[Execution Copy]
LOAN AND SECURITY AGREEMENT
by and among
ICO WORLDWIDE, INC.
WEDCO, INC.
BAYSHORE INDUSTRIAL, INC.,
as Borrowers
and
ICO, INC.
ICO POLYMERS, INC.
WEDCO TECHNOLOGY, INC.
WEDCO PETROCHEMICAL, INC
ICO TECHNOLOGY, INC.
as Guarantors
and
ICO P&O, INC.
ICO GLOBAL SERVICES, INC.
and
CONGRESS FINANCIAL CORPORATION (SOUTHWEST),
as Lender
and
Dated: As of April 9, 2002
TABLE OF CONTENTS
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SECTION 1. DEFINITIONS..........................................................................................1
SECTION 2. CREDIT FACILITIES...................................................................................23
2.1 Loans...............................................................................................23
2.2 Letter of Credit Accommodations.....................................................................24
SECTION 3. INTEREST AND FEES...................................................................................29
3.1 Interest............................................................................................29
3.2 Fees................................................................................................30
3.3 Changes in Laws and Increased Costs of Loans........................................................31
SECTION 4. CONDITIONS PRECEDENT................................................................................33
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations...........................33
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations...............................35
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST...........................................................36
SECTION 6. COLLECTION AND ADMINISTRATION.......................................................................41
6.1 Borrowers' Loan Accounts............................................................................41
6.2 Statements..........................................................................................41
6.3 Collection of Accounts..............................................................................42
6.4 Payments............................................................................................44
6.5 Authorization to Make Loans.........................................................................44
6.6 Appointment of Agent for Requesting Loans and Receipts of Loans and Statements......................45
SECTION 7. COLLATERAL REPORTING AND COVENANTS..................................................................46
7.1 Collateral Reporting................................................................................46
7.2 Accounts Covenants..................................................................................46
7.3 Inventory Covenants.................................................................................47
7.4 Equipment and Real Property Covenants...............................................................48
7.5 Power of Attorney...................................................................................49
7.6 Right to Cure.......................................................................................49
7.7 Access to Premises..................................................................................50
SECTION 8. REPRESENTATIONS AND WARRANTIES......................................................................50
8.1 Corporate Existence, Power and Authority............................................................50
8.2 Name; State of Organization; Chief Executive Office; Collateral Locations...........................51
8.3 Financial Statements; No Material Adverse Change....................................................51
(i)
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8.4 Priority of Liens; Title to Properties.............................................................52
8.5 Tax Returns........................................................................................52
8.6 Litigation.........................................................................................52
8.7 Compliance with Other Agreements and Applicable Laws...............................................52
8.8 Environmental Compliance...........................................................................53
8.9 Employee Benefits..................................................................................53
8.10 Bank Accounts......................................................................................54
8.11 Intellectual Property..............................................................................54
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.................................................55
8.13 Labor Disputes.....................................................................................55
8.14 Restrictions on Subsidiaries.......................................................................56
8.15 Material Contracts.................................................................................56
8.16 Payable Practices..................................................................................56
8.17 Intercompany Credit Facilities.....................................................................56
8.18 Accuracy and Completeness of Information...........................................................57
8.19 Survival of Warranties; Cumulative.................................................................57
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.................................................................57
9.1 Maintenance of Existence. ........................................................................57
9.2 New Collateral Locations...........................................................................58
9.3 Compliance with Laws, Regulations, Etc.............................................................58
9.4 Payment of Taxes and Claims........................................................................59
9.5 Insurance..........................................................................................60
9.6 Financial Statements and Other Information.........................................................62
9.7 Sale of Assets, Merger, Dissolution, Etc...........................................................63
9.8 Encumbrances.......................................................................................65
9.9 Indebtedness.......................................................................................67
9.10 Loans, Investments, Etc............................................................................73
9.11 Dividends and Redemptions..........................................................................80
9.12 Transactions with Affiliates.......................................................................81
9.13 Compliance with ERISA. ...........................................................................82
9.14 End of Fiscal Years; Fiscal Quarters...............................................................82
9.15 Change in Business.................................................................................82
9.16 Limitation of Restrictions Affecting Subsidiaries..................................................82
9.17 Minimum EBITDA.....................................................................................83
9.18 License Agreements.................................................................................83
9.19 Proceeds of Dividends and Loans....................................................................84
9.20 Costs and Expenses.................................................................................84
9.21 Further Assurances.................................................................................85
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.....................................................................85
10.1 Events of Default..................................................................................85
10.2 Remedies...........................................................................................88
(ii)
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SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW.......................................91
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver..............................91
11.2 Waiver of Notices..................................................................................93
11.3 Amendments and Waivers.............................................................................93
11.4 Waiver of Counterclaims............................................................................93
11.5 Indemnification....................................................................................93
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS...................................................................94
12.1 Term...............................................................................................94
12.2 Interpretative Provisions..........................................................................95
12.3 Notices............................................................................................97
12.4 Partial Invalidity.................................................................................97
12.5 Successors.........................................................................................97
12.6 Entire Agreement...................................................................................98
12.7 Counterparts, Etc..................................................................................98
12.8 Nonapplicability of Article 346 of Texas Finance Code et seq.......................................98
12.9 DTPA WAIVER........................................................................................98
12.10 ORAL AGREEMENTS INEFFECTIVE........................................................................98
(iii)
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit B Form of Compliance Certificate
(i)
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated as of April 9, 2002 is entered
into by and among Congress Financial Corporation (Southwest) , a Texas
corporation ("Lender") and ICO Worldwide, Inc., a Texas corporation
("Worldwide"), Wedco, Inc., a New Jersey corporation ("Wedco") and Bayshore
Industrial Inc., a Texas corporation ("Bayshore", and together with Worldwide
and Wedco, each individually a "Borrower" and collectively, "Borrowers"), ICO,
Inc., a Texas corporation ("Parent"), ICO Polymers, Inc., a Delaware corporation
("Polymers"), Wedco Technology, Inc., a New Jersey corporation ("Wedco Tech")
Wedco Petrochemical, Inc., a Delaware corporation ("Wedco Petro") and ICO
Technology, Inc., a Delaware corporation ("ICO Tech", and together with Parent,
Polymers, Wedco Tech and Wedco Petro each individually a "Guarantor" and
collectively, "Guarantors") and ICO P&O, Inc., a Delaware corporation ("P&O")
and ICO Global Services, Inc., a Delaware corporation ("Global").
W I T N E S S E T H:
WHEREAS, Bank of America Texas, N.A. provided a secured revolving
credit facility to P&O, Borrowers and Guarantors as set forth in the Amended and
Restated Business Loan Agreement (Receivables and Inventory), dated as of
February 21, 1997, by and between the Bank of America Texas, N.A. and P&O and
related agreements, documents and instruments;
WHEREAS, P&O, Borrowers and Guarantors have terminated such secured
revolving credit facility and desire to replace such facility with the secured
revolving credit facility provided for herein;
WHEREAS, P&O, Borrowers and Guarantors have requested that Lender enter
into the financing arrangements with Borrowers provided for herein pursuant to
which Lender may make loans and provide other financial accommodations to
Borrowers; and
WHEREAS, Lender is willing to agree to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean, as to each Borrower and Guarantor, all
present and future rights of such Borrower and Guarantor to payment of a
monetary obligation, whether or not earned by performance, which is not
evidenced by chattel paper or an instrument, (a) for property that has been or
is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for
services
rendered or to be rendered, (c) for a secondary obligation incurred or to be
incurred, or (d) arising out of the use of a credit or charge card or
information contained on or for use with the card.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or loans. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage. As of the date hereof, the Reserve Percentage is .0.
1.3 "Affiliate" shall mean, with respect to a specified Person, any
other Person which directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such Person, and
without limiting the generality of the foregoing, includes (i) any Person which
beneficially owns or holds ten (10%) percent or more of any class of Voting
Stock of such Person or other equity interests in such Person, (a) any Person of
which such Person beneficially owns or holds ten (10%) percent or more of any
class of Voting Stock or in which such Person beneficially owns or holds ten
(10%) percent or more of the equity interests and (b) any director or executive
officer of such Person. For the purposes of this definition, the term "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise.
1.4 "Applicable Margin" shall mean, at any time, as to the Interest
Rate for Prime Rate Loans and the Interest Rate for Eurodollar Rate Loans, the
applicable percentage (on a per annum basis) set forth below if either the
Quarterly Average Excess Availability for the immediately preceding fiscal
quarter is at or within the amounts indicated for such percentage or the
Leverage Ratio as of the last day of the immediately preceding fiscal quarter
(which ratio for this purpose shall be calculated based on the four (4)
immediately preceding fiscal quarters) is at or within the levels indicated for
such percentage:
2
Applicable Applicable
Prime Eurodollar
Excess Availability Leverage Ratio Rate Margin Rate Margin
------------------- -------------- ----------- -----------
(a) $20,000,000 or more Less than 2.00 to 1/4% 2 1/4%
1.00
(b) Greater than or equal to Greater than 2.00 to 1/2% 2 1/2%
$10,000,000 and less than 1.00 but equal to or
$20,000,000 less than 3.00 to
1.00
(c) Less than $10,000,000 Greater than 3.00 to 3/4% 2 3/4%
1.00
Provided, that, (i) the Applicable Margin shall be calculated and established
once each fiscal quarter (commencing with the fiscal quarter ending on or about
June 30, 2002) and shall remain in effect until such date thereafter as it may
be adjusted in accordance with Sections 1.48(b) or 1.48(c) hereof and (ii) the
Applicable Margin shall be the lower percentage set forth above based on the
Quarterly Average Excess Availability or the Leverage Ratio.
1.5 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.6 "Borrower Agent" shall mean ICO P&O, Inc., a Delaware corporation, in
its capacity as Borrower Agent on behalf of itself and the other Borrowers
pursuant to Section 6.6 hereof and its successors and assigns in such capacity.
1.7 "Borrowers" shall mean, collectively, the following (together with
their respective successors and assigns): (a) ICO Worldwide, Inc., a Texas
corporation; (b) Wedco, Inc., a New Jersey corporation; and (c) Bayshore
Industrial, Inc., a Texas corporation; each sometimes being referred to herein
individually as a "Borrower".
1.8 "Borrowing Base" shall mean, at any time, as to each Borrower, the
amount equal to:
(a) the lesser of:
(i) the amount equal to: (A) eighty-five (85%) percent of
the Net Amount of the Eligible Accounts of such Borrower, plus (B) the lesser of
(1) the Inventory Loan Limit for such Borrower or (2) fifty-five (55%) percent
multiplied by Value of the Eligible Inventory of such Borrower, or
(ii) the Loan Limit for such Borrower,
minus
(b) Reserves attributable to such Borrower.
3
For purposes only of applying the Inventory Loan Limit, Lender may treat the
then undrawn amounts of outstanding Letter of Credit Accommodations for the
purpose of purchasing Eligible Inventory as Loans to the extent Lender is in
effect basing the issuance of the Letter of Credit Accommodations on the Value
of the Eligible Inventory being purchased with such Letter of Credit
Accommodations. In determining the actual amounts of such Letter of Credit
Accommodations to be so treated for purposes of the sublimit, the outstanding
Loans and Reserves shall be attributed first to any components of the lending
formulas set forth above that are not subject to such sublimit, before being
attributed to the components of the lending formulas subject to such sublimit.
The amounts of Eligible Inventory of any Borrower shall, at Lender's option, be
determined based on the lesser of the amount of Inventory set forth in the
general ledger of such Borrower or the perpetual inventory record maintained by
such Borrower.
1.9 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York, or the State of North Carolina, or the State
of Texas and a day on which Lender is open for the transaction of business,
except that if a determination of a Business Day shall relate to any Eurodollar
Rate Loans, the term Business Day shall also exclude any day on which banks are
closed for dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
1.10 "Capital Leases" shall mean, as applied to any Person, any lease of
(or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.11 "Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock or partnership, limited liability company or other
equity interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.12 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date ninety (90) days or less issued or directly
and fully guaranteed or insured by the United States of America of any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit or
bankers' acceptances with a maturity of one hundred eighty (180) days or less of
any financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$250,000,000; (c) commercial paper (including variable rate demand notes) with a
maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of any Borrower or Guarantor) organized under the laws of any State of
the United States of America or the District of Columbia and rated at least A-1
by Standard & Poor's Ratings Service, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies,
Inc. or at least P-1 by ▇▇▇▇▇'▇ Investors Service, Inc.; (d) repurchase
obligations with a term of not more than thirty (30) days for underlying
securities of the types described in clause (a) above entered into with any
financial
4
institution having combined capital and surplus and undivided profits of not
less than $250,000,000; (e) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the United States of America or issued by any governmental agency
thereof and backed by the full faith and credit of the United States of America,
in each case maturing within ninety (90) days or less from the date of
acquisition; provided, that, the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of Depository
Institutions with Securities Dealers and Others, as adopted by the Comptroller
of the Currency on October 31, 1985; and (f) investments in money market funds
and mutual funds which invest substantially all of their assets in securities of
the types described in clauses (a) through (e) above.
1.13 "Change of Control" shall mean except as permitted in Section 9
(a) the transfer (in one transaction or a series of transactions) of all or
substantially all of the assets of any Borrower or Guarantor to any Person or
group (as such term is used in Section 13(d)(3) of the Exchange Act); (b) the
liquidation or dissolution of any Borrower or Guarantor or the adoption of a
plan by the stockholders of any Borrower or Guarantor relating to the
dissolution or liquidation of such Borrower or Guarantor; (c) the acquisition by
any Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act), of beneficial ownership, directly or indirectly, of a majority of the
voting power of the total outstanding Voting Stock of any Borrower or Guarantor,
(d) during any period of two (2) consecutive years commencing upon the date of
this Agreement, individuals who at the beginning of such period constituted the
Board of Directors of any Borrower or Guarantor (together with any new directors
whose nomination for election was approved by the stockholders of such Borrower
or Guarantor or was approved by a vote of at least a majority of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of any
Borrower or Guarantor then still in office; or (e) the failure of Parent to own
directly or indirectly one hundred (100%) percent of the voting power of the
total outstanding Voting Stock of any other Borrower or Guarantor.
1.14 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.15 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.16 "Collateral Access Agreement" shall mean an agreement in writing, in
form and substance satisfactory to Lender, from any lessor of premises to any
Borrower or Guarantor, or any other person to whom any Collateral is consigned
or who has custody, control or possession of any such Collateral or is otherwise
the owner or operator of any premises on which any of such Collateral is
located, pursuant to which such lessor, consignee or other person, inter alia,
acknowledges the first priority security interest of Lender in such Collateral,
agrees to waive any and all claims such lessor, consignee or other person may,
at any time, have against such Collateral, whether for processing, storage or
otherwise, and agrees to permit Lender access to, and the right to remain on,
the premises of such lessor, consignee or other person so as to
5
exercise Lender's rights and remedies and otherwise deal with such Collateral
and in the case of any consignee or other person who at any time has custody,
control or possession of any Collateral, acknowledges that it holds and will
hold possession of the Collateral for the benefit of Lender and agrees to follow
all instructions of Lender with respect thereto.
1.17 "Consolidated Net Income" shall mean, with respect to any Person for
any period, the aggregate of the net income (loss) of such Person and its
Subsidiaries, on a consolidated basis, for such period (excluding to the extent
included therein any extraordinary or non-recurring gains and extraordinary
non-cash impairment charges to property, plant and equipment or goodwill) after
deducting all charges which should be deducted before arriving at the net income
(loss) for such period and after deducting the Provision for Taxes for such
period, all as determined in accordance with GAAP; provided, that, (a) the net
income of any Person that is not a wholly- owned Subsidiary or that is accounted
for by the equity method of accounting shall be included only to the extent of
the amount of dividends or distributions paid or payable to such Person or a
wholly-owned Subsidiary of such Person; (b) except to the extent included
pursuant to the foregoing clause, the net income of any Person accrued prior to
the date it becomes a wholly-owned Subsidiary of such Person or is merged into
or consolidated with such Person or any of its wholly-owned Subsidiaries or that
Person's assets are acquired by such Person or by any of its wholly-owned
Subsidiaries shall be excluded; (c) the effect of any change in accounting
principles adopted by such Person or its Subsidiaries after the date hereof
shall be excluded; (d) net income shall exclude interest accruing, but not paid
on indebtedness owing to a Subsidiary or parent corporation of such Person,
which is subordinated in right of payment to the payment in full of the
Obligations, on terms and conditions acceptable to Lender; and (e) the net
income (if positive) of any wholly-owned Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
wholly-owned Subsidiary to such Person or to any other wholly-owned Subsidiary
of such Person is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such wholly-owned Subsidiary shall be
excluded, except that for purposes of Section 9.17 hereof, the net income of a
wholly-owned Foreign Subsidiary may be included notwithstanding any agreement
with a lender to such Subsidiary in effect on the date hereof that may limit or
restrict the payment of dividends or other distributions by such Subsidiary. For
the purposes of this definition, net income excludes any gain and non-cash loss
(but not any cash loss) together with any related Provision for Taxes for such
gain and non-cash loss (but not any cash loss) realized upon the sale or other
disposition of any assets that are not sold in the ordinary course of business
(including, without limitation, dispositions pursuant to sale and leaseback
transactions) or of any capital stock of such Person or a Subsidiary of such
Person and any net income realized as a result of changes in accounting
principles or the application thereof to such Person.
1.18 "Credit Facility" shall mean the Loans and Letter of Credit
Accommodations provided to or for the benefit of any Borrower pursuant to
Sections 2.1 and 2.2 hereof.
1.19 "Default" shall mean an act, condition or event which with notice or
passage of time or both would constitute an Event of Default.
6
1.20 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Lender, by and among Lender, the
Borrower or Guarantor with a deposit account at any bank and the bank at which
such deposit account is at any time maintained which provides that such bank
will comply with instructions originated by Lender directing disposition of the
funds in the deposit account without further consent by such Borrower or
Guarantor and such other terms and conditions as Lender may require, including
as to any such agreement with respect to any Blocked Account, providing that all
items received or deposited in the Blocked Accounts are the property of Lender,
that the bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to time
on deposit therein and that the bank will wire, or otherwise transfer, in
immediately available funds, on a daily basis to the Lender Payment Account all
funds received or deposited into the Blocked Accounts.
1.21 "EBITDA" shall mean, as to any Person, with respect to any period,
an amount equal to: (a) the Consolidated Net Income of such Person for such
period, plus (b) depreciation and amortization for such period (to the extent
deducted in the computation of Consolidated Net Income of such Person), all in
accordance with GAAP, plus (c) Interest Expense for such period (to the extent
deducted in the computation of Consolidated Net Income of such Person), plus (d)
the Provision of Taxes for such period (to the extent deducted in the
computation of Consolidated Net Income of such Person).
