
Lender; (iii) shall not be required to initiate any litigation or collection
proceedings hereunder or under any other Loan Document except to the extent
requested by the Required Lenders; (iv) shall not be responsible to the Lenders
for any recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or any certificate or other document
referred to or provided for in, or received by any of them under, this Agreement
or any other Loan Document or for the value, validity, effectiveness,
enforceability, or sufficiency of this Agreement or any other Loan Document or
any other document referred to or provided for herein or therein or for any
failure by any Person to perform any of its obligations hereunder or thereunder;
(v) may consult with legal counsel (including counsel for the Borrower),
independent public accountants, and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants, or experts; and (vi)
shall incur no
44
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate, or other instrument or writing believed by it to be
genuine and signed or sent by the proper party or parties. As to any matters not
expressly provided for by this Agreement, the Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder in accordance with
instructions signed by the Required Lenders, and such instructions of the
Required Lenders and any action taken or failure to act pursuant thereto shall
be binding on all of the Lenders; provided, however, that the Agent shall not be
required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or any other Loan Document or applicable
law.
Section 10.2 Rights of Agent as a Lender. With respect to its
Commitment hereunder, the portion of the Advance funded by it and the Note
issued to it, the Agent in its capacity as a Lender hereunder shall have the
same rights and powers hereunder as any other Lender and may exercise the same
as though it were not acting as the Agent and the term "Lender" or "Lenders"
shall, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent and its Affiliates may (without having to account
therefor to any Lender) accept deposits from, lend money to, act as trustee
under indentures of, provide merchant banking services to, and generally engage
in any kind of business with the Borrower, any of its Subsidiaries, any other
Obligated Party, and any other Person who may do business with or own securities
of the Borrower, any Subsidiary, or any other Obligated Party, all as if it were
not acting as the Agent and without any duty to account therefor to the Lenders.
Section 10.3 Sharing of Payments, Etc. If any Lender shall obtain any
payment of any principal of or interest on the Advance made by it under this
Agreement or payment of any other obligation under the Loan Documents then owed
by the Borrower or any other Obligated Party to such Lender, whether voluntary,
involuntary, through the exercise of any right of setoff, banker's lien,
counterclaim or similar right, or otherwise, in excess of its pro rata share,
such Lender shall promptly purchase from the other Lenders participations in
those portions of the Advance held by them hereunder in such amounts, and make
such other adjustments from time to time as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of the other
Lenders in accordance with its pro rata portion thereof. To such end, all of the
Lenders shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if all or any portion of such excess payment
is thereafter rescinded or must otherwise be restored. The Borrower agrees, to
the fullest extent it may effectively do so under applicable law, that any
Lender so purchasing a participation in those portions of the Advance made by
the other Lenders may exercise all rights of setoff, banker's lien,
counterclaim, or similar rights with respect to such participation as fully as
if such Lender were a direct holder of those portions of the Advance to the
Borrower in the amount of such participation. Nothing contained herein shall
require any Lender to exercise any such right or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Borrower.
Section 10.4 Indemnification. THE LENDERS HEREBY AGREE TO INDEMNIFY THE
AGENT FROM AND HOLD THE AGENT HARMLESS AGAINST (TO THE EXTENT NOT REIMBURSED
UNDER SECTIONS 11.1 AND 11.2, BUT WITHOUT LIMITING THE
45
OBLIGATIONS OF THE BORROWER UNDER SECTIONS 11.1 AND 11.2), RATABLY IN ACCORDANCE
WITH THEIR RESPECTIVE COMMITMENTS, ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES
(INCLUDING ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER
WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE AGENT IN ANY WAY
RELATING TO OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR
OMITTED TO BE TAKEN BY THE AGENT UNDER OR IN RESPECT OF ANY OF THE LOAN
DOCUMENTS; PROVIDED, THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF THE
FOREGOING TO THE EXTENT CAUSED BY THE AGENT'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, IT IS THE EXPRESS INTENTION OF
THE LENDERS THAT THE AGENT SHALL BE INDEMNIFIED HEREUNDER FROM AND HELD HARMLESS
AGAINST ALL OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS'
FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE AGENT.
WITHOUT LIMITING ANY OTHER PROVISION OF THIS SECTION, EACH LENDER AGREES TO
REIMBURSE THE AGENT PROMPTLY UPON DEMAND FOR ITS PRO RATA SHARE (CALCULATED ON
THE BASIS OF THE COMMITMENTS) OF ANY AND ALL OUT-OF-POCKET EXPENSES (INCLUDING
ATTORNEYS' FEES) INCURRED BY THE AGENT IN CONNECTION WITH THE PREPARATION,
EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT OR ENFORCEMENT
(WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL
ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THE LOAN DOCUMENTS, TO
THE EXTENT THAT THE AGENT IS NOT REIMBURSED FOR SUCH EXPENSES BY THE BORROWER.
Section 10.5 Independent Credit Decisions. Each Lender agrees that it
has independently and without reliance on the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower and the Obligated Parties and decision to
enter into this Agreement and that it will, independently and without reliance
upon the Agent or any other Lender, and based upon such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement or
any of the other Loan Documents. The Agent shall not be required to keep itself
informed as to the performance or observance by the Borrower or any Obligated
Party of this Agreement or any other Loan Document or to inspect the properties
or books of the Borrower or any Obligated Party. Except for notices, reports and
other documents and information expressly required to be furnished to the
Lenders by the Agent hereunder or under the other Loan Documents, the Agent
shall not have any duty or responsibility to provide any Lender with any credit
or other financial information concerning the affairs, financial condition or
business of the Borrower or any
46
Obligated Party (or any of their Affiliates) which may come into the possession
of the Agent or any of its Affiliates.
Section 10.6 Several Commitments. The commitments to lend and other
obligations of the Lenders under this Agreement are several. The default by the
Lender in making its portion of the Advance in accordance with its Commitment
hereunder shall not relieve the other Lenders of their obligations under this
Agreement. In the event of any default by any Lender in making its portion of
the Advance, each nondefaulting Lender shall be obligated to make its portion of
the Advance but shall not be obligated to advance the amount which the
defaulting Lender was required to advance hereunder. In no event shall any
Lender be required to advance an amount or amounts which shall in the aggregate
exceed such Lender's Commitment, as applicable. No Lender shall be responsible
for any act or omission of any other Lender.
Section 10.7 Successor Agent. Subject to the appointment and acceptance
of a successor Agent as provided below, the Agent may resign at any time by
giving notice thereof to the Lenders and the Borrower and the Agent may be
removed at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders (with the consent of the Borrower,
with consent will not be unreasonably withheld) will have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders and shall have accepted such appointment within thirty (30)
days after the retiring Agent's giving notice of resignation or the Required
Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent, which shall be a commercial bank
organized under the laws of the United States of America or any State thereof
and having combined capital and surplus of at least $500,000,000.00. Upon the
acceptance of its appointment as successor Agent, such successor Agent shall
thereupon succeed to and become vested with all rights, powers, privileges,
immunities, and duties of the resigning or removed Agent, and the resigning or
removed Agent shall be discharged from its duties and obligations under this
Agreement and the other Loan Documents. After any Agent's resignation or removal
as Agent, the provisions of this Article X shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was the Agent.
ARTICLE XI
Miscellaneous
Section 11.1 Expenses. Borrower hereby agrees to pay on demand (a) all
reasonable costs and expenses of the Agent in connection with the preparation,
negotiation, execution, and delivery of this Agreement and the other Loan
Documents and any and all amendments, modifications, renewals, extensions, and
supplements thereof and thereto, including, without limitation, the reasonable
fees and expenses of legal counsel for the Agent and the Lenders, (b) all
reasonable costs and expenses of the Agent and the Lenders in connection with
any Default and the enforcement of this Agreement or any other Loan Document,
including, without limitation, the reasonable fees and expenses of legal counsel
for the Agent and the Lenders, (c) all transfer, stamp, documentary, or other
similar taxes, assessments, or charges levied by any
47
Governmental Authority in respect of this Agreement or any of the other Loan
Documents, (d) all costs, expenses, assessments, and other charges incurred in
connection with any filing, registration, recording, or perfection of any
security interest or Lien contemplated by this Agreement or any other Loan
Document, and (e) all other reasonable costs and expenses incurred by the Agent
and the Lenders in connection with this Agreement or any other Loan Document,
including, without limitation, all costs, expenses, and other charges incurred
in connection with obtaining audit, or appraisal in respect of the Collateral.