1.22 "Eligible Accounts" shall mean Accounts created by a Borrower which
are and continue to be acceptable to Lender based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by such Borrower or rendition of services by such Borrower in
the ordinary course of its business which transactions are completed in
accordance with the terms and provisions contained in any documents related
thereto;
(b) such Accounts are not unpaid more than the earlier of sixty
(60) days after the original due date for them or ninety (90) days after the
date of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained
in Section 7.2(b) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect
to such Accounts is located in the United States of America or Canada (provided,
that, at any time promptly upon Lender's request, such Borrower shall execute
and deliver, or cause to be executed and delivered, such other agreements,
documents and instruments as may be required by Lender to perfect the security
interests of Lender in those Accounts of an account debtor with its chief
executive office
7
or principal place of business in Canada in accordance with the applicable laws
of the Province of Canada in which such chief executive office or principal
place of business is located and take or cause to be taken such other and
further actions as Lender may request to enable Lender as secured party with
respect thereto to collect such Accounts under the applicable Federal or
Provincial laws of Canada) or, at Lender's option, if the chief executive office
and principal place of business of the account debtor with respect to such
Accounts is located other than in the United States of America or Canada, then
if either: (i) the account debtor has delivered to such Borrower an irrevocable
letter of credit issued or confirmed by a bank satisfactory to Lender and
payable only in the United States of America and in U.S. dollars, sufficient to
cover such Account, in form and substance satisfactory to Lender and if required
by Lender, the original of such letter of credit has been delivered to Lender or
Lender's agent and the issuer thereof, and such Borrower has complied with the
terms of Section 5.2(f) hereof with respect to the assignment of the proceeds of
such letter of credit to Lender or naming Lender as transferee beneficiary
thereunder, as Lender may specify, or (ii) such Account is subject to credit
insurance payable to Lender issued by an insurer and on terms and in an amount
acceptable to Lender, or (iii) such Account is otherwise acceptable in all
respects to Lender (subject to such lending formula with respect thereto as
Lender may determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇ (such that
the obligation of the account debtors with respect to such Accounts is
conditioned upon such Borrower's satisfactory completion of any further
performance under the agreement giving rise thereto), ▇▇▇▇ and hold invoices or
retainage invoices, except as to ▇▇▇▇ and hold invoices, if Lender shall have
received an agreement in writing from the account debtor, in form and substance
satisfactory to Lender, confirming the unconditional obligation of the account
debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to any right of setoff or recoupment
against such Accounts (but the portion of the Accounts of such account debtor in
excess of the amount at any time and from time to time owed by such Borrower to
such account debtor or claimed owed by such account debtor may be deemed
Eligible Accounts),
(h) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of such Accounts or reduce the
amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of any Borrower or Guarantor;
8
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition (including, without limitation, any bankruptcy, dissolution,
liquidation, reorganization or similar proceeding);
(m) such Accounts are not evidenced by or arising under any
instrument or chattel paper;
(n) the aggregate amount of such Accounts owing by a single
account debtor (other than Dow Chemical Company and its wholly-owned
subsidiaries) do not constitute more than ten (10%) percent of the aggregate
amount of all otherwise Eligible Accounts and such Accounts owing by Dow
Chemical Company and its wholly-owned subsidiaries do not constitute more than
twenty-five (25%) percent of the aggregate amount of all otherwise Eligible
Accounts (but the portion of the Accounts not in excess of the applicable
percentages may be deemed Eligible Accounts);
(o) such Accounts are not owed by an account debtor who has
Accounts unpaid more than the earlier of sixty (60) days after the original due
date for them or ninety (90) days after the original invoice date for them which
constitute more than fifty (50%) percent of the total Accounts of such account
debtor;
(p) the account debtor is not located in a state requiring the
filing of a Notice of Business Activities Report or similar report in order to
permit such Borrower to seek judicial enforcement in such State of payment of
such Account, unless such Borrower has qualified to do business in such state or
has filed a Notice of Business Activities Report or equivalent report for the
then current year or such failure to file and inability to seek judicial
enforcement is capable of being remedied without any material delay or material
cost;
(q) such Accounts are owed by account debtors whose total
indebtedness to such Borrower does not exceed the credit limit with respect to
such account debtors as determined by such Borrower from time to time, to the
extent such credit limit as to any account debtor is established consistent with
the current practices of such Borrower as of the date hereof and such credit
limit is acceptable to Lender (but the portion of the Accounts not in excess of
such credit limit may be deemed Eligible Accounts); and
(r) such Accounts are owed by account debtors deemed creditworthy
at all times by Lender in good faith.
9
Any Accounts which are not Eligible Accounts shall nevertheless be part of the
Collateral.
1.23 "Eligible Inventory" shall mean, as to each Borrower, Inventory of
such Borrower consisting of finished goods held for resale in the ordinary
course of the business of such Borrower and raw materials for such finished
goods, in each case which are acceptable to Lender based on the criteria set
forth below. In general, Eligible Inventory shall not include (a) work-in-
process; (b) components which are not part of finished goods; (c) spare parts
for equipment; (d) packaging and shipping materials; (e) supplies used or
consumed in such Borrower's business; (f) Inventory at premises other than those
owned and controlled by any Borrower, except any Inventory which would otherwise
be deemed Eligible Inventory that is not located at premises owned and operated
by any Borrower may nevertheless be considered Eligible Inventory: (i) as to
locations which are leased by a Borrower, if Lender shall have received a
Collateral Access Agreement from the owner and lessor of such location, duly
authorized, executed and delivered by such owner and lessor, or if Lender shall
not have received such Collateral Access Agreement (or Lender shall determine to
accept a Collateral Access Agreement that does not include all required
provisions or provisions in the form otherwise required by Lender), Lender may,
at its option, nevertheless consider Inventory at such location to be Eligible
Inventory to the extent Lender shall have established such Reserves in respect
of amounts at any time payable by such Borrower to the owner and lessor thereof
as Lender shall determine, and (ii) as to locations owned and operated by a
third person, (A) if Lender shall have received a Collateral Access Agreement
from such owner and operator with respect to such location, duly authorized,
executed and delivered by such owner and operator or if Lender shall not have
received such Collateral Access Agreement (or Lender shall determine to accept a
Collateral Access Agreement that does not include all required provisions or
provisions in the form otherwise required by Lender), Lender may, at its option,
nevertheless consider Inventory at such location to be Eligible Inventory to the
extent Lender shall have established such Reserves in respect of amounts at any
time payable by such Borrower to the owner and operator thereof as Lender shall
determine, and (B) in addition, if required by Lender, if Lender shall have
received: (1) UCC financing statements between the owner and operator, as
consignee or bailee and such Borrower, as consignor or ▇▇▇▇▇▇, in form and
substance satisfactory to Lender, which are duly assigned to Lender and (2) a
written notice to any lender to the owner and operator of the first priority
security interest in such Inventory of Lender; (g) Inventory subject to a
security interest or lien in favor of any Person other than Lender except those
permitted in this Agreement (but without limiting the right of Lender to
establish any Reserves with respect to amounts secured by such security interest
or lien in favor of any Person even if permitted herein); (h) ▇▇▇▇ and hold
goods; (i) unserviceable, obsolete or slow moving Inventory; (j) Inventory which
is not subject to the first priority, valid and perfected security interest of
Lender; (k) returned, damaged and/or defective Inventory; (l) Inventory
purchased or sold on consignment and (m) Inventory located outside the United
States of America. Any Inventory which is not Eligible Inventory shall
nevertheless be part of the Collateral.
1.24 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower and any
Governmental Authority, (a) relating to pollution and the protection,
10
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
1.25 "Equipment" shall mean, as to each Borrower and Guarantor, all of
such Borrower's and Guarantor's now owned and hereafter acquired equipment,
wherever located, including machinery, data processing and computer equipment
(whether owned or licensed and including embedded software), vehicles, tools,
furniture, fixtures, all attachments, accessions and property now or hereafter
affixed thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located.
1.26 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules, regulations and interpretations
thereunder or related thereto.
1.27 "ERISA Affiliate" shall mean any person required to be aggregated
with any Borrower, any Guarantor or any of its or their respective Subsidiaries
under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.
1.28 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a
Plan; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412 of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the occurrence of a "prohibited
transaction" with respect to which any Borrower, Guarantor or any of its or
their respective Subsidiaries is a "disqualified person" (within the meaning of
Section 4975 of the Code) or with respect to which any Borrower, Guarantor or
any of its or their respective Subsidiaries could otherwise be liable; (f) a
complete or partial withdrawal by any Borrower, Guarantor or any ERISA Affiliate
from a Multiemployer Plan or a cessation of operations which is treated as such
a withdrawal or notification that a Multiemployer
11
Plan is in reorganization; (g) the filing of a notice of intent to terminate,
the treatment of a Plan amendment as a termination under Section 4041 or 4041A
of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty
Corporation to terminate a Plan; (h) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan; (i) the
imposition of any liability under Title IV of ERISA, other than the Pension
Benefit Guaranty Corporation premiums due but not delinquent under Section 4007
of ERISA, upon any Borrower, Guarantor or any ERISA Affiliate in excess of
$1,000,000 and (j) any other event or condition with respect to a Plan including
any Plan subject to Title IV of ERISA maintained, or contributed to, by any
ERISA Affiliate that could reasonably be expected to result in liability of any
Borrower in excess of $1,000,000.
1.29 "Eurodollar Rate" shall mean with respect to the Interest Period for
a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by a Borrower or Borrower Agent on behalf
of such Borrower and approved by Lender) on or about 9:00 a.m. (New York time)
two (2) Business Days prior to the commencement of such Interest Period in
amounts substantially equal to the principal amount of the Eurodollar Rate Loans
requested by and available to such Borrower in accordance with this Agreement,
with a maturity of comparable duration to the Interest Period selected by or on
behalf of a Borrower.
1.30 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.31 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.32 "Excess Availability" shall mean, as to each Borrower, the amount,
as determined by Lender, calculated at any date, equal to: (a) the lesser of:
(i) the Borrowing Base of such Borrower (without regard to any Reserves) and
(ii) the Revolving Loan Limit of such Borrower, minus (b) the sum of: (i) the
amount of all then outstanding and unpaid Obligations of such Borrower (other
than Obligations of such Borrower arising pursuant to any guarantees in favor of
Lender of the Obligations of the other Borrowers), plus (ii) the amount of the
Reserves attributable to such Borrower, plus (iii) the aggregate amount of all
then outstanding and unpaid trade payables and other obligations of such
Borrower which are outstanding more than sixty (60) days past due as of such
time (other than trade payables or other obligations being contested or disputed
by such Borrower in good faith), plus (iv) without duplication, the amount of
checks issued by such Borrower to pay trade payables and other obligations which
are more than sixty (60) days past due as of such time (other than trade
payables or other obligations being contested or disputed by such Borrower in
good faith), but not yet sent.
1.33 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
12
1.34 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements, deposit account control agreements,
investment property control agreements, intercreditor agreements and all other
agreements, documents and instruments now or at any time hereafter executed
and/or delivered by any Borrower or Obligor in connection with this Agreement.
1.35 "Foreign Subsidiaries" shall mean the Subsidiaries of Parent
organized or incorporated under the laws of a jurisdiction outside the United
States of America which have substantially all of their respective assets and
operations outside the United States of America; sometimes being referred to
herein individually as a "Foreign Subsidiary".
1.36 "Funded Debt" shall mean, with respect to any Person, any
Indebtedness of such Person and its Subsidiaries consisting of any liability (a)
in respect of borrowed money (whether or not the recourse of the lender is to
the whole of the assets of such Person or only to a portion thereof) or
evidenced by bonds, notes, debentures or similar instruments; (b) representing
the balance deferred and unpaid of the purchase price of any property or
services (except any such balance that constitutes an account payable to a trade
creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed
by such Person in the ordinary course of business of such Person in connection
with obtaining goods, materials or services that is not overdue by more than
ninety (90) days, unless the trade payable is being contested in good faith);
and (c) all obligations as lessee under leases which have been, or should be, in
accordance with GAAP recorded as Capital Leases.
1.37 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.17 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with those used in
the preparation of the most recent audited financial statements delivered to
Lender prior to the date hereof.
1.38 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
1.39 "Guarantors" shall mean, collectively, the following (together with
their respective successors and assigns): (a) ICO, Inc., a Texas corporation;
(b) ICO Polymers, Inc., a Delaware corporation; (c) Wedco Technology, Inc., a
New Jersey corporation; (d) Wedco Petrochemicals, Inc., a Delaware corporation;
and (e) ICO Technology, Inc., a Delaware corporation; each sometimes being
referred to herein individually as a "Guarantor".
13
1.40 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.41 "Indebtedness" shall mean, with respect to any Person, any
liability, whether or not contingent, (a) in respect of borrowed money (whether
or not the recourse of the lender is to the whole of the assets of such Person
or only to a portion thereof) or evidenced by bonds, notes, debentures or
similar instruments; (b) representing the balance deferred and unpaid of the
purchase price of any property or services (except any such balance that
constitutes an account payable to a trade creditor (whether or not an Affiliate)
created, incurred, assumed or guaranteed by such Person in the ordinary course
of business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition;
(e) all obligations with respect to redeemable stock and redemption or
repurchase obligations under any Capital Stock or other equity securities issued
by such Person; (f) all reimbursement obligations and other liabilities of such
Person with respect to surety bonds (whether bid, performance or otherwise),
letters of credit, banker's acceptances, drafts or similar documents or
instruments issued for such Person's account; (g) all indebtedness of such
Person in respect of indebtedness of another Person for borrowed money or
indebtedness of another Person otherwise described in this definition which is
secured by any consensual lien, security interest, collateral assignment,
conditional sale, mortgage, deed of trust, or other encumbrance on any asset of
such Person, whether or not such obligations, liabilities or indebtedness are
assumed by or are a personal liability of such Person, all as of such time; (h)
all obligations, liabilities and indebtedness of such Person (marked to market)
arising under swap agreements, cap agreements and collar agreements and other
agreements or arrangements designed to protect such person against fluctuations
in interest rates or currency or commodity values; and (i) all obligations owed
by such Person under License Agreements with respect to non-refundable, advance
or minimum guarantee royalty payments.
1.42 "Information Certificate" shall mean the Information Certificates of
Borrowers and Obligors constituting Exhibit A hereto containing material
information with respect to Borrowers and Obligors, their respective businesses
and assets provided by or on behalf of Borrowers and
14
Obligors to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.43 "Intellectual Property" shall mean, as to each Borrower and
Guarantor, such Borrower's and Guarantor's now owned and hereafter arising or
acquired: patents, patent rights, patent applications, copyrights, works which
are the subject matter of copyrights, copyright registrations, trademarks, trade
names, trade styles, trademark and service ▇▇▇▇ applications, and licenses and
rights to use any of the foregoing; all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing; all
rights to ▇▇▇ for past, present and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings, designs,
blueprints, surveys, reports, manuals, and operating standards; goodwill
(including any goodwill associated with any trademark or the license of any
trademark); customer and other lists in whatever form maintained; trade secret
rights, copyright rights, rights in works of authorship, domain names and domain
name registration; software and contract rights relating to computer software
programs, in whatever form created or maintained.
1.44 "Intercompany Credit Facilities" shall mean, collectively, the
credit facilities provided by P&O to Global and Global to each of Borrowers
pursuant to the Intercompany Loan Agreements; sometimes being referred to herein
individually as an "Intercompany Credit Facility".
1.45 "Intercompany Loan Agreements" shall mean, collectively, the
following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, extended or replaced): (a) the $38,440,402
Revolving Intercompany Promissory Note, dated as of April 1, 2002, issued by
Global payable to P&O; (b) the $24,605,500 Revolving Intercompany Promissory
Note, dated as of April1, 2002, issued by Wedco payable to Global; (c) the
$14,236,040 Revolving Intercompany Promissory Note, dated as of April1, 2002,
issued by Bayshore payable to Global; (d) the $25,534,827 Revolving Intercompany
Promissory Note, dated as of April 1, 2002, issued by Worldwide payable to
Global; (e) the Guarantee of Obligations of Wedco, Inc. to Global Services,
Inc., dated as of April 1, 2002, by the other Borrowers, P&O and Guarantors in
favor of Global; (f) the Guarantee of Obligations of Bayshore Industrial, Inc.
to Global Services, Inc., dated as of April 1, 2002, by the other Borrowers, P&O
and Guarantors in favor of Global; (g) the Guarantee of Obligations of ICO
Worldwide, Inc. to Global Services, Inc., dated as of April 1, 2002, by the
other Borrowers, P&O and Guarantors in favor of Global; and (h) all agreements,
documents and instruments related to any of the foregoing.
1.46 "Intercompany Indebtedness" shall mean Indebtedness of P&O to any of
its "Wholly-Owned Restricted Subsidiaries" (as such term is defined in the
Senior Indenture as in effect on the date hereof) and Indebtedness of any
Restricted Subsidiary (as such term is defined in the Senior Indenture as in
effect on the date hereof) of P&O to P&O or any of its Wholly- Owned Restricted
Subsidiaries.
1.47 "Interest Expense" shall mean, for any period, as to any Person, as
determined in accordance with GAAP, the total interest expense of such Person,
whether paid or accrued during
15
such period (including the interest component of Capital Leases for such
period), including, without limitation, discounts in connection with the sale of
any Accounts and bank fees, commissions, discounts and other fees and charges
owed with respect to letters of credit, banker's acceptances or similar
instruments, but excluding interest paid in property other than cash and any
other interest expense not payable in cash.
1.48 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as
Borrower Agent may elect, the exact duration to be determined in accordance with
the customary practice in the applicable Eurodollar Rate market; provided, that,
such Borrower (or Borrower Agent on behalf of such Borrower) may not elect an
Interest Period which will end after the last day of the then-current term of
this Agreement.
1.49 "Interest Rate" shall mean,
(a) Subject to clauses (b) and (c) of this definition below:
(i) as to Prime Rate Loans, a rate equal to
one-quarter (1/4%) percent per annum in excess of the Prime Rate,
(ii) as to Eurodollar Rate Loans, a rate equal to two
and one-quarter (2 1/4%) percent per annum in excess of the Adjusted Eurodollar
Rate (in each case, based on the Eurodollar Rate applicable for the Interest
Period selected by the Borrower requesting such Loan, or Borrower Agent on
behalf of such Borrower, as in effect two (2) Business Days prior to the
commencement of such Interest Period, whether such rate is higher or lower than
any rate previously quoted to Borrower Agent.
(b) Subject to clause (c) of this definition below, effective
as of the first (1st) day of the second month of each fiscal quarter (commencing
with the fiscal quarter ending on or about June 30, 2002), the Interest Rate
payable by each Borrower shall be increased or decreased, as the case may be,
(i) as to Prime Rate Loans, to the rate equal to the Applicable Margin on a per
annum basis in excess of the Prime Rate, and (ii) as to Eurodollar Rate Loans,
to the rate equal to the Applicable Margin on a per annum basis in excess of the
Adjusted Eurodollar Rate.