Section 11.2 Indemnification. THE BORROWER SHALL INDEMNIFY EACH OF THE
AGENT AND THE LENDERS AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS
AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENT,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) TO WHICH ANY OF
THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A)
THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR
ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY THE BORROWER OF ANY
REPRESENTATION, WARRANTY, COVENANT, CONTAINED IN ANY OF THE LOAN DOCUMENTS, (D)
THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY
HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF THE PROPERTIES
OR ASSETS OF THE BORROWER OR ANY SUBSIDIARY, OR (E) ANY INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED
INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, RELATING TO ANY OF THE
FOREGOING.
Section 11.3 Limitation of Liability. Neither the Agent or the Lenders
nor any Affiliate, officer, director, employee, attorney, or agent of the Agent
or the Lenders shall have any liability with respect to, and the Borrower hereby
waives, releases, and agrees not to xxx any of them upon, any claim for any
special, indirect, incidental, or consequential damages suffered or incurred by
the Borrower in connection with, arising out of, or in any way related to, this
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Agreement or any of the other Loan Documents. The Borrower
hereby waives, releases, and agrees not to xxx the Agent or the Lenders or any
of such Person's Affiliates, officers, directors, employees, attorneys, or
agents for punitive damages in respect of any claim in connection with, arising
out of, or in any way related to, this Agreement or any of the other Loan
Documents, or any of the transactions contemplated by this Agreement or any of
the other Loan Documents. Nothing contained in this Section shall affect the
rights of the Borrower to collect actual damages awarded to them against any of
the Agents, the Lenders or any Affiliate of any of the foregoing Persons.
Section 11.4 No Duty. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by any of the Agent or the Lenders
shall have the right to act exclusively in the interest of such Persons and
shall have no duty of disclosure, duty of loyalty,
48
duty of care, or other duty or obligation of any type or nature whatsoever to
the Borrower or any of the Borrower's shareholders or any other Person.
Section 11.5 Lender Not Fiduciary. The relationship between the
Borrower, on one hand, and the Agent and the Lenders, on the other hand, is
solely that of debtor and creditor, and no such Person has any fiduciary or
other special relationship with the Borrower, and no term or condition of any of
the Loan Documents shall be construed so as to deem the relationship between the
Borrower and such Persons to be other than that of debtor and creditor.
Section 11.6 No Waiver; Cumulative Remedies. No failure on the part of
any of the Agent or the Lenders to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power, or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided for in this Agreement and the other
Loan Documents are cumulative and not exclusive of any rights and remedies
provided by law.
Section 11.7 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns. The Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Agent
and all of the Lenders. Any Lender may sell participations to one or
more banks or other institutions in or to all or a portion of its
rights and obligations under this Agreement and the other Loan
Documents (including, without limitation, all or a portion of its
Commitment and its Percentage of outstanding principal of the Advance);
provided, however, that (i) such Lender's obligations under this
Agreement and the other Loan Documents (including, without limitation,
its Commitment and its Percentage of outstanding principal of the
Advance) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the Borrower for the performance of such obligations,
(iii) such Lender shall remain the holder of its Note for all purposes
of this Agreement, and (iv) the Borrower shall continue to deal solely
and directly with such Lender in connection with such Lender's rights
and obligations under this Agreement and the other Loan Documents.
Participants have no rights under the Loan Documents except as provided
below. Subject to the following, each Lender may obtain, on behalf of
its participants, the benefits of Section 2.14 with respect to all
participations in its part of the Obligations outstanding from time to
time, so long as Borrower is not obligated to pay any amount in excess
of the amount that would be due to that Lender under Section 2.14
calculated as though no participations have been made. No Lender may
sell any participating interest under which the participant has any
rights to approve any amendment, modification, or waiver of any Loan
Document except as to matters in Section 11.7(a), (b) and (c).