(c) Notwithstanding anything to the contrary contained in
clauses (a) and (b) of this definition, the Applicable Margin otherwise used to
calculate the Interest Rate for Prime Rate Loans and Eurodollar Rate Loans shall
be the highest percentage set forth in the definition of the term Applicable
Margin for each category of Loans (without regard to the amount of Quarterly
Average Excess Availability or the Leverage Ratio) plus two (2%) percent per
annum, at Lender's option, (i) for the period (A) from and after the effective
date of termination or non-renewal hereof until Lender has received full and
final payment of all outstanding and unpaid Obligations which are not contingent
and cash collateral or letter of credit, as Lender may specify, in the amounts
and on the terms required under Section 12.1 hereof for contingent Obligations
(notwithstanding entry of a judgment against any Borrower or Guarantor) and (B)
from and after the date of the occurrence of an Event of Default and for so long
as such Event of
16
Default is continuing and (ii) on Loans to any Borrower at any time outstanding
in excess of the Borrowing Base of such Borrower or the Loan Limit of such
Borrower (whether or not such excess(es) arise or are made with or without the
knowledge or consent of Lender and whether made before or after an Event of
Default).
1.50 "Inventory" shall mean, as to each Borrower and Guarantor, all of
such Borrower's and Guarantor's now owned and hereafter existing or acquired
goods, wherever located, which (a) are leased by such Borrower or Guarantor as
lessor; (b) are held by such Borrower for sale or lease or to be furnished under
a contract of service; (c) are furnished by such Borrower or Guarantor under a
contract of service; or (d) consist of raw materials, work in process, finished
goods or materials used or consumed in its business.
1.51 "Inventory Loan Limit" shall mean, as to each Borrower, at any
time, the amount equal to $10,000,000 minus the then outstanding principal
amount of Loans to the other Borrowers (and including Letter of Credit
Accommodations for the purpose of purchasing Eligible Inventory as provided in
the definition of the term Borrowing Base) based on Eligible Inventory.
1.52 "Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Lender, by and among Lender, any
Borrower or Guarantor (as the case may be) and any securities intermediary,
commodity intermediary or other person who has custody, control or possession of
any investment property of such Borrower or Guarantor acknowledging that such
securities intermediary, commodity intermediary or other person has custody,
control or possession of such investment property on behalf of Lender, that it
will comply with entitlement orders originated by Lender with respect to such
investment property, or other instructions of Lender, or (as the case may be)
apply any value distributed on account of any commodity contract as directed by
Lender, in each case, without the further consent of such Borrower or Guarantor
and including such other terms and conditions as Lender may require.
1.53 "Lender Payment Account" shall mean account no. 50000 ▇▇▇▇▇▇▇▇ of
Lender at Wachovia Bank, National Association or such other account of Lender as
Lender may from time to time designate to Borrower Agent as the Lender Payment
Account for purposes of this Agreement and the other Financing Agreements.
1.54 "Letter of Credit Accommodations" shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from time
to time either (a) issued or opened by Lender for the account of any Borrower or
Obligor or (b) with respect to which Lender has agreed to indemnify the issuer
or guaranteed to the issuer the performance by any Borrower or Obligor of its
obligations to such issuer; sometimes being referred to herein individually as
"Letter of Credit Accommodation".
1.55 "Leverage Ratio" shall mean, at any time, the ratio of: (a) the
Funded Debt of Parent and its Subsidiaries as of such time (and including for
this purpose, (i) the Indebtedness of Parent evidenced by or arising under the
Senior Notes, (ii) all Funded Debt of Parent and any direct or indirect
Subsidiary of Parent, whether foreign or domestic and (iii) the Obligations) to
17
(b) the EBITDA of Parent and its Subsidiaries for the four (4) immediately
preceding fiscal quarters of such Parent (treated as a single accounting
period). For purposes of calculating the Leverage Ratio the June, 2001
$7,410,000 severance payment, the December, 2001 $1,840,000 litigation charge
and any charges after the date hereof of up to $2,400,000 in the aggregate taken
in connection with the settlement of occupational health claims and any charges
after the date hereof for expenses paid for solely with Capital Stock of Parent
shall not be considered.
1.56 "License Agreements" shall have the meaning set forth in Section
8.11 hereof.
1.57 "Loan Limit" shall mean, as to each Borrower, at any time, the
amount equal to the Maximum Credit minus the then outstanding principal amount
of the Loans and the Letter of Credit Accommodations provided to the other
Borrowers.
1.58 "Loans" shall mean the loans now or hereafter made by or on behalf
of Lender for the account of any Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.59 "Material Adverse Effect" shall mean a material adverse effect on
(a) the financial condition, business, performance or operations of any
Borrower, or (b) the legality, validity or enforceability of this Agreement or
any of the other Financing Agreements; (c) the legality, validity,
enforceability, perfection or priority of the security interests and liens of
Lender upon the Collateral; (d) the Collateral of any Borrower or its value;
(e) the ability of any Borrower to repay the Obligations or of any Borrower to
perform its obligations under this Agreement or any of the other Financing
Agreements as and when to be performed; or (f) the ability of Lender to enforce
the Obligations or realize upon the Collateral or otherwise with respect to the
rights and remedies of Lender under this Agreement or any of the other Financing
Agreements.
1.60 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of any Borrower or
Guarantor involving monetary liability of or to any Person in an amount in
excess of $5,000,000 in any fiscal year and (b) any other contract or other
agreement (other than the Financing Agreements), whether written or oral, to
which any Borrower or Guarantor is a party as to which the breach,
nonperformance, cancellation or failure to renew by any party thereto would have
a Material Adverse Effect.
1.61 "Maturity Date" shall have the meaning set forth in Section 12.1
hereof.
1.62 "Maximum Credit" shall mean the amount of $25,000,000.
1.63 "Maximum Interest Rate" shall mean the maximum non-usurious rate
of interest under applicable Federal or State law as in effect from time to time
that may be contracted for, taken, reserved, charged or received in respect of
any of the Obligations.
1.64 "Mortgage" shall mean the Deed of Trust and Security Agreement,
dated of even date herewith, by Worldwide in favor of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ as trustee
on behalf of Lender with
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respect to the ▇▇▇▇▇▇▇ Road Facility and related assets, as the same now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.65 "Multiemployer Plan" shall mean a "multi-employer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by any Borrower,
Guarantor or any ERISA Affiliate.
1.66 "Net Amount of Eligible Accounts" shall mean, as to any Borrower,
the gross amount of the Eligible Accounts of such Borrower less (a) sales,
excise or similar taxes included in the amount thereof and (b) returns,
discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed with respect thereto.
1.67 "Net Recovery Percentage" shall mean the fraction, expressed as a
percentage, (a) the numerator of which is the amount equal to the amount of the
recovery in respect of the Inventory at such time a "net orderly liquidation
value" basis as set forth in the most recent acceptable appraisal of Inventory
received by Lender in accordance with Section 7.3, net of operating expenses,
liquidation expenses and commissions, and (b) the denominator of which is the
applicable original cost of the aggregate amount of the Inventory subject to
such appraisal.
1.68 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all of Borrowers to Lender and/or
any of its Affiliates, including principal, interest, charges, fees, costs and
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, arising under this Agreement or any of the other Financing
Agreements, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to such Borrower under the United States
Bankruptcy Code or any similar statute (including the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case, whether or not such amounts are allowed or allowable in whole or in part
in such case), whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated, or
secured or unsecured.
1.69 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations (including, without
limitation, P&O and Guarantors), other than Borrowers. As of the date hereof,
Global is not an Obligor.
1.70 "Parent" shall mean ICO, Inc., a Texas corporation, and its
successors and assigns.
1.71 "P&O Unrestricted Cash" shall mean the existing cash or Cash
Equivalents owned by P&O as set forth on the most recent balance sheet of P&O
provided to Lender, which funds are and shall be available for use by P&O
without condition or restriction, free and clear of any pledge, security
interest, lien, claim or other encumbrance, the amount of which as of April 1,
2001 is $13,389,097.
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1.72 "Participant" shall mean any financial institution that acquires
and holds a participation in the interest of Lender in any of the Loans and
Letter of Credit Accommodations in conformity with the provisions of Section
12.5 of this Agreement governing participations.
1.73 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Code), limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.74 "Plan" means an employee benefit plan (as defined in Section 3(3)
of ERISA) which any Borrower or Guarantor sponsors, maintains, or to which it
makes, is making, or is obligated to make contributions, or in the case of a
Multiemployer Plan has made contributions at any time during the immediately
preceding six (6) plan years.
1.75 "Prime Rate" shall mean the rate from time to time publicly
announced by Wachovia Bank, National Association, or its successors, as its
prime rate, whether or not such announced rate is the best rate available at
such bank.
1.76 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.77 "Provision for Taxes" shall mean an amount equal to all taxes
imposed on or measured by net income, whether Federal, State, Provincial, county
or local, and whether foreign or domestic, that are paid or payable by any
Person in respect of any period in accordance with GAAP.
1.78 "Quarterly Average Excess Availability" shall mean, at any time,
the daily average of the aggregate amount of the Excess Availability of
Borrowers for the immediately preceding fiscal quarter as calculated by Lender
in good faith.
1.79 "Real Property" shall mean all now owned and hereafter acquired
real property of each Borrower and Guarantor, including leasehold interests,
together with all buildings, structures, and other improvements located thereon
and all licenses, easements and appurtenances relating thereto, wherever
located, including the Real Property and related assets more particularly
described in the Mortgage.
1.80 "Receivables" shall mean all of the following now owned or
hereafter arising or acquired property of each Borrower and Guarantor: (a) all
Accounts; (b) all interest, fees, late charges, penalties, collection fees and
other amounts due or to become due or otherwise payable in connection with any
Account; (c) all payment intangibles of such Borrower or Guarantor; (d) letters
of credit, indemnities, guarantees, security or other deposits and proceeds
thereof issued payable to any Borrower or Guarantor or otherwise in favor of or
delivered to any Borrower or Guarantor in connection with any Account; or (e)
all other accounts, contract rights, chattel paper, instruments, notes, general
intangibles and other forms of obligations owing to any
20
Borrower or Guarantor, whether from the sale and lease of goods or other
property, licensing of any property (including Intellectual Property or other
general intangibles), rendition of services or from loans or advances by any
Borrower or Guarantor or to or for the benefit of any third person (including
loans or advances to any Affiliates or Subsidiaries of any Borrower or
Guarantor) or otherwise associated with any Accounts, Inventory or general
intangibles of any Borrower or Guarantor (including, without limitation, choses
in action, causes of action, tax refunds, tax refund claims, any funds which may
become payable to any Borrower or Guarantor in connection with the termination
of any Plan or other employee benefit plan and any other amounts payable to any
Borrower or Guarantor from any Plan or other employee benefit plan, rights and
claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, casualty or any similar types of
insurance and any proceeds thereof (other than insurance proceeds in respect of
property securing third party Indebtedness permitted by Section 9.9) and
proceeds of insurance covering the lives of employees on which any Borrower or
Guarantor is a beneficiary).
1.81 "Records" shall mean, as to each Borrower and Guarantor, all of
such Borrower's and Guarantor's present and future books of account of every
kind or nature, purchase and sale agreements, invoices, ledger cards, bills of
lading and other shipping evidence, statements, correspondence, memoranda,
credit files and other data relating to the Collateral or any account debtor,
together with the tapes, disks, diskettes and other data and software storage
media and devices, file cabinets or containers in or on which the foregoing are
stored (including any rights of any Borrower or Guarantor with respect to the
foregoing maintained with or by any other person).
1.82 "Reference Bank" shall mean Wachovia Bank, National Association,
or such other bank as Lender may from time to time designate.
1.83 "Refinancing Indebtedness" shall have meaning set forth in Section
9.9 hereof.
1.84 "Reserves" shall mean as of any date of determination, such
amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Loans and Letter of Credit Accommodations which would
otherwise be available to any Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, adversely affect, or would have a reasonable
likelihood of adversely affecting, either (i) the Collateral or any other
property which is security for the Obligations or its value or (ii) the assets
or business of any Borrower or Obligor or (iii) the security interests and other
rights of Lender in the Collateral (including the enforceability, perfection and
priority thereof) or (b) to reflect Lender's good faith belief that any
collateral report or financial information furnished by or on behalf of any
Borrower or Obligor to Lender is or may have been incomplete, inaccurate or
misleading in any material respect or (c) to reflect outstanding Letter of
Credit Accommodations as provided in Section 2.2 hereof or (d) in respect of any
state of facts which Lender determines in good faith constitutes a Default or an
Event of Default. Without limiting the generality of the foregoing, Reserves may
be established to reflect that dilution with respect to the Accounts of any
Borrower (based on the ratio of the aggregate amount of non-cash reductions in
Accounts of such Borrower for any period to the aggregate
21
dollar amount of the sales of Borrower for such period) as calculated by Lender
for any period is or is reasonably anticipated to be greater than five (5%)
percent or to reflect that the amount of the outstanding Loans to any Borrower
based on the Eligible Inventory of such Borrower are less than eighty (80%)
percent of the Net Recovery Percentage multiplied by the Value of the Eligible
Inventory. To the extent Lender may revise the lending formulas used to
determine the Borrowing Base or establish new criteria or revise existing
criteria for Eligible Accounts or Eligible Inventory so as to address any
circumstances, condition, event or contingency in a manner satisfactory to
Lender, Lender shall not establish a Reserve for the same purpose. The amount of
any Reserve established by Lender shall have a reasonable relationship to the
event, condition or other matter which is the basis for such reserve as
determined by Lender in good faith.
1.85 "Senior Notes" shall mean, collectively, the Series A and Series B
10 3/8% Senior Notes due 2007 issued by P&O in the original aggregate principal
amount of $120,000,000 pursuant to the Senior Indenture, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.86 "Senior Indenture" shall mean the Indenture, dated as of June 9,
1997, by and between P&O, as issuer, and Fleet National Bank, as trustee, with
respect to the Senior Notes, as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.87 "▇▇▇▇▇▇▇ Road Facility" shall mean the Real Property of Worldwide
located on or about ▇▇▇▇▇▇▇ Road in ▇▇▇▇▇▇ County, Texas or otherwise subject to
the Mortgage.
1.88 "Solvent" shall mean, at any time with respect to any Person, that
at such time such Person (a) is able to pay its debts as they mature and has
(and has a reasonable basis to believe it will continue to have) sufficient
capital (and not unreasonably small capital) to carry on its business consistent
with its practices as of the date hereof, and (b) the assets and properties of
such Person at a fair valuation (and including as assets for this purpose at a
fair valuation all rights of subrogation, contribution or indemnification
arising pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).
1.89 "Subsidiary" or "subsidiary" shall mean, with respect to any
Person, any corporation, limited liability company, limited liability
partnership or other limited or general partnership, trust, association or other
business entity of which an aggregate of at least a majority of the outstanding
Capital Stock or other interests entitled to vote in the election of the board
of directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent
22
controlling interest therein, of such Person is, at the time, directly or
indirectly, owned by such Person and/or one or more subsidiaries of such Person.
1.90 "UCC" shall mean the Uniform Commercial Code as in effect in the
State of Texas, and any successor statute, as in effect from time to time
(except that terms used herein which are defined in the Uniform Commercial Code
as in effect in the State of Texas on the date hereof shall continue to have the
same meaning notwithstanding any replacement or amendment of such statute except
as Lender may otherwise determine).
1.91 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in first-out
basis in accordance with GAAP or (b) market value, provided, that, for purposes
of the calculation of the Borrowing Base, (i) the Value of the Inventory shall
not include: (A) the portion of the value of Inventory equal to the profit
earned by any Affiliate on the sale thereof to any Borrower or (B) write-ups or
write-downs in value with respect to currency exchange rates and (ii)
notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Lender prior to the
date hereof, if any.
1.92 "Voting Stock" shall mean with respect to any Person, (a) one (1)
or more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
1.93 "Weighted Average Life to Maturity" shall mean, when applied to
any Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
SECTION 2. CREDIT FACILITIES
2.1 Loans.
(a) Subject to and upon the terms and conditions contained
herein, Lender agrees to make Loans to each Borrower from time to time in
amounts requested by such Borrower (or Borrower Agent on behalf of such
Borrower) up to the amount outstanding at any time equal to the lesser of: (i)
the Borrowing Base of such Borrower at such time or (ii) the Loan Limit of such
Borrower at such time.
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(b) Lender may, in its discretion, from time to time, upon not
less than five (5) days prior notice to Borrower Agent, reduce the lending
formula(s) with respect to Eligible Inventory to the extent that Lender
determines in good faith that: (i) the number of days of the turnover of the
Inventory for any period has adversely changed or (ii) the liquidation value of
the Eligible Inventory, or any category thereof, has decreased, including any
decrease attributable to a change in the nature, quality or mix of the
Inventory. The amount of any decrease in the lending formulas shall have a
reasonable relationship to the event, condition or circumstance which is the
basis for such decrease as determined by Lender in good faith. In determining
whether to reduce the lending formula(s), Lender may consider events,
conditions, contingencies or risks which are also considered in determining
Eligible Accounts, Eligible Inventory or in establishing Reserves.
(c) Except in Lender's discretion, or as otherwise provided
herein, (i) the aggregate amount of the Loans and the Letter of Credit
Accommodations outstanding at any time shall not exceed the Maximum Credit, (ii)
the aggregate principal amount of the Loans and Letter of Credit Accommodations
outstanding at any time to a Borrower shall not exceed the lesser of the
Borrowing Base of such Borrower or the Loan Limit of such Borrower, and (iii)
the aggregate principal amount of the Loans outstanding at any time to Borrowers
based on the Eligible Inventory of Borrowers shall not exceed $10,000,000.
(d) In the event that the aggregate principal amount of the
Loans and Letter of Credit Accommodations outstanding to a Borrower exceed the
Borrowing Base of such Borrower or the Loan Limit of such Borrower, or the
aggregate principal amount of Loans and Letter of Credit Accommodations based on
the Eligible Inventory of a Borrower exceed the Inventory Loan Limit of such
Borrower, or the aggregate principal amount of Loans and Letter of Credit
Accommodations based on the Eligible Inventory of all Borrowers exceeds the
sublimit set forth above, or the aggregate amount of the outstanding Letter of
Credit Accommodations exceed the sublimit for Letter of Credit Accommodations
set forth in Section 2.2(e), or the aggregate amount of the Loans and Letter of
Credit Accommodations exceed the Maximum Credit, such event shall not limit,
waive or otherwise affect any rights of Lender in such circumstances or on any
future occasions and Borrowers shall, within three (3) Business Days after
written demand by Lender, which may be made at any time or from time to time,
immediately repay to Lender the entire amount of any such excess(es) for which
payment is demanded.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained
herein, at the request of a Borrower (or Borrower Agent on behalf of such
Borrower), Lender agrees, to provide or arrange for Letter of Credit
Accommodations for the account of such Borrower containing terms and conditions
acceptable to Lender and the issuer thereof. Any payments made by or on behalf
of Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations provided to or for the benefit of a Borrower
shall constitute additional Loans to such Borrower pursuant to this Section 2.
24
(b) In addition to any charges, fees or reasonable expenses
charged by any bank or issuer in connection with the Letter of Credit
Accommodations, Borrowers shall pay to Lender, a letter of credit fee at a rate
equal to one and one-half (1 1/2%) percent per annum, on the daily outstanding
balance of the Letter of Credit Accommodations for the immediately preceding
month (or part thereof), payable in arrears as of the first day of each
succeeding month, except that Borrowers shall pay to Lender such letter of
credit fee, at a rate equal to three and one-half (3 1/2%) percent per annum on
such daily outstanding balance for: (i) the period from and after the date of
termination or non-renewal hereof until Lender has received full and final
payment of all Obligations (notwithstanding entry of a judgment against any
Borrower) and (ii) the period from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing as
determined by Lender. Such letter of credit fee shall be calculated on the basis
of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrowers to pay such fee shall survive the termination of this
Agreement.