(b) The Borrower and each of the Lenders agree that any Lender
(the "Assigning Lender") may, with the Agent's consent (which consent
shall not be unreasonably
49
withheld) and unless an Event of Default has occurred, the Borrower's
consent, which consent of the Borrower shall not be unreasonably
withheld or delayed, at any time assign to one or more Eligible
Assignees all, or a proportionate part of all, of its rights and
obligations under this Agreement and the other Loan Documents
(including, without limitation, its Commitment and its Percentage of
outstanding principal of the Advance) (each an "Assignee"); provided,
however, that (i) except in the case of an assignment of all of a
Lender's rights and obligations under this Agreement and the other Loan
Documents, the amount of the Commitment and the amount of outstanding
principal of the Advance of the Assigning Lender being assigned
pursuant to each assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall in no
event be less than $5,000,000, and (ii) the parties to each such
assignment shall execute and deliver to the Agent for its acceptance
and recording in the Register (as defined below), an Assignment and
Acceptance, together with the Note subject to such assignment, and a
processing and recordation fee of $5,000 to be paid by the Assignee.
Upon such execution, delivery, acceptance, and recording, from and
after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five Business Days after the
execution thereof, or, if so specified in such Assignment and
Acceptance, the date of acceptance thereof by the Agent, (x) the
assignee thereunder shall be a party hereto as a "Lender" and, to the
extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and under the Loan Documents and (y)
the Lender that is an assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to
such Assignment and Acceptance, relinquish its rights and be released
from its obligations under this Agreement and the other Loan Documents
(and, in the case of an Assignment and Acceptance covering all or the
remaining portion of a Lender's rights and obligations under the Loan
Documents, such Lender shall cease to be a party thereto); provided
that the Obligations of the Borrower under Sections 2.14, 11.1 and 11.2
shall continue to apply to such Lender.
(c) By executing and delivering an Assignment and Acceptance,
the Lender that is an assignor thereunder and the assignee thereunder
confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance,
such Assigning Lender makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties, or
representations made in or in connection with the Loan Documents or the
execution, legality, validity, and enforceability, genuineness,
sufficiency, or value of the Loan Documents or any other instrument or
document furnished pursuant thereto; (ii) such Assigning Lender makes
no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any Obligated
Party or the performance or observance by the Borrower or any Obligated
Party of its obligations under the Loan Documents; (iii) such assignee
confirms that it has received a copy of the other Loan Documents,
together with copies of the current financial statements dated a date
acceptable to such assignee and such other documents and information as
it has
50
deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent or such assignor and
based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not
taking action under this Agreement and the other Loan Documents; (v)
such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Agent to take such action as agent
on its behalf and exercise such powers under the Loan Documents as are
delegated to the Agent by the terms thereof, together with such powers
as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.
(d) The Agent shall maintain at its Principal Office a copy of
each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders
and the Commitment of and principal amount of the Advance owing to,
each Lender from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agent and the Lenders may treat
each Person whose name is recorded in the Register as a Lender
hereunder for all purposes under the Loan Documents. The Register shall
be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an Assigning Lender and assignee representing that it is an Eligible
Assignee, together with any Note subject to such assignment, the Agent
shall, if such Assignment and Acceptance has been completed and is in
the form satisfactory to the Agent in its sole discretion, (i) accept
such Assignment and Acceptance, (ii) record the information contained
therein in the Register, and (iii) give prompt written notice thereof
to the Borrower. Within five (5) Business Days after its receipt of
such notice, the Borrower, at its expense, shall execute and deliver to
the Agent in exchange for the surrendered Note, a new Note to the order
of such Eligible Assignee in an amount equal to the amount of
outstanding principal of the Advance assumed by it pursuant to such
Assignment and Acceptance and, if the Assigning Lender has retained a
portion of its portion of the Advance, a new Note to the order of the
Assigning Lender in an amount equal to the amount of outstanding
principal of the Advance retained by it hereunder (each such promissory
note shall constitute a "Note", as applicable, for purposes of the Loan
Documents). Such new Notes shall be in an aggregate principal amount of
the surrendered Notes, shall be dated the last interest payment date
prior to the effective date of such Assignment and Acceptance, and
shall otherwise be in substantially the form of the Notes initially
issued pursuant hereto with appropriate changes.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section, disclose to the assignee or participant or proposed assignee
or participant, any information relating to the Borrower
51
or its Subsidiaries furnished to such Lender by or on behalf of the
Borrower or its Subsidiaries.
Section 11.8 Survival. All representations and warranties made in this
Agreement or any other Loan Documents or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by any of the Agent or the Lenders or any closing shall affect the
representations and warranties or the right of any such Person to rely upon
them. Without prejudice to the survival of any other obligation of the Borrower
hereunder, the obligations of the Borrower under Sections 2.14, 11.1 and 11.2
shall survive repayment of the Notes and termination of the Lenders' commitments
to lend hereunder.
Section 11.9 ENTIRE AGREEMENT; AMENDMENTS. THIS AGREEMENT, THE NOTES
AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement or the Notes shall in any event be effective unless the same
shall be in writing and signed and delivered by the Borrower and the Required
Lenders, and then any such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No amendment, modification, waiver or consent shall change the Percentage
of any Lender without the consent of such Lender. No amendment, modification,
waiver or consent shall (a) extend or increase the amount of the Commitments,
(b) extend the date for payment of any principal of or interest on the Advance
or any fees or other amounts payable hereunder, (c) reduce the principal amount
of the Advance, the rate of interest thereof or any fees or other amounts
payable hereunder, (d) release a Guaranty Agreement or all or substantially all
of the Collateral, or (e) reduce the aggregate Percentage required to effect an
amendment, modification, waiver or consent without, in each case, the consent of
all Lenders. No provisions of Article X or other provision of this Agreement
affecting the Agent in its capacity as such shall be amended, modified or waived
without the consent of the Agent. If, in connection with any proposed amendment,
waiver or consent (a "Proposed Change"):
(i) requiring the consent of all Lenders, the consent of
Required Lenders is obtained, but the consent of other Lenders is not
obtained (any such Lender whose consent is not obtained as described in
this clause (I) and in clause (ii) below being referred to as a
"Non-Consenting Lender"), or
(ii) requiring the consent of Required Lenders, the consent of
Required Lenders is obtained,
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then, so long as the Agent is not a Non-Consenting Lender, at the
Borrower's request, the Agent or an Eligible Assignee shall have the
right (but not the obligation) with the Agent's approval, to purchase
from the Non-Consenting Lenders' outstanding Percentage of the Advance
for an amount equal to the principal balances thereof and all accrued
interest and fees with respect thereto through the date of sale
pursuant to Assignment and Acceptance(s), without premium or discount.
Section 11.10 Maximum Interest Rate. No provision of this Agreement or
any other Loan Document shall require the payment or the collection of interest
in excess of the maximum amount permitted by applicable law. If any excess of
interest in such respect is hereby provided for, or shall be adjudicated to be
so provided, in any Loan Document or otherwise in connection with this loan
transaction, the provisions of this Section shall govern and prevail and neither
the Borrower nor the sureties, guarantors, successors, or assigns of the
Borrower shall be obligated to pay the excess amount of such interest or any
other excess sum paid for the use, forbearance, or detention of sums loaned
pursuant hereto. In the event any of the Agent or the Lenders ever receives,
collects, or applies as interest any such sum, such amount which would be in
excess of the maximum amount permitted by applicable law shall be applied as a
payment and reduction of the principal of the indebtedness evidenced by the
Notes; and, if the principal of the Notes has been paid in full, any remaining
excess shall forthwith be paid to the Borrower. In determining whether or not
the interest paid or payable exceeds the Maximum Rate, the Borrower and the
Agent and the Lenders shall, to the extent permitted by applicable law, (a)
characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (b) exclude voluntary prepayments and the effects thereof; and
(c) amortize, prorate, allocate, and spread in equal or unequal parts the total
amount of interest throughout the entire contemplated term of the indebtedness
evidenced by the Notes so that interest for the entire term does not exceed the
Maximum Rate.