(c) The Borrower requesting such Letter of Credit
Accommodation (or Borrower Agent on behalf of such Borrower) shall give Lender
two (2) Business Days' prior written notice of such Borrower's request for the
issuance of a Letter of Credit Accommodation. Such notice shall be irrevocable
and shall specify the original face amount of the Letter of Credit Accommodation
requested, the effective date (which date shall be a Business Day) of issuance
of such requested Letter of Credit Accommodation, whether such Letter of Credit
Accommodations may be drawn in a single or in partial draws, the date on which
such requested Letter of Credit Accommodation is to expire (which date shall be
a Business Day), the purpose for which such Letter of Credit Accommodation is to
be issued, and the beneficiary of the requested Letter of Credit Accommodation.
The Borrower requesting the Letter of Credit Accommodation (or Borrower Agent on
behalf of such Borrower) shall attach to such notice the proposed form of the
Letter of Credit Accommodation.
(d) In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations shall
be available unless each of the following conditions precedent have been
satisfied in a manner satisfactory to Lender: (i) the Borrower requesting such
Letter of Credit Accommodation (or Borrower Agent on behalf of such Borrower)
shall have delivered to the proposed issuer of such Letter of Credit
Accommodation at such times and in such manner as such proposed issuer may
require, an application, in form and substance satisfactory to such proposed
issuer and Lender, for the issuance of the Letter of Credit Accommodation and
such other documents as may be required pursuant to the terms thereof, and the
form and terms of the proposed Letter of Credit Accommodation shall be
satisfactory to Lender and such proposed issuer, (ii) as of the date of
issuance, no order of any court, arbitrator or other Governmental Authority
shall purport by its terms to enjoin or restrain money center banks generally
from issuing letters of credit of the type and in the amount of the proposed
Letter of Credit Accommodation, and no law, rule or regulation applicable to
money center banks generally and no request or directive (whether or not having
the force of law) from any Governmental Authority with jurisdiction over money
center banks generally shall prohibit, or request that the proposed issuer of
such Letter of Credit Accommodation refrain from, the issuance of letters of
credit generally or the issuance of such Letters of Credit Accommodation;
25
and (iii) the Excess Availability of the Borrower requesting such Letter of
Credit Accommodation, prior to giving effect to any Reserves with respect to
such Letter of Credit Accommodations, on the date of the proposed issuance of
any Letter of Credit Accommodations, shall be equal to or greater than: (A) if
the proposed Letter of Credit Accommodation is for the purpose of purchasing
Eligible Inventory and the documents of title with respect thereto are consigned
to the issuer, the sum of (1) the percentage equal to one hundred (100%) percent
minus the then applicable percentage with respect to Eligible Inventory set
forth in the definition of the term Borrowing Base multiplied by the Value of
such Eligible Inventory, plus (2) freight, taxes, duty and other amounts which
Lender estimates must be paid in connection with such Inventory upon arrival and
for delivery to one of such Borrower's locations for Eligible Inventory within
the United States of America and (B) if the proposed Letter of Credit
Accommodation is for any other purpose or the documents of title are not
consigned to the issuer in connection with a Letter of Credit Accommodation for
the purpose of purchasing Inventory, an amount equal to one hundred (100%)
percent of the face amount thereof and all other commitments and obligations
made or incurred by Lender with respect thereto. Effective on the issuance of
each Letter of Credit Accommodation, a Reserve shall be established in the
applicable amount set forth in Section 2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
(e) Except in Lender's discretion, the amount of all
outstanding Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Lender in connection therewith (other than
Letter of Credit Accommodations in respect of workers' compensation or self
insurance, performance bonds or similar instruments to the extent constituting
Permitted Indebtedness as such term is defined the Senior Indenture) shall not
at any time exceed $5,000,000 and the amount of all outstanding Letter of Credit
Accommodations and all other commitments and obligations made or incurred by
Lender in connection therewith shall not at any time exceed $10,000,000.
(f) Borrowers and Guarantors shall indemnify and hold Lender
harmless from and against any and all losses, claims, damages, liabilities,
reasonable costs and expenses which Lender may suffer or incur in connection
with any Letter of Credit Accommodations and any documents, drafts or
acceptances relating thereto, including any losses, claims, damages,
liabilities, reasonable costs and expenses due to any action taken by any issuer
or correspondent with respect to any Letter of Credit Accommodation, except for
such losses, claims, damages, liabilities, reasonable costs or expenses that are
a direct result of the gross negligence or wilful misconduct of Lender as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction. Each Borrower and Guarantor assumes all risks with respect to the
acts or omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
such Borrower's agent. Each Borrower and Guarantor assumes all risks for, and
agrees to pay, all foreign, Federal, State and local taxes, duties and levies
relating to any goods subject to any Letter of Credit Accommodations or any
documents, drafts or acceptances thereunder. Each Borrower and Guarantor hereby
releases and holds Lender harmless from and against any acts, waivers, errors,
delays or omissions, whether caused by any Borrower, Guarantor, by any issuer or
correspondent or otherwise with respect to or relating to any Letter of Credit
Accommodation, except for the gross negligence or wilful misconduct of Lender as
determined pursuant to a final, non-appealable order of a court of
26
competent jurisdiction. The provisions of this Section 2.2(f) shall survive the
payment of Obligations and the termination of this Agreement.
(g) In connection with Inventory purchased pursuant to Letter
of Credit Accommodations, Borrowers and Guarantors shall, at Lender's request,
instruct all suppliers, carriers, forwarders, customs brokers, warehouses or
others receiving or holding cash, checks, Inventory, documents or instruments in
which Lender holds a security interest to deliver them to Lender and/or subject
to Lender's order, and if they shall come into such Borrower's or Guarantor's
possession, to deliver them, upon Lender's request, to Lender in their original
form. Borrowers and Guarantors shall also, at Lender's request, designate Lender
as the consignee on all bills of lading and other negotiable and non-negotiable
documents.
(h) Each Borrower and Guarantor hereby irrevocably authorizes
and directs any issuer of a Letter of Credit Accommodation to name such Borrower
or Guarantor as the account party therein and to deliver to Lender all
instruments, documents and other writings and property received by issuer
pursuant to the Letter of Credit Accommodations and to accept and rely upon
Lender's instructions and agreements with respect to all matters arising in
connection with the Letter of Credit Accommodations or the applications
therefor. Nothing contained herein shall be deemed or construed to grant any
Borrower or Guarantor any right or authority to pledge the credit of Lender in
any manner. Lender shall have no liability of any kind with respect to any
Letter of Credit Accommodation provided by an issuer other than Lender unless
Lender has duly executed and delivered to such issuer the application or a
guarantee or indemnification in writing with respect to such Letter of Credit
Accommodation. Borrowers and Guarantors shall be bound by any reasonable
interpretation made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of Credit Accommodation or
any documents, drafts or acceptances thereunder, notwithstanding that such
interpretation may be inconsistent with any instructions of any Borrower or
Guarantor. Lender shall have the sole and exclusive right and authority to, and
Borrowers and Guarantors shall not: (i) at any time an Event of Default exists
or has occurred and is continuing, (A) approve or resolve any questions of non-
compliance of documents, (B) give any instructions as to acceptance or rejection
of any documents or goods or (C) execute any and all applications for steamship
or airway guaranties, indemnities or delivery orders, and (ii) at all times
(provided that if no Event of Default has occurred, Lender shall not exercise
any of the following unless agreed to by or on behalf of any Borrower),
(A) grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in any Borrower's name or in any Guarantor's name.
(i) Any rights, remedies, duties or obligations granted or
undertaken by any Borrower or Guarantor to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement in
favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been granted or undertaken by such
Borrower or Guarantor to Lender. Any duties or obligations undertaken by Lender
to any issuer
27
or correspondent in any application for any Letter of Credit Accommodation, or
any other agreement by Lender in favor of any issuer or correspondent to the
extent relating to any Letter of Credit Accommodation, shall be deemed to have
been undertaken by Borrowers and Guarantors to Lender and to apply in all
respects to Borrowers and Guarantors.
2.3 Use of Proceeds; Intercompany Indebtedness.
(a) Each Borrower shall only use any proceeds of the Loans to
refinance then existing Intercompany Indebtedness owing by such Borrower to
Global arising pursuant to the Intercompany Credit Facility of such Borrower
with Global; provided, that, (i) Global shall only use the proceeds of such
repayments of Intercompany Indebtedness from a Borrower either: (A) to make a
substantially contemporaneous repayment of then existing Intercompany
Indebtedness owing by Global to P&O arising pursuant to the Intercompany Credit
Facility of Global with P&O or (B) to make a substantially contemporaneous loan
in immediately available funds to such Borrower under the terms of the
Intercompany Credit Facility of such Borrower and (ii) P&O shall only use the
proceeds of such repayments of Intercompany Indebtedness from Global either: (A)
to make a substantially contemporaneous payment in respect of the Indebtedness
of P&O evidenced by the Senior Notes to the extent permitted under Section 9.9
hereof or (B) to make a substantially contemporaneous payment for actual and
necessary reasonable out-of-pocket legal and accounting, insurance, marketing,
corporate management, payroll and similar types of services incurred or paid for
by any Borrower or Obligor or Global on behalf of itself or any of its
Subsidiaries or Affiliates in the ordinary course of their respective businesses
or as the same may be directly attributable to any such Subsidiary or Affiliate
(and in each case in accordance with current practices as of the date hereof)
and for the payment of taxes by or on behalf of Parent, provided, that, the
proceeds of the repayment of such Intercompany Indebtedness shall not be used
for such purposes unless and until the P&O Unrestricted Cash is less than
$10,000,000 or (C) to make a substantially contemporaneous payment of a dividend
to Parent, the proceeds of which shall only be used by Parent to pay a dividend
to its shareholders to the extent permitted under Section 9.11(c) hereof. Global
and P&O shall direct that any payments to it as described above shall be
remitted directly to the person to whom Global or P&O, as the case may be, is
required to pay such amounts upon its receipt thereof pursuant to the terms
above.
(b) Each Borrower shall only use any proceeds of any loans to
it under its Intercompany Credit Facility only for general operating, working
capital and other proper corporate purposes of such Borrower not otherwise
prohibited by the terms hereof, including for loans, investments and
acquisitions to the extent permitted under Section 9.10 hereof.
(c) None of the proceeds of the Loans or Letter of Credit
Accommodations or of any loans under the Intercompany Credit Facilities will be
used, directly or indirectly, for the purpose of purchasing or carrying any
margin security or for the purposes of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the Loans to be considered a "purpose
credit" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System, as amended.
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SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers shall pay to Lender interest on the outstanding
principal amount of the Loans at the Interest Rate. All interest accruing
hereunder on and after the date of any Event of Default or termination or
non-renewal hereof shall be payable on demand.
(b) Each Borrower (or Borrower Agent on behalf of such
Borrower) may from time to time request Eurodollar Rate Loans or may request
that Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing
Eurodollar Rate Loans continue for an additional Interest Period. Such request
from a Borrower (or Borrower Agent on behalf of such Borrower) shall specify the
amount of the Eurodollar Rate Loans or the amount of the Prime Rate Loans to be
converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate Loans to
be continued (subject to the limits set forth below) and the Interest Period to
be applicable to such Eurodollar Rate Loans. Subject to the terms and conditions
contained herein, three (3) Business Days after receipt by Lender of such a
request from a Borrower (or Borrower Agent on behalf of such Borrower), such
Eurodollar Rate Loans shall be made or Prime Rate Loans shall be converted to
Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case
may be, provided, that, (i) no Default or Event of Default shall exist or have
occurred and be continuing, (ii) no party hereto shall have sent any notice of
termination or non-renewal of this Agreement, (iii) such Borrower (or Borrower
Agent on behalf of such Borrower) shall have complied with such customary
procedures as are established by Lender and specified by Lender to Borrower
Agent from time to time for requests by Borrowers for Eurodollar Rate Loans,
(iv) no more than four (4) Interest Periods may be in effect at any one time,
(v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not
less than $1,000,000 or an integral multiple of $500,000 in excess thereof, and
(vi) Lender shall have determined that the Interest Period or Adjusted
Eurodollar Rate is available to Lender and can be readily determined as of the
date of the request for such Eurodollar Rate Loan by Borrower. Any request by or
on behalf of a Borrower for Eurodollar Rate Loans or to convert Prime Rate Loans
to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall
be irrevocable. Notwithstanding anything to the contrary contained herein,
Lender and Reference Bank shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions hereof shall be
deemed to apply as if Lender and Reference Bank had purchased such deposits to
fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received and approved a request to continue such Eurodollar Rate Loan
at least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrower Agent, be subsequently converted to Prime Rate Loans in
the event that this Agreement shall terminate or not be renewed. Borrowers shall
pay to Lender, upon demand by Lender (or Lender may, at its option, charge any
loan account of any Borrower) any amounts required to compensate any Lender, the
Reference Bank or any Participant for any
29
loss (including loss of anticipated profits), cost or expense incurred by such
person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate
Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrowers to Lender monthly
in arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. No agreements,
conditions, provisions or stipulations contained in this Agreement or any of the
other Financing Agreements or any Event of Default, or the exercise by Lender of
the right to accelerate the payment or the maturity of all or any portion of the
Obligations, or the exercise by Lender of any option whatsoever contained in
this Agreement or any of the other Financing Agreements, or the prepayment by
any Borrower or Guarantor of any of the Obligations, or the occurrence of any
event or contingency whatsoever, shall entitle Lender to contract for, charge or
receive, in any event, interest exceeding the Maximum Interest Rate. In no event
shall any Borrower or Guarantor be obligated to pay interest exceeding such
Maximum Interest Rate. All agreements, conditions or stipulations, if any, which
may in any event or contingency whatsoever operate to bind, obligate or compel
any Borrower or Guarantor to pay a rate of interest exceeding the Maximum
Interest Rate shall be without binding force or effect, at law or in equity, to
the extent of the excess of interest over such Maximum Interest Rate. In the
event any interest is contracted for, charged or received in excess of the
Maximum Interest Rate ("Excess"), each Borrower and Guarantor acknowledges and
stipulates that any such contract, charge or receipt shall be the result of an
accident and bona fide error, and that any Excess received by Lender shall be
applied, first, to the payment of the then outstanding and unpaid principal
hereunder; second, to the payment of the other Obligations then outstanding and
unpaid; and third, returned to Borrowers, it being the intent of the parties
hereto not to enter at any time into a usurious or otherwise illegal
relationship. Each Borrower and Guarantor recognizes that, with fluctuations in
the rate of interest set forth in Section 3.1 of this Agreement and the Maximum
Interest Rate, such an unintentional result could inadvertently occur. By the
execution of this Agreement, each Borrower and Guarantor agrees that (A) the
credit or return of any Excess shall constitute the acceptance by any Borrower
or Guarantor of such Excess, and (B) Borrowers and Guarantors shall not seek or
pursue any other remedy, legal or equitable, against Lender, based in whole or
in part upon contracting for, charging or receiving of any interest in excess of
the Maximum Interest Rate. For the purpose of determining whether or not any
Excess has been contracted for, charged or received by Lender, all interest at
any time contracted for, charged or received by Lender in connection with this
Agreement or any of the other Financing Agreements shall be amortized, prorated,
allocated and spread during the entire term of this Agreement in accordance with
the amounts outstanding from time to time hereunder and the Maximum Interest
Rate from time to time in effect in order to lawfully charge the maximum amount
of interest permitted under applicable law.
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3.2 Fees.
(a) Borrowers shall pay to Lender as a closing fee the amount
of $187,500, which shall be fully earned and payable as of the date hereof.
(b) Borrowers shall pay to Lender monthly a servicing fee in
an amount equal to $3,000 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each month
thereafter.
(c) Borrower shall pay to Lender monthly an unused line fee at
a rate equal to the percentage (on a per annum basis) set forth below calculated
upon the amount by which the Maximum Credit as then in effect exceeds the
average daily principal balance of the outstanding Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof) while
this Agreement is in effect and for so long thereafter as Lender may continue to
make any Loans or any Letter of Credit Accommodations are outstanding (and
including any payments by Lender or on its behalf for the collection and
enforcement of the Obligations and for the protection, preservation, maintenance
or sale, disposition or other realization upon any of the Collateral). Such fee
shall be payable on the first day of each month in arrears. The percentage used
for determining the unused line fee shall be [three-eighths (3/8%)] percent,
provided, that, effective as of the first (1st) day of the second month of each
fiscal quarter (commencing with the fiscal quarter ending on or about June 30,
2002), the percentage used for determining the unused line fee shall be as set
forth below if either the Quarterly Average Excess Availability for the
immediately preceding fiscal quarter is at or within the amounts indicated for
such percentage or the Leverage Ratio as of the last day of the immediately
preceding fiscal quarter (which ratio for this purpose shall be calculated based
on the four (4) immediately preceding fiscal quarters) is at or within the
levels indicated for such percentage:
Unused Line
Excess Availability Leverage Ratio Fee Percentage
------------------- -------------- --------------
(i) $20,000,000 or more Less than 2.00 to 1.00 3/8%
(ii) Greater than or equal to Greater than 2.00 to 1.00 3/8%
$10,000,000 and less but equal to or less than
than $20,000,000 3.00 to 1.00
(iii) Less than $10,000,000 Greater than 3.00 to 1.00 1/2%
Provided, that, (A) the unused line fee percentage shall be calculated and
established once each fiscal quarter (commencing with the fiscal quarter ending
on or about June 30, 2002) and (B) the unused line fee percentage shall be the
lower percentage set forth above based on the Quarterly Average Excess
Availability or the Leverage Ratio.
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3.3 Changes in Laws and Increased Costs of Loans.
(a) If after the date hereof, either (i) any change in, or in
the interpretation of, any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to Lender or any
banking or financial institution from whom Lender borrows funds or obtains
credit (a "Funding Bank"), or (ii) a Funding Bank or Lender complies with any
future guideline or request from any central bank or other Governmental
Authority or (iii) a Funding Bank or Lender determines that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described
below, or a Funding Bank or Lender complies with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, and in the case of any event set
forth in this clause (iii), such adoption, change or compliance has or would
have the direct or indirect effect of reducing the rate of return on Lender's
capital as a consequence of its obligations hereunder to a level below that
which Lender could have achieved but for such adoption, change or compliance
(taking into consideration the Funding Bank's or Lender's policies with respect
to capital adequacy) by an amount deemed by Lender to be material, and the
result of any of the foregoing events described in clauses (i), (ii) or (iii) is
or results in an increase in the cost to Lender of funding or maintaining the
Loans or the Letter of Credit Accommodations, then Borrowers and Guarantors
shall from time to time upon demand by Lender pay to Lender additional amounts
sufficient to indemnify Lender against such increased cost on an after-tax basis
(after taking into account applicable deductions and credits in respect of the
amount indemnified). A certificate as to the amount of such increased cost shall
be submitted to Borrower Agent by Lender and shall be conclusive, absent
manifest error.