Section 11.11 Notices. All notices and other communications provided
for in this Agreement and the other Loan Documents to which the Borrower is a
party shall be in writing and may be telecopied (faxed), mailed by certified
mail return receipt requested, or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof;
or, as to any party at such other address as shall be designated by such party
in a notice to the other party given in accordance with this Section. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopy, subject to telephone
confirmation of receipt, or when personally delivered to, in the case of a
mailed notice, when duly deposited in the mails, in each case given or addressed
as aforesaid; provided, however, notices to the Agent pursuant to Article II
shall not be effective until received by the Agent.
Section 11.12 GOVERNING LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AGREEMENT
HAS BEEN ENTERED INTO IN XXXXXX COUNTY, TEXAS, AND IT SHALL BE PERFORMABLE FOR
ALL PURPOSES IN XXXXXX COUNTY, TEXAS. SUBJECT TO SECTION 11.19, ANY ACTION OR
53
PROCEEDING AGAINST THE BORROWER UNDER OR IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN XXXXXX COUNTY, TEXAS.
THE BORROWER HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE
VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY
SUCH COURT IS AN INCONVENIENT FORUM. THE BORROWER AGREES THAT SERVICE OF PROCESS
UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
AT ITS ADDRESS SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 11.11. NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT
THE RIGHT OF THE AGENT OR THE LENDERS TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR, SUBJECT TO SECTION 11.19, SHALL LIMIT THE RIGHT OF SUCH
PERSONS TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR WITH RESPECT
TO ANY OF ITS PROPERTY IN COURTS IN OTHER JURISDICTIONS. SUBJECT TO SECTION
11.19, ANY ACTION OR PROCEEDING BY THE BORROWER AGAINST ANY OF THE AGENT OR THE
LENDERS SHALL BE BROUGHT ONLY IN A COURT LOCATED IN XXXXXX COUNTY, TEXAS.
Section 11.13 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.14 Severability. Any provision of this Agreement by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 11.15 Headings. The headings, captions, and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 11.16 Non-Application of Chapter 346 of Texas Finance Code. The
provisions of Chapter 346 of the Texas Finance Code are specifically declared by
the parties hereto not to be applicable to this Agreement or any of the other
Loan Documents or to the transactions contemplated hereby.
Section 11.17 Construction. The Borrower, the Agent and the Lenders
acknowledge that each of them has had the benefit of legal counsel of its own
choice and has been afforded an opportunity to review this Agreement and the
other Loan Documents with its legal counsel and that this Agreement and the
other Loan Documents shall be construed as if jointly drafted by the Borrower,
the Agent and the Lenders.
Section 11.18 Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the
54
limitations of, another covenant shall not avoid the occurrence of a Default if
such action is taken or such condition exists.
Section 11.19 Waiver of Trial By Jury. To the fullest extent permitted,
by applicable law, the Borrower hereby voluntarily, knowingly, irrevocably and
unconditionally waives any right to have a jury participate in resolving any
dispute (whether based upon contract, tort or otherwise) between or among the
Borrower and any other party to this Agreement arising out of or in any way
related to this Agreement, any other Loan Documents, or any relationship between
any other party to this Agreement and the Borrower. This provision is a material
inducement to the Lenders to provide the financing described in this Agreement.
ARTICLE XII
Arbitration
Section 12.1 Arbitration. Upon the demand of any party, any Dispute
shall be resolved by binding arbitration (except as set forth in Section 12.5
below) in accordance with the terms of this Agreement. A "Dispute" shall mean
any action, dispute, claim or controversy of any kind, whether in contract or
tort, statutory or common law, legal or equitable, now existing or hereafter
arising under or in connection with, or in any way pertaining to, any of the
Loan Documents, or any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related directly or
indirectly to any of the Loan Documents, including without limitation, any of
the foregoing arising in connection with the exercise of any self-help,
ancillary or other remedies pursuant to any of the Loan Documents. Any party may
by summary proceedings bring an action in court to compel arbitration of a
Dispute. Any party who fails or refuses to submit to arbitration following a
lawful demand by any other party shall bear all costs and expenses incurred by
such other party in compelling arbitration of any Dispute.