(b) If prior to the first day of any Interest Period, (i)
Lender shall have determined in good faith (which determination shall be
conclusive and binding upon Borrowers and Guarantors) that, by reason of
circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Interest Period, (ii)
Lender determines that the Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to Lender
of making or maintaining Eurodollar Rate Loans during such Interest Period, or
(iii) Dollar deposits in the principal amounts of the Eurodollar Rate Loans to
which such Interest Period is to be applicable are not generally available in
the London interbank market, Lender shall give telecopy or telephonic notice
thereof to Borrower Agent as soon as practicable thereafter, and will also give
prompt written notice to Borrower when such conditions no longer exist. If such
notice is given (A) any Eurodollar Rate Loans requested to be made on the first
day of such Interest Period shall be made as Prime Rate Loans, (B) any Loans
that were to have been converted on the first day of such Interest Period to or
continued as Eurodollar Rate Loans shall be converted to or continued as Prime
Rate Loans and (C) each outstanding Eurodollar Rate Loan shall be converted, on
the last day of the then-current Interest Period thereof, to Prime Rate Loans.
Until such notice has been withdrawn by Lender, no further Eurodollar Rate Loans
shall be made or continued as such, nor shall any Borrower (or Borrower Agent on
behalf of any Borrower) have the right to convert Prime Rate Loans to Eurodollar
Rate Loans.
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(c) Notwithstanding any other provision herein, if the
adoption of or any change in any law, treaty, rule or regulation or final,
non-appealable determination of an arbitrator or a court or other Governmental
Authority or in the interpretation or application thereof occurring after the
date hereof shall make it unlawful for Lender to make or maintain Eurodollar
Rate Loans as contemplated by this Agreement, (i) Lender shall promptly give
written notice of such circumstances to Borrower Agent (which notice shall be
withdrawn whenever such circumstances no longer exist), (ii) the commitment of
Lender hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans
as such and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be
canceled and, until such time as it shall no longer be unlawful for Lender to
make or maintain Eurodollar Rate Loans, Lender shall then have a commitment only
to make a Prime Rate Loan when a Eurodollar Rate Loan is requested and (iii)
Loans then outstanding as Eurodollar Rate Loans, if any, shall be converted
automatically to Prime Rate Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a Eurodollar Rate Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, Borrowers and Guarantors shall pay to such Lender such
amounts, if any, as may be required pursuant to Section 3.3(d) below.
(d) Borrowers and Guarantors shall indemnify Lender and hold
Lender harmless from any loss or expense which Lender may sustain or incur as a
consequence of (i) default by any Borrower in making a borrowing of, conversion
into or extension of Eurodollar Rate Loans after such Borrower (or Borrower
Agent on behalf of such Borrower) has given a notice requesting the same in
accordance with the provisions of this Agreement, (ii) default by any Borrower
in making any prepayment of a Eurodollar Rate Loan after such Borrower (or
Borrower Agent on behalf of such Borrower) has given a notice thereof in
accordance with the provisions of this Agreement, and (iii) the making of a
prepayment of Eurodollar Rate Loans on a day which is not the last day of an
Interest Period with respect thereto. With respect to Eurodollar Rate Loans,
such indemnification may include an amount equal to the excess, if any, of (A)
the amount of interest which would have accrued on the amount so prepaid, or not
so borrowed, converted or extended, for the period from the date of such
prepayment or of such failure to borrow, convert or extend to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or extend, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Rate Loans provided for herein over (B) the amount of interest (as reasonably
determined by such Lender) which would have accrued to Lender on such amount by
placing such amount on deposit for a comparable period with leading banks in the
interbank Eurodollar market. This covenant shall survive the termination or
non-renewal of this Agreement and the payment of the Obligations.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
33
(a) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or Governmental Authority (and
including a copy of the certificate of incorporation of each Borrower and
Guarantor certified by the Secretary of State (or equivalent Governmental
Authority) which shall set forth the same complete corporate name of such
Borrower or Guarantor as is set forth herein and such documents as shall set
forth the organizational identification number of each Borrower or Guarantor, if
one is issued in its jurisdiction of incorporation);
(b) no material adverse change shall have occurred in the
assets, business or prospects of Borrowers since the date of Lender's latest
field examination (not including for this purpose the field review referred to
in clause (d) below) and no change or event shall have occurred which would
impair the ability of any Borrower or Obligor to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a party
or of Lender to enforce the Obligations or realize upon the Collateral;
(c) Lender shall have completed a field review of the Records
and such other information with respect to the Collateral as Lender may require
to determine the amount of Loans available to Borrowers (including, without
limitation, current perpetual inventory records and/or roll-forwards of Accounts
and Inventory through the date of closing and test counts of the Inventory in a
manner satisfactory to Lender, together with such supporting documentation as
may be necessary or appropriate, and other documents and information that will
enable Lender to accurately identify and verify the Collateral), the results of
which each case shall be satisfactory to Lender, not more than three (3)
Business Days prior to the date hereof;
(d) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements;
(e) the aggregate amount of the Excess Availability of all of
Borrowers as determined by Lender, as of the date hereof, shall be not less than
$15,000,000 after giving effect to the initial Loans made or to be made and
Letter of Credit Accommodations issued or to be issued in connection with the
initial transactions hereunder;
(f) Lender shall have received, in form and substance
satisfactory to Lender, Deposit Account Control Agreements by and among Lender,
each Borrower and Guarantor, as the case may be and each bank where such
Borrower (or Guarantor) has a deposit account, in each case, duly authorized,
executed and delivered by such bank and Borrower or Guarantor, as the case may
be (or Lender shall be the bank's customer with respect to such deposit account
as Lender may specify);
34
(g) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first priority
security interest in all of the Collateral, subject as to priority, only to the
liens indicated on Schedule 8.4 to the Information Certificate and the other
liens permitted under Section 9.8 hereof which under applicable law have
priority over the security interests of Lender;
(h) Lender shall have received and reviewed lien and judgement
search results for the jurisdiction of incorporation of each Borrower and
Guarantor, the jurisdiction of the chief executive office of each Borrower and
Guarantor and all jurisdictions in which assets of Borrower and Guarantors are
located, which search results shall be in form and substance satisfactory to
Lender;
(i) Lender shall have received, in form and substance
satisfactory to Lender, a valid and effective title insurance policy issued by a
company and agent acceptable to Lender: (i) insuring the priority, amount and
sufficiency of the Mortgage, (ii) insuring against matters that would be
disclosed by surveys and (iii) containing any legally available endorsements,
assurances or affirmative coverage requested by Lender for protection of its
interests;
(j) Lender shall have received originals of the shares of the
stock certificates representing all of the issued and outstanding shares of the
Capital Stock of the Subsidiaries of Parent (other than Capital Stock of the
Foreign Subsidiaries, Polymers and Worldwide which are Subsidiaries of Global
and Global which is a Subsidiary of P&O), in each case together with stock
powers duly executed in blank with respect thereto;
(k) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(l) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrowers and
Guarantors with respect to the Financing Agreements and such other matters as
Lender may request; and
(m) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance reasonably satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lenders making the Loans and/or providing Letter of Credit Accommodations to
Borrowers, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such
35
representations and warranties had been made on and as of the date of the making
of each such Loan or providing each such Letter of Credit Accommodation and
after giving effect thereto, except to the extent that such representations and
warranties expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and accurate on and as of
such earlier date);
(b) no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or threatened in any court or before
any arbitrator or Governmental Authority, which (i) purports to enjoin,
prohibit, restrain or otherwise affect (A) the making of the Loans or providing
the Letter of Credit Accommodations, or (B) the consummation of the transactions
contemplated pursuant to the terms hereof or the other Financing Agreements or
(ii) has or has a reasonable likelihood of having a Material Adverse Effect; and
(c) no Default or Event of Default shall exist or have
occurred and be continuing on and as of the date of the making of such Loan or
providing each such Letter of Credit Accommodation and after giving effect
thereto.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 Grant of Security Interest. To secure payment and performance of
all Obligations, each Borrower and Guarantor hereby grants to Lender, a
continuing security interest in, a lien upon, and a right of set off against,
and hereby assigns to Lender, as security, all of the following property and
interests in property of each Borrower and Guarantor, in each case whether now
owned or hereafter acquired or existing, and wherever located (together with all
other collateral security for the Obligations at any time granted to or held or
acquired by Lender, collectively, the "Collateral"):
(a) all Accounts;
(b) all general intangibles, including, without limitation,
all Intellectual Property;
(c) all Inventory;
(d) all Equipment and fixtures at any time located on or about
the ▇▇▇▇▇▇▇ Road Facility or otherwise at any time described in the Mortgage or
any other mortgage, deed of trust or deed to secure debt by any Borrower or
Guarantor in favor of or for the benefit of Lender and the Real Property and
fixtures constituting the ▇▇▇▇▇▇▇ Road Facility or otherwise described in the
Mortgage or such other mortgage, deed of trust or deed to secure debt;
(e) all chattel paper, including, without limitation, all
tangible and electronic chattel paper;
(f) all instruments, including, without limitation, all
promissory notes;
36
(g) all documents;
(h) all deposit accounts;
(i) all letters of credit, banker's acceptances and similar
instruments and including all letter-of-credit rights;
(j) all supporting obligations and all present and future
liens, security interests, rights, remedies, title and interest in, to and in
respect of Receivables and other Collateral, including (i) rights and remedies
under or relating to guaranties, contracts of suretyship, letters of credit and
credit and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (iii) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (iv) deposits by and property of account debtors or
other persons securing the obligations of account debtors;
(k) all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (ii) monies, credit balances,
deposits and other property of any Borrower or Guarantor now or hereafter held
or received by or in transit to Lender or its Affiliates or at any other
depository or other institution from or for the account of any Borrower or
Guarantor, whether for safekeeping, pledge, custody, transmission, collection or
otherwise;
(l) all commercial tort claims, including, without limitation,
those identified in the Information Certificate;
(m) to the extent not otherwise described above, all
Receivables;
(n) all Records; and
(o) all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of or other involuntary conversion of any kind or
nature of any or all of the other Collateral.
5.2 Perfection of Security Interests.
(a) Each Borrower and Guarantor irrevocably and
unconditionally authorizes Lender (or its agent) to file at any time and from
time to time such financing statements with respect to the Collateral naming
Lender or its designee as the secured party and such Borrower or Guarantor as
debtor, as Lender may require, and including any other information with respect
to such Borrower or Guarantor or otherwise required by part 5 of Article 9 of
the Uniform Commercial Code of such jurisdiction as Lender may determine,
together with any amendment and continuations with respect thereto, which
authorization shall apply to all financing statements filed on, prior to or
after the date hereof. Each Borrower and Guarantor hereby
37
ratifies and approves all financing statements naming Lender or its designee as
secured party and such Borrower or Guarantor, as the case may be, as debtor with
respect to the Collateral (and any amendments with respect to such financing
statements) filed by or on behalf of Lender prior to the date hereof and
ratifies and confirms the authorization of Lender to file such financing
statements (and amendments, if any). Each Borrower and Guarantor hereby
authorizes Lender to adopt on behalf of such Borrower and Guarantor any symbol
required for authenticating any electronic filing. In the event that the
description of the collateral in any financing statement naming Lender or its
designee as the secured party and any Borrower or Guarantor as debtor includes
assets and properties of such Borrower or Guarantor that do not at any time
constitute Collateral, whether hereunder, under any of the other Financing
Agreements or otherwise, the filing of such financing statement shall
nonetheless be deemed authorized by such Borrower or Guarantor to the extent of
the Collateral included in such description and it shall not render the
financing statement ineffective as to any of the Collateral or otherwise affect
the financing statement as it applies to any of the Collateral. In no event
shall any Borrower or Guarantor at any time file, or permit or cause to be
filed, any correction statement or termination statement with respect to any
financing statement (or amendment or continuation with respect thereto) naming
Lender or its designee as secured party and such Borrower or Guarantor as
debtor.
(b) Each Borrower and Guarantor does not have any chattel
paper (whether tangible or electronic) or instruments as of the date hereof,
except as set forth in the Information Certificate. In the event that any
Borrower or Guarantor shall be entitled to or shall receive any chattel paper or
instrument after the date hereof, Borrowers and Guarantors shall promptly notify
Lender thereof in writing. Promptly upon the receipt thereof by or on behalf of
any Borrower or Guarantor (including by any agent or representative), such
Borrower or Guarantor shall deliver, or cause to be delivered to Lender, all
tangible chattel paper and instruments that such Borrower or Guarantor has or
may at any time acquire, accompanied by such instruments of transfer or
assignment duly executed in blank as Lender may from time to time specify, in
each case except as Lender may otherwise agree. At Lender's option, each
Borrower and Guarantor shall, or Lender may at any time on behalf of any
Borrower or Guarantor, cause the original of any such instrument or chattel
paper to be conspicuously marked in a form and manner acceptable to Lender with
the following legend referring to chattel paper or instruments as applicable:
"This [chattel paper][instrument] is subject to the security interest of
Congress Financial Corporation and any sale, transfer, assignment or encumbrance
of this [chattel paper][instrument] violates the rights of such secured party."
(c) In the event that any Borrower or Guarantor shall at any
time hold or acquire an interest in any electronic chattel paper or any
"transferable record" (as such term is defined in Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction), such Borrower or Guarantor shall promptly notify Lender thereof
in writing. Promptly upon Lender's request, such Borrower or Guarantor shall
take, or cause to be taken, such actions as Lender may request to give Lender
control of such electronic chattel paper under Section 9-105 of the UCC and
control of such transferable record under Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or, as the case may be, Section
16 of the Uniform Electronic Transactions Act, as in effect in such
jurisdiction.
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(d) Each Borrower and Guarantor does not have any deposit
accounts as of the date hereof, except as set forth in the Information
Certificate. Borrowers and Guarantors shall not, directly or indirectly, after
the date hereof open, establish or maintain any deposit account unless each of
the following conditions is satisfied: (i) Lender shall have received not less
than five (5) Business Days prior written notice of the intention of any
Borrower or Guarantor to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Lender the name of
the account, the owner of the account, the name and address of the bank at which
such account is to be opened or established, the individual at such bank with
whom such Borrower or Guarantor is dealing and the purpose of the account, (ii)
the bank where such account is opened or maintained shall be acceptable to
Lender, and (iii) on or before the opening of such deposit account, such
Borrower or Guarantor shall as Lender may specify either (A) deliver to Lender a
Deposit Account Control Agreement with respect to such deposit account duly
authorized, executed and delivered by such Borrower or Guarantor and the bank at
which such deposit account is opened and maintained or (B) arrange for Lender to
become the customer of the bank with respect to the deposit account on terms and
conditions acceptable to Lender. The terms of this subsection (d) shall not
apply to deposit accounts specifically and exclusively used for payroll, payroll
taxes and other employee wage and benefit payments to or for the benefit of any
Borrower's or Guarantor's salaried employees.
(e) No Borrower or Guarantor owns or holds, directly or
indirectly, beneficially or as record owner or both, any investment property, as
of the date hereof, or have any investment account, securities account,
commodity account or other similar account with any bank or other financial
institution or other securities intermediary or commodity intermediary as of the
date hereof, in each case except as set forth in the Information Certificate.
(i) In the event that any Borrower or Guarantor shall
be entitled to or shall at any time after the date hereof hold or acquire any
certificated securities, such Borrower or Guarantor shall promptly endorse,
assign and deliver the same to Lender, accompanied by such instruments of
transfer or assignment duly executed in blank as Lender may from time to time
specify. If any securities, now or hereafter acquired by any Borrower or
Guarantor are uncertificated and are issued to such Borrower or Guarantor or its
nominee directly by the issuer thereof, such Borrower or Guarantor shall
immediately notify Lender thereof and shall as Lender may specify, either (A)
cause the issuer to agree to comply with instructions from Lender as to such
securities, without further consent of any Borrower or Guarantor or such
nominee, or (B) arrange for Lender to become the registered owner of the
securities.
(ii) Borrowers and Guarantors shall not, directly or
indirectly, after the date hereof open, establish or maintain any investment
account, securities account, commodity account or any other similar account
(other than a deposit account) with any securities intermediary or commodity
intermediary unless each of the following conditions is satisfied: (A) Lender
shall have received not less than five (5) Business Days' prior written notice
of the intention of Borrower or Guarantor to open or establish such account
which notice shall specify in reasonable detail and specificity acceptable to
Lender the name of the account, the owner of the account, the name and address
of the securities intermediary or commodity intermediary at which such account
is to be opened or established, the individual at such intermediary with
39
whom such Borrower or Guarantor is dealing and the purpose of the account, (B)
the securities intermediary or commodity intermediary (as the case may be) where
such account is opened or maintained shall be acceptable to Lender, and (C) on
or before the opening of such investment account, securities account or other
similar account with a securities intermediary or commodity intermediary, such
Borrower or Guarantor shall as Lender may specify either (1) execute and
deliver, and cause to be executed and delivered to Lender, an Investment
Property Control Agreement with respect thereto duly authorized, executed and
delivered by such Borrower or Guarantor and such securities intermediary or
commodity intermediary or (2) arrange for Lender to become the entitlement
holder with respect to such investment property on terms and conditions
acceptable to Lender.
(f) Borrowers and Guarantors are not the beneficiary or
otherwise entitled to any right to payment under any letter of credit, banker's
acceptance or similar instrument as of the date hereof, except as set forth in
the Information Certificate. In the event that any Borrower or Guarantor shall
be entitled to or shall receive any right to payment under any letter of credit,
banker's acceptance or any similar instrument, whether as beneficiary thereof or
otherwise after the date hereof, such Borrower or Guarantor shall promptly
notify Lender thereof in writing. Such Borrower or Guarantor shall immediately,
as Lender may specify, either (i) deliver, or cause to be delivered to Lender,
with respect to any such letter of credit, banker's acceptance or similar
instrument, the written agreement of the issuer and any other nominated person
obligated to make any payment in respect thereof (including any confirming or
negotiating bank), in form and substance satisfactory to Lender, consenting to
the assignment of the proceeds of the letter of credit to Lender by such
Borrower or Guarantor and agreeing to make all payments thereon directly to
Lender or as Lender may otherwise direct or (ii) cause Lender to become, at
Borrowers' expense, the transferee beneficiary of the letter of credit, banker's
acceptance or similar instrument (as the case may be).
(g) Borrowers and Guarantors do not have any commercial tort
claims as of the date hereof, except as set forth in the Information
Certificate. In the event that any Borrower or Guarantor shall at any time after
the date hereof have any commercial tort claims, such Borrower or Guarantor
shall promptly notify Lender thereof in writing, which notice shall (i) set
forth in reasonable detail the basis for and nature of such commercial tort
claim and (ii) include the express grant by such Borrower or Guarantor to Lender
of a security interest in such commercial tort claim (and the proceeds thereof).