Section 12.2 Governing Rules. Arbitration proceedings shall be
administered by the American Arbitration Association ("AAA") or such other
administrator as the parties shall mutually agree upon in accordance with the
AAA Commercial Arbitration Rules. All Disputes submitted to arbitration shall be
resolved in accordance with the Federal Arbitration Act (Title 9 of the United
States Code), notwithstanding any conflicting choice of law provision in any of
the Loan Documents. The arbitration shall be conducted at a location in Texas
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. Section 91 or any similar applicable state law.
Section 12.3 No Waiver; Provisional Remedies, Self-Help and
Foreclosure. No provision hereof shall limit the right of any party to exercise
self-help remedies such as setoff,
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foreclosure against or sale of any real or personal property collateral or
security, or to obtain provisional or ancillary remedies, including without
limitation injunctive relief, sequestration, attachment, garnishment or the
appointment of a receiver, from a court of competent jurisdiction before, after
or during the pendency of any arbitration or other proceeding. The exercise of
any such remedy shall not waive the right of any party to compel arbitration
hereunder.
Section 12.4 Arbitrator Qualifications and Powers Awards. Arbitrators
must be active members of the State Bar of Texas with expertise in the
substantive laws applicable to the subject matter of the Dispute. Arbitrators
are empowered to resolve Disputes by summary rulings in response to motions
filed prior to the final arbitration hearing. Arbitrators (i) shall resolve all
Disputes in accordance with the substantive law of the State of Texas, (ii) may
grant any remedy or relief that a court of the State of Texas could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the Texas Rules of Civil Procedure or other applicable law. Any
Dispute in which the amount in controversy is $5,000,000 or less shall be
decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
Section 12.5 Judicial Review. Notwithstanding anything herein to the
contrary, in any arbitration in which the amount in controversy exceeds
$25,000,000, the arbitrators shall be required to make specific, written
findings of fact and conclusions of law. In such arbitrations (i) the
arbitrators shall not have the power to make any award which is not supported by
substantial evidence or which is based on legal error, (ii) an award shall not
be binding upon the parties unless the findings of fact are supported by
substantial evidence and the conclusions of law are not erroneous under the
substantive law of the State of Texas, and (iii) the parties shall have in
addition to the grounds referred to in the Federal Arbitration Act for vacating,
modifying or correcting an award the right to judicial review of (A) whether the
findings of fact rendered by the arbitrators are supported by substantial
evidence, and (B) whether the conclusions of law are erroneous under the
substantive law of the State of Texas. Judgment confirming an award in such a
proceeding may be entered only if a court determines the award is supported by
substantial evidence and not based on legal error under the substantive law of
the State of Texas.
Section 12.6 Miscellaneous. To the maximum extent practicable, the AAA,
the arbitrators and the parties shall take all action required to conclude any
arbitration proceedings within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulations, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provisions most
directly related to the Loan Documents or
56
the subject matter of the Dispute shall control. This arbitration provision
shall survive termination, amendment or expiration of any of the Loan Documents
or any relationship between the parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWER:
T-3 ENERGY SERVICES, INC.
By: /s/ XXXXXXX X. XXXX
----------------------------------------
Xxxxxxx X. Xxxx, Vice President
Address for Notices:
00000 Xxxxxxxxx Xxxxxxx, #000
Xxxxxxx, Xxxxx 00000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
AGENT AND LENDER:
XXXXX FARGO ENERGY CAPITAL, INC.
Commitment: $12,000,000
By: /s/ XXXX XXXXXXX
----------------------------------------
Xxxx Xxxxxxx, Senior Vice President
Address for Notices:
0000 Xxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Fax No.: 000-000-0000
Telephone No.: 000-000-0000
Attention: Xxxx Xxxxxxx
58