In the event that such notice does not include such grant of a security
interest, the sending thereof by such Borrower or Guarantor to Lender shall be
deemed to constitute such grant to Lender. Upon the sending of such notice, any
commercial tort claim described therein shall constitute part of the Collateral
and shall be deemed included therein. Without limiting the authorization of
Lender provided in Section 5.2(a) hereof or otherwise arising by the execution
by such Borrower or Guarantor of this Agreement or any of the other Financing
Agreements, Lender is hereby irrevocably authorized from time to time and at any
time to file such financing statements naming Lender or its designee as secured
party and such Borrower or Guarantor as debtor, or any amendments to any
financing statements, covering any such commercial tort claim as Collateral. In
addition, each Borrower and Guarantor shall promptly upon Lender's reasonable
request, execute and deliver, or cause to be executed and delivered, to Lender
such other agreements, documents and instruments as Lender may require
40
in connection with such commercial tort claim.
(h) Borrowers and Guarantors do not have any goods, documents
of title or other Collateral in the custody, control or possession of a third
party as of the date hereof, except as set forth in the Information Certificate
and except for goods located in the United States in transit to a location of a
Borrower or Guarantor permitted herein in the ordinary course of business of
such Borrower or Guarantor in the possession of the carrier transporting such
goods. In the event that any goods, documents of title or other Collateral are
at any time after the date hereof in the custody, control or possession of any
other person not referred to in the Information Certificate or such carriers,
Borrowers and Guarantors shall promptly notify Lender thereof in writing.
Promptly upon Lender's request, Borrowers and Guarantors shall use their best
efforts to deliver, or cause to be delivered, to Lender a Collateral Access
Agreement duly authorized, executed and delivered by such person and the
Borrower or Guarantor that is the owner of such Collateral.
(i) Borrowers and Guarantors shall take any other actions
reasonably requested by Lender from time to time to cause the attachment,
perfection and first priority of, and the ability of Lender to enforce, the
security interest of Lender in any and all of the Collateral, including, without
limitation, (i) executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the UCC or other applicable
law, to the extent, if any, that any Borrower's or Guarantor's signature thereon
is required therefor, (ii) causing Lender's name to be noted as secured party on
any certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of Lender to enforce, the
security interest of Lender in such Collateral, (iii) complying with any
provision of any statute, regulation or treaty of the United States as to any
Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of Lender to enforce, the security
interest of Lender in such Collateral, (iv) obtaining the consents and approvals
of any Governmental Authority or third party, including, without limitation, any
consent of any licensor, lessor or other person obligated on Collateral, and
taking all actions required by any earlier versions of the UCC or by other law,
as applicable in any relevant jurisdiction.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Accounts. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of any Borrower or Guarantor and (c) all other appropriate
debits and credits as provided in this Agreement, including fees, charges,
costs, expenses and interest. All entries in the loan account(s) shall be made
in accordance with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower Agent each month a
statement setting forth the balance in the Borrowers' loan account(s) maintained
by Lender for Borrowers pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Lender but shall, absent manifest errors or
omissions, be considered correct and deemed accepted by Borrowers and Guarantors
and conclusively binding upon Borrowers and Guarantors as an account stated
except to the
41
extent that Lender receives a written notice from Borrower Agent of any specific
exceptions of Borrower Agent thereto within sixty (60) days after the date such
statement has been received by Borrower Agent. Until such time as Lender shall
have rendered to Borrower Agent a written statement as provided above, the
balance in any Borrower's loan account(s) shall be presumptive evidence of the
amounts due and owing to Lender by Borrowers and Guarantors.
6.3 Collection of Accounts.
(a) Borrowers and Guarantors shall establish and maintain, at
their expense, blocked accounts or lockboxes and related blocked accounts
(together with any deposit accounts of P&O or any other Obligor that may at any
time be subject to a Deposit Account Control Agreement, collectively, the
"Blocked Accounts"), as Lender may specify, with such banks as are acceptable to
Lender into which Borrowers and Guarantors shall promptly deposit and direct
their respective account debtors to directly remit all payments on Receivables
and all payments constituting proceeds of Inventory or other Collateral, in each
case in the identical form in which such payments are made, whether by cash,
check or other manner. Borrowers and Guarantors shall deliver, or cause to be
delivered, to Lender, and upon Lender's request, Obligors shall deliver, or
cause to be delivered, to Lender, a Deposit Account Control Agreement duly
authorized, executed and delivered by each bank where a Blocked Account is
maintained as provided in Section 5.2 hereof or at any time and from time to
time Lender may become the bank's customer with respect to any of the Blocked
Accounts and promptly upon Lender's request, Borrowers and Obligors shall
execute and deliver such agreements and documents as Lender may require in
connection therewith.
(b) The depository banks at which the Blocked Accounts are
maintained may transfer the funds on deposit in the Blocked Accounts to such
operating bank account of the applicable Borrower or Obligor whose funds have
been deposited in such Blocked Account as such Borrower or Obligor or in the
case of any of the Borrowers, Borrower Agent, may specify to such bank (with
notice thereof to Lender) until such time as Lender shall notify the depository
bank otherwise.
(i) With respect to the Blocked Accounts of
Borrowers, without limiting any other rights or remedies of Lender, Lender may,
at its option, instruct the depository banks at which such Blocked Accounts are
maintained to transfer all available funds received or deposited therein to the
Lender Payment Account at any time that either: (A) a Default or Event of
Default shall exist or have occurred and be continuing, or (B) Excess
Availability is less than $15,000,000 or (C) the bank at which the Blocked
Accounts are maintained shall send a notice that such bank intends to terminate
any Deposit Account Control Agreement. Lender shall send to Borrower Agent a
copy of any such written instruction sent by Lender to the depository bank
promptly thereafter. With respect to the Blocked Accounts of Borrowers, in the
event that at any time after Lender has instructed such depository banks to
transfer such funds to the Lender Payment Account, each of the conditions set
forth in clauses (A) and (B) above do not exist or have not occurred and are not
continuing for a period of thirty (30) consecutive days, upon Borrower Agent's
written request received by Lender within five (5) Business Days after the end
of such thirty (30) day period, Lender shall instruct such depository banks to
transfer the funds
42
on deposit in such accounts to such operating deposit account of the applicable
Borrower as Borrower Agent may specify in writing to Lender until such time as
Lender is entitled to notify and shall notify the depository bank otherwise as
provided above.
(ii) With respect to the Blocked Accounts of Obligors, without
limiting any other rights or remedies of Lender, Lender may, at its option,
instruct the depository banks at which such Blocked Accounts are maintained to
transfer all available funds received or deposited therein to the Lender Payment
Account at any time that either: (A) a Default or Event of Default shall exist
or have occurred and be continuing or (B) the bank at which the Blocked Accounts
are maintained shall send a notice that such bank intends to terminate any
Deposit Account Control Agreement. Lender shall send to Borrower Agent a copy of
any such written instruction sent by Lender to the depository bank promptly
thereafter. In the event that at any time after Lender has instructed such
depository banks to transfer such funds to the Lender Payment Account, there is
no Default or Event of Default for a period of thirty (30) consecutive days,
upon such Obligors written request received by Lender within five (5) Business
Days after the end of such thirty (30) day period, Lender shall instruct such
depository banks to transfer the funds on deposit in such accounts to such
operating deposit account of the applicable Obligor as such Obligor may specify
in writing to Lender until such time as Lender is entitled to notify and shall
notify the depository bank otherwise as provided above.
(c) Each Borrower agrees that all payments made to such Blocked
Accounts or other funds received and collected by Lender, whether in respect of
the Receivables, as proceeds of Inventory or other Collateral or otherwise shall
be treated as payments to Lender in respect of the Obligations and therefore
shall constitute the property of Lender to the extent of the then outstanding
Obligations.
(d) For purposes of calculating the amount of the Loans available to
each Borrower, such payments will be applied (conditional upon final collection)
to the Obligations on the Business Day of receipt by Lender of immediately
available funds in the Lender Payment Account provided such payments and notice
thereof are received in accordance with Lender's usual and customary practices
as in effect from time to time and within sufficient time to credit such
Borrower's loan account on such day, and if not, then on the next Business Day.
(e) Each Borrower and Guarantor and their respective shareholders,
directors, employees, agents, Subsidiaries or other Affiliates shall, acting as
trustee for Lender, receive, as the property of Lender, any monies, checks,
notes, drafts or any other payment relating to and/or proceeds of Accounts or
other Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be
deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be commingled with any
Borrower's or Guarantor's own funds. Borrowers agree to reimburse Lender on
demand for any amounts owed or paid to any bank at which a Blocked Account is
established or any other bank or person involved in the transfer of funds to or
from the Blocked Accounts arising out of Lender's payments to or indemnification
of such bank or person. The obligations of Borrowers to reimburse Lender for
such amounts pursuant to this Section 6.3 shall survive the termination or
non-renewal of this Agreement.
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6.4 Payments.
(a) All Obligations shall be payable to the Lender Payment
Account as provided in Section 6.3 or such other place as Lender may designate
from time to time. Lender shall apply payments received or collected from any
Borrower or Guarantor or for the account of any Borrower or Guarantor (including
the monetary proceeds of collections or of realization upon any Collateral) as
follows: first, to pay any fees, indemnities or expense reimbursements then due
to Lender from any Borrower or Guarantor; second, to pay interest due in respect
of any Loans; third, to pay principal due in respect of the Loans; fourth, to
pay or prepay any other Obligations whether or not then due, in such order and
manner as Lender determines. Notwithstanding anything to the contrary contained
in this Agreement, (i) unless so directed by Borrower Agent, or unless a Default
or an Event of Default shall exist or have occurred and be continuing, Lender
shall not apply any payments which it receives to any Eurodollar Rate Loans,
except (A) on the expiration date of the Interest Period applicable to any such
Eurodollar Rate Loans or (B) in the event that there are no outstanding Prime
Rate Loans and (ii) to the extent any Borrower uses any proceeds of the Loans or
Letter of Credit Accommodations to acquire rights in or the use of any
Collateral or to repay any Indebtedness used to acquire rights in or the use of
any Collateral, payments in respect of the Obligations shall be deemed applied
first to the Obligations arising from Loans and Letter of Credit Accommodations
that were not used for such purposes and second to the Obligations arising from
Loans and Letter of Credit Accommodations the proceeds of which were used to
acquire rights in or the use of any Collateral in the chronological order in
which such Borrower acquired such rights in or the use of such Collateral.
(b) At Lender's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of any Borrower.
Borrowers and Guarantors shall make all payments to Lender on the Obligations
free and clear of, and without deduction or withholding for or on account of,
any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees,
deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Lender is required to surrender or return such payment
or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Lender. Borrowers and Guarantors shall be liable to pay
to Lender, and do hereby indemnify and hold Lender harmless for the amount of
any payments or proceeds surrendered or returned. This Section 6.4(b) shall
remain effective notwithstanding any contrary action which may be taken by
Lender in reliance upon such payment or proceeds. This Section 6.4 shall survive
the payment of the Obligations and the termination of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Borrower Agent
or any Borrower or other authorized person or, at the discretion of Lender, if
such Loans are necessary to satisfy any Obligations. All requests for Loans or
Letter of Credit Accommodations hereunder shall specify the date on which the
requested advance is to be made or Letter of Credit Accommodations established
44
(which day shall be a Business Day) and the amount of the requested Loan.
Requests received after 11:00 a.m. Dallas, Texas time on any day shall be deemed
to have been made as of the opening of business on the immediately following
Business Day. All Loans and Letter of Credit Accommodations under this Agreement
shall be conclusively presumed to have been made to, and at the request of and
for the benefit of, any Borrower or Guarantor when deposited to the credit of
any Borrower or Guarantor or otherwise disbursed or established in accordance
with the instructions of any Borrower or Guarantor or in accordance with the
terms and conditions of this Agreement.
6.6 Appointment of Agent for Requesting Loans and Receipts of Loans and
Statements.
(a) Each Borrower hereby irrevocably appoints and constitutes
Borrower Agent as its agent to request and receive Loans and Letter of Credit
Accommodations pursuant to this Agreement and the other Financing Agreements
from Lender in the name or on behalf of such Borrower. Lender may disburse the
Loans to such bank account of Borrower Agent or a Borrower or otherwise make
such Loans to a Borrower and provide such Letter of Credit Accommodations to a
Borrower as Borrower Agent may designate or direct, without notice to any other
Borrower or Obligor. Notwithstanding anything to the contrary contained herein,
Lender may at any time and from time to time require that Loans to or for the
account of any Borrower be disbursed directly to an operating account of such
Borrower.
(b) Borrower Agent hereby accepts the appointment by Borrowers
to act as the agent of Borrowers pursuant to this Section 6.6. Borrower Agent
shall ensure that the disbursement of any Loans to each Borrower requested by or
paid to or for the account of Borrower Agent, or the issuance of any Letter of
Credit Accommodations for a Borrower hereunder, shall be paid to or for the
account of such Borrower.
(c) Each Borrower and other Guarantor hereby irrevocably
appoints and constitutes Borrower Agent as its agent to receive statements on
account and all other notices from Lender with respect to the Obligations or
otherwise under or in connection with this Agreement and the other Financing
Agreements.
(d) Any notice, election, representation, warranty, agreement
or undertaking by or on behalf of any Borrower or any Guarantor by Borrower
Agent shall be deemed for all purposes to have been made by such Borrower or
Guarantor, as the case may be, and shall be binding upon and enforceable against
such Borrower or Guarantor to the same extent as if made directly by such
Borrower of Guarantor.
(e) No purported termination of the appointment of Borrower
Agent as agent as aforesaid shall be effective, except after ten (10) days'
prior written notice to Lender.
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SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
(a) Borrowers shall provide Lender with the following
documents in a form satisfactory to Lender:
(i) as soon as possible after the end of each week
(but in any event by each Wednesday after the end thereof), on a weekly basis or
more frequently as Lender may request at any time that the aggregate amount of
the Excess Availability of Borrowers is less than $7,500,000 or a Default or
Event of Default shall exist or have occurred, schedules of sales made, credits
issued and cash received;
(ii) as soon as possible after the end of each month
(but in any event within ten (10) Business Days after the end thereof), on a
monthly basis or more frequently as Lender may request at any time that the
aggregate amount of the Excess Availability of Borrowers is less than $7,500,000
or a Default or Event of Default shall exist or have occurred, (A) perpetual
inventory reports, (B) inventory reports by location and category (and including
the amounts of Inventory and the book value thereof at, any leased locations and
at premises of warehouses, processors or other third parties), (C) agings of
accounts receivable and (D) agings of accounts payable (and including
information indicating the amounts owing to owners and lessors of leased
premises, warehouses, processors and other third parties from time to time in
possession of any Collateral);
(iii) upon Lender's request, (A) copies of customer
statements and credit memos, remittance advices and reports, and copies of
deposit slips and bank statements, (B) copies of shipping and delivery
documents, and (C) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by any Borrower or Guarantor;
(iv) such other reports as to the Collateral as
Lender shall reasonably request from time to time.
(b) If any Borrower's or Guarantor's records or reports of the
Collateral are prepared or maintained by an accounting service, contractor,
shipper or other agent, such Borrower and Guarantor hereby irrevocably
authorizes such service, contractor, shipper or agent to deliver such records,
reports, and related documents to Lender and to follow Lender's instructions
with respect to further services at any time that an Event of Default exists or
has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrowers shall notify Lender promptly of: (i) any
material delay in any Borrower's performance of any of its material obligations
to any account debtor or the assertion of any material claims, offsets, defenses
or counterclaims by any account debtor, or any material
46
disputes with account debtors, or any settlement, adjustment or compromise
thereof, (ii) all material adverse information known to any Borrower or
Guarantor relating to the financial condition of any account debtor and (iii)
any event or circumstance which, to any Borrower's or Guarantor's knowledge,
would cause Lender to consider any then existing Accounts as no longer
constituting Eligible Accounts. No credit, discount, allowance or extension or
agreement for any of the foregoing shall be granted to any account debtor
without Lender's consent, except in the ordinary course of a Borrower's or
Guarantor's business in accordance with the current practices and policies of
such Borrower or Guarantor as in effect on the date hereof and except as set
forth in the schedules delivered to Lender pursuant to Section 7.1(a) above. So
long as no Event of Default exists or has occurred and is continuing, Borrowers
and Guarantors shall settle, adjust or compromise any claim, offset,
counterclaim or dispute with any account debtor. At any time that an Event of
Default exists or has occurred and is continuing, Lender shall, at its option,
have the exclusive right to settle, adjust or compromise any claim, offset,
counterclaim or dispute with account debtors or grant any credits, discounts or
allowances.
(b) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of each Borrower's business in
accordance with practices and policies previously disclosed to Lender, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement, (v) none of the transactions
giving rise thereto will violate any applicable foreign, Federal, State or local
laws or regulations, all documentation relating thereto will be legally
sufficient under such laws and regulations and all such documentation will be
legally enforceable in accordance with its terms.
(c) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Receivables or other Collateral, by
mail, telephone, facsimile transmission or otherwise.
7.3 Inventory Covenants. With respect to the Inventory: (a) each
Borrower and Guarantor shall at all times maintain inventory records reasonably
satisfactory to Lender, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, such Borrower's or
Guarantor's cost therefor and daily withdrawals therefrom and additions thereto;
(b) Borrowers and Guarantors shall conduct a physical count of the Inventory at
least once each year but at any time or times as Lender may request on or after
an Event of Default, and promptly following such physical inventory shall supply
Lender with a report in the form and with such specificity as may be
satisfactory to Lender concerning such physical count; (c) Borrowers and
Guarantors shall not remove any Inventory from the locations set forth or
permitted herein, without the prior written consent of Lender, except for sales
of Inventory in the ordinary course of its business and except to move Inventory
directly from one location set forth or permitted herein to another such
location and except for Inventory shipped from the
47
manufacturer thereof to such Borrower or Guarantor which is in transit to the
locations set forth or permitted herein; (d) upon Lender's request, Borrowers
shall, at their expense, no more than one (1) time in any twelve (12) month
period (provided, that if the aggregate amount of the component of the Borrowing
Base based on Eligible Inventory at any time exceeds $5,000,000, two (2) times
in any twelve (12) month period), but at any time or times as Lender may request
on or after an Event of Default, deliver or cause to be delivered to Lender
written appraisals as to the Inventory in form, scope and methodology acceptable
to Lender and by an appraiser acceptable to Lender, addressed to Lender and upon
which Lender is expressly permitted to rely; (e) Borrowers and Guarantors shall
produce, use, store and maintain the Inventory with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including the requirements of the Federal Fair
Labor Standards Act of 1938, as amended and all rules, regulations and orders
related thereto); (f) none of the Inventory or other Collateral constitutes farm
products or the proceeds thereof; (g) each Borrower and Guarantor assumes all
responsibility and liability arising from or relating to the production, use,
sale or other disposition of the Inventory; (h) Borrowers and Guarantors shall
not sell Inventory to any customer on approval, or any other basis which
entitles the customer to return or may obligate any Borrower or Guarantor to
repurchase such Inventory; (i) Borrowers and Guarantors shall keep the Inventory
in good and marketable condition; and (j) Borrowers and Guarantors shall not,
without prior written notice to Lender or the specific identification of such
Inventory in a report with respect thereto provided by Borrower Agent to Lender
pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on
consignment or approval.
7.4 Equipment and Real Property Covenants. With respect to the
Equipment and Real Property: (a) upon Lender's request at any time on or after
an Event of Default, Borrowers and Guarantors shall, at their expense, deliver
or cause to be delivered to Lender written appraisals as to the Equipment and/or
the Real Property subject to the Mortgage in form, scope and methodology
acceptable to Lender and by an appraiser acceptable to Lender, addressed to
Lender and upon which Lender is expressly permitted to rely; (b) Borrowers and
Guarantors shall keep the Equipment in good order, repair, running and
marketable condition (ordinary wear and tear excepted); (c) Borrowers and
Guarantors shall use the Equipment and Real Property with all reasonable care
and caution and in accordance with applicable standards of any insurance and in
conformity with all applicable laws; (d) the Equipment is and shall be used in
the business of Borrowers and Guarantors and not for personal, family, household
or farming use; (e) Borrowers and Guarantors shall not remove any Equipment from
the locations set forth or permitted herein, except to the extent necessary to
have any Equipment repaired or maintained in the ordinary course of its business
or to move Equipment directly from one location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by or
for the benefit of such Borrower or Guarantor in the ordinary course of
business, provided, that, other than the movement of Equipment for repairs or
the movement of motor vehicles as permitted herein, Borrowers and Guarantors
shall not move any Equipment currently located at the ▇▇▇▇▇▇▇ Road Facility
having a value in excess of $250,000 in the aggregate for all such Equipment
that might be so moved to any other location, without the prior written consent
of Lender; and (f) each Borrower and Guarantor assumes all responsibility and
liability arising from the use of the Equipment and Real Property.
48
7.5 Power of Attorney. Each Borrower and Guarantor hereby irrevocably
designates and appoints Lender (and all persons designated by Lender) as such
Borrower's and Guarantor's true and lawful attorney-in-fact, and authorizes
Lender, in such Borrower's, Guarantor's or Lender's name, to: (a) at any time an
Event of Default exists or has occurred and is continuing (i) demand payment on
Receivables or other Collateral, (ii) enforce payment of Receivables by legal
proceedings or otherwise, (iii) exercise all of such Borrower's or Guarantor's
rights and remedies to collect any Receivable or other Collateral, (iv) sell or
assign any Receivable upon such terms, for such amount and at such time or times
as the Lender deems advisable, (v) settle, adjust, compromise, extend or renew
an Account, (vi) discharge and release any Receivable, (vii) prepare, file and
sign such Borrower's or Guarantor's name on any proof of claim in bankruptcy or
other similar document against an account debtor or other obligor in respect of
any Receivables or other Collateral, (viii) notify the post office authorities
to change the address for delivery of remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral to an address
designated by Lender, and open and dispose of all mail addressed to such
Borrower or Guarantor and handle and store all mail relating to the Collateral;
and (ix) do all acts and things which are necessary, in Lender's determination,
to fulfill such Borrower's or Guarantor's obligations under this Agreement and
the other Financing Agreements and (b) at any time to (i) take control in any
manner of any item of payment in respect of Receivables or constituting
Collateral or otherwise received in or for deposit in the Blocked Accounts or
otherwise received by Lender, (ii) have access to any lockbox or postal box into
which remittances from account debtors or other obligors in respect of
Receivables or other proceeds of Collateral are sent or received, (iii) endorse
such Borrower's or Guarantor's name upon any items of payment in respect of
Receivables or constituting Collateral or otherwise received by Lender and
deposit the same in Lender's account for application to the Obligations, (iv)
endorse such Borrower's or Guarantor's name upon any chattel paper, document,
instrument, invoice, or similar document or agreement relating to any Receivable
or any goods pertaining thereto or any other Collateral, including any warehouse
or other receipts, or bills of lading and other negotiable or non-negotiable
documents, (v) clear Inventory the purchase of which was financed with Letter of
Credit Accommodations through U.S. Customs or foreign export control authorities
in such Borrower's or Guarantor's name, Lender's name or the name of Lender's
designee, and to sign and deliver to customs officials powers of attorney in
such Borrower's or Guarantor's name for such purpose, and to complete in such
Borrower's or Guarantor's or Lender's name, any order, sale or transaction,
obtain the necessary documents in connection therewith and collect the proceeds
thereof, and (vi) sign such Borrower's or Guarantor's name on any verification
of Receivables and notices thereof to account debtors or any secondary obligors
or other obligors in respect thereof. Each Borrower and Guarantor hereby
releases Lender and its officers, employees and designees from any liabilities
arising from any act or acts under this power of attorney and in furtherance
thereof, whether of omission or commission, except as a result of Lender's own
gross negligence or wilful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, upon notice to Borrower
Agent, (a) cure any default by any Borrower or Guarantor under any material
agreement with a third party that affects the Collateral, its value or the
ability of Lender to collect, sell or otherwise dispose of the Collateral or the
rights and remedies of Lender therein or the ability of any Borrower or
49
Guarantor to perform its obligations hereunder or under any of the other
Financing Agreements, (b) pay or bond on appeal any judgment entered against any
Borrower or Guarantor, (c) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and (d) pay any amount, incur any expense or perform any act which, in Lender's
judgment, is necessary or appropriate to preserve, protect, insure or maintain
the Collateral and the rights of Lender with respect thereto. Lender may add any
amounts so expended to the Obligations and charge any Borrower's account
therefor, such amounts to be repayable by Borrowers on demand. Lender shall be
under no obligation to effect such cure, payment or bonding and shall not, by
doing so, be deemed to have assumed any obligation or liability of any Borrower
or Guarantor. Any payment made or other action taken by Lender under this
Section shall be without prejudice to any right to assert an Event of Default
hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as reasonably requested by
Lender, at the reasonable cost and expense of Borrowers, (a) Lender or its
designee shall have complete access to all of each Borrower's and Guarantor's
premises during normal business hours and after notice to Borrower Agent, or at
any time and without notice to Borrower Agent if an Event of Default exists or
has occurred and is continuing, for the purposes of inspecting, verifying and
auditing the Collateral and all of each Borrower's and Guarantor's books and
records, including the Records, and (b) each Borrower and Guarantor shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may request, and (c) Lender or Lender's designee may use
during normal business hours such of any Borrower's and Guarantor's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Receivables and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Each Borrower and Guarantor hereby represents and warrants to Lender
the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of the
making of Loans and providing Letter of Credit Accommodations to Borrowers:
8.1 Corporate Existence, Power and Authority. Each Borrower and
Guarantor is a corporation duly organized and in good standing under the laws of
its state of incorporation and is duly qualified as a foreign corporation and in
good standing in all states or other jurisdictions where the nature and extent
of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on such Borrower's or
Guarantor's financial condition, results of operation or business or the rights
of Lender in or to any of the Collateral. The execution, delivery and
performance of this Agreement, the other Financing Agreements and the
transactions contemplated hereunder and thereunder (a) are all within each
Borrower's and Guarantor's corporate powers, (b) have been duly authorized, (c)
are not in contravention of law or the terms of any Borrower's or Guarantor's
certificate of incorporation, by-laws, or other
50
organizational documentation, or any indenture, agreement or undertaking to
which any Borrower or Guarantor is a party or by which any Borrower or Guarantor
or its property are bound and (d) will not result in the creation or imposition
of, or require or give rise to any obligation to grant, any lien, security
interest, charge or other encumbrance upon any property of any Borrower or
Guarantor (other than those created or imposed by this Agreement or any of the
other Financing Agreements). This Agreement and the other Financing Agreements
to which any Borrower or Guarantor is a party constitute legal, valid and
binding obligations of such Borrower and Guarantor enforceable in accordance
with their respective terms.
8.2 Name; State of Organization; Chief Executive Office; Collateral
Locations.
(a) The exact legal name of each Borrower and Guarantor is as
set forth on the signature page of this Agreement and in the Information
Certificate. No Borrower or Guarantor has, during the past five years, been
known by or used any other corporate or fictitious name or been a party to any
merger or consolidation, or acquired all or substantially all of the assets of
any Person, or acquired any of its property or assets out of the ordinary course
of business, except as set forth in the Information Certificate.
(b) Each Borrower and Guarantor is an organization of the type
and organized in the jurisdiction set forth in the Information Certificate. The
Information Certificate accurately sets forth the organizational identification
number of each Borrower and Guarantor or accurately states that such Borrower or
Guarantor has none and accurately sets forth the federal employer identification
number of each Borrower and Guarantor.
(c) The chief executive office and mailing address of each
Borrower and Guarantor and each Borrower's and Guarantor's Records concerning
Accounts are located only at the address identified as such in Schedule 8.2 to
the Information Certificate and its only other places of business and the only
other locations of Collateral, if any, are the addresses set forth in Schedule
8.2 to the Information Certificate, subject to the rights of any Borrower or
Guarantor to establish new locations in accordance with Section 9.2 below. The
Information Certificate correctly identifies any of such locations which are not
owned by a Borrower or Guarantor and sets forth the owners and/or operators
thereof.
8.3 Financial Statements; No Material Adverse Change. All financial
statements relating to any Borrower or Guarantor which have been or may
hereafter be delivered by any Borrower or Guarantor to Lender have been prepared
in accordance with GAAP (except as to any interim financial statements, to the
extent such statements are subject to normal year-end adjustments and do not
include any notes) and fairly present in all material respects the financial
condition and the results of operation of such Borrower and Guarantor as at the
dates and for the periods set forth therein. Except as disclosed in any interim
financial statements furnished by Borrowers and Guarantors to Lender prior to
the date of this Agreement, there has been no act, condition or event which has
had or is reasonably likely to have a Material Adverse Effect since the date of
the most recent audited financial statements of any Borrower or Guarantor
furnished by any Borrower or Guarantor to Lender prior to the date of this
Agreement.
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8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4 to
the Information Certificate and the other liens permitted under Section 9.8
hereof. Each Borrower and Guarantor has good and marketable fee simple title to
or valid leasehold interests in all of its Real Property and good, valid and
merchantable title to all of its other properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 to the Information Certificate or permitted under Section 9.8
hereof.
8.5 Tax Returns. Each Borrower and Guarantor has filed, or caused to be
filed, in a timely manner all material tax returns, reports and declarations
which are required to be filed by it. All information in such tax returns,
reports and declarations is complete and accurate in all material respects. Each
Borrower and Guarantor has paid or caused to be paid all material taxes due and
payable or claimed due and payable in any assessment received by it, except
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to such Borrower or Guarantor and
with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation. Except as set forth on Schedule 8.6 to the Information
Certificate, (a) there is no investigation by any Governmental Authority
pending, or to the best of any Borrower's or Guarantor's knowledge threatened,
against or affecting any Borrower or Guarantor, its or their assets or business
and (b) there is no action, suit, proceeding or claim by any Person pending, or
to the best of any Borrower's or Guarantor's knowledge threatened, against any
Borrower or Guarantor or its or their assets or goodwill, or against or
affecting any transactions contemplated by this Agreement, in each case, which
if adversely determined against such Borrower or Guarantor has or could
reasonably be expected to have a Material Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws.
(a) Borrowers and Guarantors are not in default in any respect
under, or in violation in any respect of the terms of, any material agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound. Borrowers and Guarantors are in
compliance with the requirements of all applicable material laws, rules,
regulations and orders of any Governmental Authority relating to their
respective businesses, including, without limitation, those set forth in or
promulgated pursuant to the Occupational Safety and Health Act of 1970, as
amended, the Fair Labor Standards Act of 1938, as amended, ERISA, the Code, as
amended, and the rules and regulations thereunder, and all Environmental Laws.
(b) Borrowers and Guarantors have obtained all material
permits, licenses, approvals, consents, certificates, orders or authorizations
of any Governmental Authority
52
required for the lawful conduct of its business (the "Permits"). All of the
Permits are valid and subsisting and in full force and effect. There are no
actions, claims or proceedings pending or to the best of any Borrower's or
Guarantor's knowledge, threatened that seek the revocation, cancellation,
suspension or modification of any of the Permits.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrowers, Guarantors and any Subsidiary of any Borrower or
Guarantor have not generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which at any time violates in any
material respect any applicable Environmental Law or Permit, and the operations
of Borrowers, Guarantors and any Subsidiary of any Borrower or Guarantor
complies in all material respects with all Environmental Laws and all Permits.
(b) Except as set forth on Schedule 8.8 to the Information
Certificate, there has been no investigation by any Governmental Authority or
any proceeding, complaint, order, directive, claim, citation or notice by any
Governmental Authority or any other person nor is any pending or to the best of
any Borrower's or Guarantor's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
any Borrower or Guarantor and any Subsidiary of any Borrower or Guarantor or the
release, spill or discharge, threatened or actual, of any Hazardous Material or
the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which adversely affects or could reasonably be expected
to adversely affect in any material respect any Borrower or Guarantor or its or
their business, operations or assets or any properties at which such Borrower or
Guarantor has transported, stored or disposed of any Hazardous Materials.
(c) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrowers, Guarantors and their Subsidiaries have no material
liability (contingent or otherwise) in connection with a release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(d) Borrowers, Guarantors and their Subsidiaries have all
Permits required to be obtained or filed in connection with the operations of
Borrowers and Guarantors under any Environmental Law and all of such licenses,
certificates, approvals or similar authorizations and other Permits are valid
and in full force and effect.
8.9 Employee Benefits.
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other Federal or State law.
Each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the
53
Internal Revenue Service and to the best of any Borrower's or Guarantor's
knowledge, nothinghas occurred which would cause the loss of such qualification.
Each Borrower and its ERISA Affiliates have made all required contributions to
any Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Code has been made with respect to any Plan.
(b) There are no pending, or to the best of any Borrower's or
Guarantor's knowledge, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) the current value of each Plan's assets (determined in accordance
with the assumptions used for funding such Plan pursuant to Section 412 of the
Code) are not less than such Plan's liabilities under Section 4001(a)(16) of
ERISA; (iii) each Borrower and Guarantor, and their ERISA Affiliates, have not
incurred and do not reasonably expect to incur, any liability under Title IV of
ERISA with respect to any Plan (other than premiums due and not delinquent under
Section 4007 of ERISA); (iv) each Borrower and Guarantor, and their ERISA
Affiliates, have not incurred and do not reasonably expect to incur, any
liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or
4243 of ERISA with respect to a Multiemployer Plan; and (v) each Borrower and
Guarantor, and their ERISA Affiliates, have not engaged in a transaction that
would be subject to Section 4069 or 4212(c) of ERISA.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by any Borrower or Guarantor maintained at
any bank or other financial institution are set forth on Schedule 8.10 to the
Information Certificate, subject to the right of each Borrower and Guarantor to
establish new accounts in accordance with Section 5.2 hereof.
8.11 Intellectual Property. Each Borrower and Guarantor owns or
licenses or otherwise has the right to use all Intellectual Property necessary
for the operation of its business as presently conducted or proposed to be
conducted. As of the date hereof, Borrowers and Guarantors do not have any
Intellectual Property registered, or subject to pending applications, in the
United States Patent and Trademark Office or any similar office or agency in the
United States, any State thereof, any political subdivision thereof or in any
other country, other than those described in Schedule 8.11 to the Information
Certificate and has not granted any licenses with respect thereto other than as
set forth in Schedule 8.11 to the Information Certificate. No event has occurred
which permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights. To the best of any
Borrower's and Guarantor's knowledge, no slogan or other advertising device,
product, process, method, substance or other Intellectual Property or goods
bearing or using any Intellectual Property presently contemplated to be sold by
or employed by any Borrower or Guarantor infringes any patent, trademark,
servicemark, tradename, copyright, license or other Intellectual Property owned
by any other Person presently and no claim or litigation is pending or
threatened against or affecting any Borrower or Guarantor contesting its right
to sell or use any such Intellectual Property. Schedule 8.11 to the Information
Certificate sets forth all of the agreements or other
54
arrangements of each Borrower and Guarantor pursuant to which such Borrower or
Guarantor has a license or other right to use any trademarks, logos, designs,
representations or other Intellectual Property owned by another person as in
effect on the date hereof and the dates of the expiration of such agreements or
other arrangements of such Borrower or Guarantor as in effect on the date hereof
(collectively, together with such agreements or other arrangements as may be
entered into by any Borrower or Guarantor after the date hereof, collectively,
the "License Agreements" and individually, a "License Agreement"). No trademark,
servicemark, copyright or other Intellectual Property at any time used by any
Borrower or Guarantor which is owned by another person, or owned by such
Borrower or Guarantor subject to any security interest, lien, collateral
assignment, pledge or other encumbrance in favor of any person other than
Lender, is affixed to any Eligible Inventory, except (a) to the extent permitted
under the term of the license agreements listed on Schedule 8.11 to the
Information Certificate and (b) to the extent the sale of Inventory to which
such Intellectual Property is affixed is permitted to be sold by such Borrower
or Guarantor under applicable law (including the United States Copyright Act of
1976).
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.
(a) Each Borrower and Guarantor does not have any direct or
indirect Subsidiaries or Affiliates and is not engaged in any joint venture or
partnership except as set forth in Schedule 8.12 to the Information Certificate.
(b) Each Borrower and Guarantor is the record and beneficial
owner of all of the issued and outstanding shares of Capital Stock of each of
the Subsidiaries listed on Schedule 8.12 to the Information Certificate as being
owned by such Borrower or Guarantor and there are no proxies, irrevocable or
otherwise, with respect to such shares and no equity securities of any of the
Subsidiaries are or may become required to be issued by reason of any options,
warrants, rights to subscribe to, calls or commitments of any kind or nature and
there are no contracts, commitments, understandings or arrangements by which any
Subsidiary is or may become bound to issue additional shares of it Capital Stock
or securities convertible into or exchangeable for such shares.
(c) The issued and outstanding shares of Capital Stock of each
Borrower and Guarantor are directly and beneficially owned and held by the
persons indicated in the Information Certificate, and in each case all of such
shares have been duly authorized and are fully paid and non-assessable, free and
clear of all claims, liens, pledges and encumbrances of any kind, except as
disclosed in writing to Lender prior to the date hereof.
(d) Each Borrower and Guarantor is Solvent and will continue
to be Solvent after the creation of the Obligations, the security interests of
Lender and the other transaction contemplated hereunder.
8.13 Labor Disputes.
(a) Set forth on Schedule 8.13 to the Information Certificate
is a list (including dates of termination) of all collective bargaining or
similar agreements between or applicable to
55
each Borrower and Guarantor and any union, labor organization or other
bargaining agent in respect of the employees of any Borrower or Guarantor on the
date hereof.
(b) There is (i) no significant unfair labor practice
complaint pending against any Borrower or Guarantor or, to the best of any
Borrower's or Guarantor's knowledge, threatened against it, before the National
Labor Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is
pending on the date hereof against any Borrower or Guarantor or, to best of any
Borrower's or Guarantor's knowledge, threatened against it, and (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against any
Borrower or Guarantor or, to the best of any Borrower's or Guarantor's
knowledge, threatened against any Borrower or Guarantor.
8.14 Restrictions on Subsidiaries. Except for restrictions contained
in this Agreement or any other agreement with respect to Indebtedness of any
Borrower or Guarantor permitted hereunder as in effect on the date hereof, there
are no contractual or consensual restrictions on any Borrower or Guarantor or
any of its Subsidiaries which prohibit or otherwise restrict (a) the transfer of
cash or other assets (i) between any Borrower or Guarantor and any of its or
their Subsidiaries or (ii) between any Subsidiaries of any Borrower or Guarantor
or (b) the ability of any Borrower or Guarantor or any of its or their
Subsidiaries to incur Indebtedness or grant security interests to Lender in the
Collateral.
8.15 Material Contracts. Schedule 8.15 to the Information Certificate
sets forth all Material Contracts to which any Borrower or Guarantor is a party
or is bound as of the date hereof. Borrowers and Guarantors have delivered true,
correct and complete copies of such Material Contracts to Lender on or before
the date hereof. Borrowers and Guarantors are not in breach or in default in any
material respect of or under any Material Contract and have not received any
notice of the intention of any other party thereto to terminate any Material
Contract.
8.16 Payable Practices. Each Borrower and Guarantor have not made any
material change in the historical accounts payable practices from those in
effect immediately prior to the date hereof.
8.17 Intercompany Credit Facilities.
(a) The outstanding principal balance of the Intercompany
Indebtedness of Global to P&O under the Intercompany Credit Facility between
Global and P&O as of the date hereof is $38,440,402. The outstanding principal
balance of the Intercompany Indebtedness of each of Borrowers under the
Intercompany Credit Facilities as of the date hereof is (i) $28,299,954 for
Worldwide, (ii) $25,534,827 for Wedco, and (iii) $14,236,040 for Bayshore.
(b) Each of the Intercompany Loan Agreements constitutes the
legal, valid and binding obligations of each of the parties thereto, enforceable
in accordance with their respective terms. The forms, terms and execution of
each of the Intercompany Loan Agreements is in compliance with all applicable
laws and regulations and each of the Intercompany Loan
56
Agreements has been executed by the duly authorized and acting officers of the
parties thereto who signatures are indicated thereon. P&O, Borrowers and
Guarantors have no notice of any facts which impairs or may impair the validity
or enforceability of the Intercompany Loan Agreements or the Indebtedness
evidenced by or arising pursuant thereto. The Indebtedness of each Borrower to
Global and of Global to P&O under the Intercompany Credit Facilities is and
shall be valid and enforceable. There are no defaults existing under the
Intercompany Loan Agreements and there exists no state of facts which, with the
giving of notice or passage of time or both, would constitute a default under
the Intercompany Loan Agreements.
(c) P&O and Global have and at all times will continue to have
good title to all of the Indebtedness arising under the Intercompany Loan
Agreements, free and clear of all claims, liens, pledges, encumbrances and other
assignments of any kind, nature or description.
(d) The obligations, liabilities and indebtedness of Borrowers
to Global and of Global to P&O evidenced by or arising pursuant to the
Intercompany Loan Agreements are owed free and clear of all offsets, deductions,
defenses and counterclaims of every kind and nature and are not now nor will at
any time become contingent upon the fulfillment of any contract or condition
whatsoever.
8.18 Accuracy and Completeness of Information. All information
furnished by or on behalf of any Borrower or Guarantor in writing to Lender in
connection with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including all information on the
Information Certificate is true and correct in all material respects on the date
as of which such information is dated or certified and does not omit any
material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a Material Adverse Affect, which has not been fully and accurately
disclosed to Lender in writing prior to the date hereof.
8.19 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
any Borrower or Guarantor shall now or hereafter give, or cause to be given, to
Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence.
(a) Each Borrower and Guarantor shall at all times preserve,
renew and keep in full force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals,
57
authorizations, leases, contracts and Permits necessary to carry on the business
as presently or proposed to be conducted, except as to any Borrower or Guarantor
other than Parent as permitted in Section 9.7 hereof.
(b) No Borrower or Guarantor shall change its name unless each
of the following conditions is satisfied: (i) Lender shall have received not
less than thirty (30) days prior written notice from Borrower Agent of such
proposed change in its corporate name, which notice shall accurately set forth
the new name; and (ii) Lender shall have received a copy of the amendment to the
Certificate of Incorporation of such Borrower or Guarantor providing for the
name change certified by the Secretary of State of the jurisdiction of
incorporation or organization of such Borrower or Guarantor as soon as it is
available.
(c) No Borrower or Guarantor shall change its chief executive
office or its mailing address or organizational identification number (or if it
does not have one, shall not acquire one) unless Lender shall have received not
less than thirty (30) days' prior written notice from Borrower Agent of such
proposed change, which notice shall set forth such information with respect
thereto as Lender may require and Lender shall have received such agreements as
Lender may reasonably require in connection therewith. No Borrower or Guarantor
shall change its type of organization, jurisdiction of organization or other
legal structure.
9.2 New Collateral Locations. Each Borrower and Guarantor may only open
any new location within the continental United States provided such Borrower or
Guarantor (a) gives Lender thirty (30) days prior written notice of the intended
opening of any such new location and (b) executes and delivers, or causes to be
executed and delivered, to Lender such agreements, documents, and instruments as
Lender may deem reasonably necessary or desirable to protect its interests in
the Collateral at such location.
9.3 Compliance with Laws, Regulations, Etc.
(a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, at all times, comply in all material respects with all laws,
rules, regulations, licenses, approvals, orders and other Permits applicable to
it and duly observe all requirements of any foreign, Federal, State or local
Governmental Authority, including ERISA, the Code, the Occupational Safety and
Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as
amended, and all statutes, rules, regulations, orders, permits and stipulations
relating to environmental pollution and employee health and safety, including
all of the Environmental Laws.
(b) Borrowers and Guarantors shall give written notice to
Lender immediately upon any Borrower's or Guarantor's receipt of any notice of,
or any Borrower's or Guarantor's otherwise obtaining knowledge of, (i) the
occurrence of any event involving the material release, spill or discharge,
threatened or actual, of any Hazardous Material or (ii) any investigation,
proceeding, complaint, order, directive, claims, citation or notice with respect
to: (A) any material non-compliance with or material violation of any
Environmental Law by any Borrower or Guarantor or (B) the release, spill or
discharge, threatened or actual, of any Hazardous Material other than in the
ordinary course of business in accordance with any applicable
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Environmental Law. Copies of all environmental surveys, audits, assessments,
feasibility studies and results of remedial investigations shall be promptly
furnished, or caused to be furnished, by such Borrower or Guarantor to Lender.
Each Borrower and Guarantor shall take prompt action to respond to any material
non-compliance with any of the Environmental Laws and shall regularly report to
Lender on such response.
(c) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is material non-compliance, or any
condition which requires any action by or on behalf of any Borrower or Guarantor
in order to avoid any material non-compliance, with any Environmental Law,
Borrowers shall, at Lender's request and Borrowers' expense: (i) cause an
independent environmental engineer reasonably acceptable to Lender to conduct
such tests of the site where non-compliance or alleged non-compliance with such
Environmental Laws has occurred as to such non-compliance and prepare and
deliver to Lender a report as to such non-compliance setting forth the results
of such tests, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof and (ii) provide to
Lender a supplemental report of such engineer whenever the scope of such
non-compliance, or such Borrower's or Guarantor's response thereto or the
estimated costs thereof, shall change in any material respect.
(d) Each Borrower and Guarantor shall indemnify and hold
harmless Lender and its directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all losses,
claims, damages, liabilities, reasonable costs, and expenses (including
reasonable attorneys' fees and expenses) directly or indirectly arising out of
or attributable to the use, generation, manufacture, reproduction, storage,
release, threatened release, spill, discharge, disposal or presence of a
Hazardous Material, including the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of any Borrower or
Guarantor and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination of this Agreement.
9.4 Payment of Taxes and Claims. Each Borrower and Guarantor shall, and
shall cause any Subsidiary to, duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets, except for taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to such Borrower,
Guarantor or Subsidiary, as the case may be, and with respect to which adequate
reserves have been set aside on its books. Each Borrower and Guarantor shall be
liable for any tax or penalties imposed on Lender as a result of the financing
arrangements provided for herein and each Borrower and Guarantor agrees to
indemnify and hold Lender harmless with respect to the foregoing, and to repay
to Lender, on demand the amount thereof, and until paid by such Borrower or
Guarantor such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require any Borrower or
Guarantor to pay any income or franchise taxes attributable to the income of
Lender from any amounts charged or paid hereunder to Lender. The foregoing
indemnity shall survive the payment of the Obligations and the termination of
this Agreement.
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9.5 Insurance.
(a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, at all times, maintain with financially sound and reputable
insurers insurance with respect to the Collateral against loss or damage and all
other insurance of the kinds and in the amounts customarily insured against or
carried by corporations of established reputation engaged in the same or similar
businesses and similarly situated. Said policies of insurance shall be
reasonably satisfactory to Lender as to form, amount and insurer. Borrowers and
Guarantors shall furnish certificates, policies or endorsements to Lender as
Lender shall reasonably require as proof of such insurance, and, if any Borrower
or Guarantor fails to do so, Lender is authorized, but not required, to obtain
such insurance at the expense of Borrowers. All policies shall provide for at
least thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for each Borrower and
Guarantor in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling such
insurance. Borrowers and Guarantors shall cause Lender to be named as a loss
payee as its interests may appear and an additional insured (but without any
liability for any premiums) under such insurance policies and Borrowers and
Guarantors shall obtain non-contributory lender's loss payable endorsements to
all insurance policies in form and substance satisfactory to Lender. Such
lender's loss payable endorsements shall specify that the proceeds of such
insurance shall be payable to Lender as its interests may appear and further
specify that Lender shall be paid regardless of any act or omission by any
Borrower, Guarantor or any of its or their Affiliates.
(b) Subject to Section 9.5(c) below, Lender may, at its
option, either (i) apply any or all insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or (ii) hold any or all insurance proceeds as cash
collateral for the Obligations in respect of any Letter of Credit Accommodations
or (iii) hold any or all insurance proceeds as cash collateral for all of the
Obligations. So long as no Default or Event of Default shall exist or have
occurred and be continuing, to the extent that Lender may hold any insurance
proceeds as cash collateral for all of the Obligations, Borrower Agent may
within one (1) Business Day after notice by Lender to Borrower Agent of its
intent to hold any such insurance proceeds as cash collateral for all of the
Obligations, at the option of Borrower's Agent, direct that Lender instead apply
such proceeds to payment of the Obligations, whether or not then due, in any
order and in such manner as Lender may determine and upon receipt of such
direction, Lender shall so apply such proceeds. Upon the application of the
proceeds to the Obligations at the direction of Borrower Agent, Lender may, at
its option, establish a Reserve in the amount of such proceeds. In the event
that Lender elects to establish such Reserve, such Reserve shall be reduced from
time to time by the amount of the value of any Equipment or any portion of any
building, structure or other improvement on any Real Property subject to the
valid, enforceable and perfected security interest of Lender that is repaired,
refurbished or replaced in respect of the Equipment or building, structure or
other improvement, as the case may be, whose loss, damage or destruction
resulted in the payment of the insurance proceeds.
(c) Notwithstanding anything to the contrary contained herein,
if any of the
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Equipment or any portion of any building, structure or other improvement on any
Real Property is lost, physically damaged or destroyed, upon the written request
of Borrower Agent,
(i) if the value of the Equipment or building,
structure or other improvement is equal to or less than $500,000, Lender shall
release the net cash proceeds from insurance received by Lender pursuant to this
Section 9.5 based on a claim by a Borrower as a result of such loss, damage or
destruction, provided, that, no Default or Event of Default shall exist or have
occurred and be continuing, and
(ii) if the value of the Equipment or building,
structure or other improvement is greater than $500,000, Lender shall release
the net cash proceeds from insurance received by Lender pursuant to this Section
9.5 based on a claim by a Borrower as a result of such loss, damage or
destruction to the extent necessary for the repair, refurbishing or replacement
of such Equipment or building, structure or improvement, provided, that, all of
the following conditions are satisfied: (A) no Default or Event of Default
shall exist or have occurred and be continuing, (B) the amount of the insurance
proceeds (together with any deductible to be satisfied by any Borrower or
Guarantor) are sufficient, in Lender's good faith determination, to effect such
repair, refurbishing or replacement in a satisfactory manner, (C) such proceeds
shall be used first to repair, refurbish or replace the Collateral so lost,
damaged or destroyed (free and clear of any security interests, liens, claims or
encumbrances), (D) the insurance carrier shall have waived any right of
subrogation against Borrowers and Guarantors under its policy, (E) the casualty
resulted in a payment of $2,000,000 in insurance proceeds or less, (F) such
repair, refurbishing or replacement shall be commenced as soon as reasonably
practicable and shall be diligently pursued to satisfactory completion, (G) the
insurance proceeds shall be released by Lender to Borrower Agent from time to
time as needed and/or at Lender's option, released by Lender directly to the
contractor, subcontractor, materialmen, laborers, engineers, architects and
other persons rendering services or materials to repair, refurbish or replace
such Equipment, building, structure or improvements, (H) the repair,
refurbishing or replacement to which the proceeds are applied shall cause the
Equipment, building, structure or improvement so lost, damaged, destroyed to be
of at least equal value and substantially the same character as prior to such
loss, damage or destruction and (I) at Lender's option, a Reserve may be
established to reflect the value of such Equipment or such Real Property that is
subject to the Mortgage as reduced as a result of the loss, damage or
destruction thereof as determined in good faith by Lender. If after the
Equipment or building, structure or the improvement is repaired, refurbished or
replaced in a manner satisfactory to Lender, to the extent that a Reserve may
have been established pursuant to the terms of this Section 9.5, Lender shall
thereafter, upon the written request of Borrower Agent, reduce such Reserve to
reflect the effect of the repair, refurbishment or replacement on the value of
the Equipment or Real Property (as the case may be) in such amounts as Lender
shall determine in good faith (which may, at Lender's option, be based on an
appraisal thereof, at Borrowers' expense, by an appraiser acceptable to Lender
and in form, scope and methodology acceptable to Lender and upon which Lender is
expressly permitted to rely, which appraisal shall be in addition to any
appraisal obtained pursuant to Section 7.4 hereof) so long as: no Default or
Event of Default shall exist or have occurred and be continuing and not less
than one hundred twenty (120) days prior to the end of the then current term of
this Agreement, both the repair, refurbishment or replacement is completed in a
manner
61
satisfactory to Lender and Lender shall have received the request from Borrower
for such reduction in the Reserve.
(d) At any time an Event of Default exists or has occurred and
is continuing, at its option, Lender may apply such insurance proceeds to the
cost of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as Lender
may determine or hold such proceeds as cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, keep proper books and records in which true and complete entries
shall be made of all dealings or transactions of or in relation to the
Collateral and the business of such Borrower, Guarantor and its Subsidiaries in
accordance with GAAP. Borrowers and Guarantors shall promptly furnish to Lender
all such financial and other information as Lender shall reasonably request
relating to the Collateral and the assets, business and operations of Borrowers
and Obligors, and to notify the auditors and accountants of Borrowers and
Obligors that Lender is authorized to obtain such information directly from
them. Without limiting the foregoing, Borrowers and Guarantors shall furnish or
cause to be furnished to Lender, the following: (i) within thirty-five (35) days
after the end of each fiscal month (other than a month in which there is the end
of a fiscal quarter of Parent) and within forty-five (45) days after the end of
any fiscal quarter of Parent, monthly unaudited consolidated financial
statements and unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss, and statements of cash flow)
all in reasonable detail, fairly presenting the financial position and the
results of the operations of Parent and its Subsidiaries as of the end of and
through such fiscal month, certified to be correct by the chief financial
officer or chief accounting officer of Parent, subject to normal year-end
adjustments and no footnotes and accompanied by a compliance certificate
substantially in the form of Exhibit B hereto, along with a schedule in a form
satisfactory to Lender of the calculations used in determining, as of the end of
such month, whether Borrowers and Obligors are in compliance with the covenant
set forth in Section 9.17 of this Agreement for such month and (ii) within
ninety (90) days after the end of each fiscal year, audited consolidated
financial statements and unaudited consolidating financial statements of Parent
and its Subsidiaries (including in each case balance sheets, statements of
income and loss, statements of cash flow, and statements of shareholders'
equity), and the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the operations of Parent
and its Subsidiaries as of the end of and for such fiscal year, together with
the unqualified opinion of independent certified public accountants with respect
to the audited consolidated financial statements, which accountants shall be an
independent accounting firm selected by Parent and acceptable to Lender, that
such audited consolidated financial statements have been prepared in accordance
with GAAP, and present fairly the results of operations and financial condition
of Parent and its Subsidiaries as of the end of and for the fiscal year then
ended.
(b) Borrowers and Guarantors shall promptly notify Lender in
writing of the details of (i) any loss, damage, investigation, action, suit,
proceeding or claim relating to
62
Collateral having a value of more than $1,000,000 or which if adversely
determined could reasonably be expected to have a Material Adverse Effect,
(ii) any Material Contract being terminated or amended or any new Material
Contract entered into (in which event Borrowers and Guarantors shall provide
Lender with a copy of such Material Contract), (iii) any order, judgment or
decree in excess of $1,000,000 shall have been entered against any Borrower or
Obligor or any of its or their properties or assets, (iv) any notification of a
material violation of laws or regulations received by any Borrower or Obligor,
(v) any ERISA Event, and (vi) the occurrence of any Default or Event of Default.
(c) Borrowers and Guarantors shall promptly after the sending
or filing thereof furnish or cause to be furnished to Lender copies of all
reports which Parent sends to its stockholders generally and copies of all
reports and registration statements which Parent files with the Securities and
Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.
(d) Borrowers and Guarantors shall furnish or cause to be
furnished to Lender such budgets, forecasts, projections and other information
respecting the Collateral and the business of Borrowers and Obligors, as Lender
may, from time to time, reasonably request. Lender is hereby authorized to
deliver a copy of any financial statement or any other information relating to
the business of Borrowers and Obligors to any court or other Governmental
Authority, to any Affiliate of Lender or to any assignee or Participant or
prospective assignee or Participant. P&O and each Borrower and Guarantor hereby
irrevocably authorizes and directs all accountants or auditors to deliver to
Lender, at Borrowers' expense, copies of the financial statements of P&O, any
Borrower and Guarantor and any reports or management letters prepared by such
accountants or auditors on behalf of any Borrower or Obligor and to disclose to
Lender such information as they may have regarding the business of any Borrower
and Obligor. Any documents, schedules, invoices or other papers delivered to
Lender may be destroyed or otherwise disposed of by Lender one (1) year after
the same are delivered to Lender, except as otherwise designated by Borrower
Agent to Lender in writing.
9.7 Sale of Assets, Merger, Dissolution, Etc. Each Borrower and
Guarantor shall not, and shall not permit any Subsidiary to, directly or
indirectly,
(a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it except
that: any wholly-owned Subsidiary of Parent (other than any Borrower) may merge
with and into or consolidate with any other wholly-owned Subsidiary of Parent
(other than any Borrower), provided, that, each of the following conditions is
satisfied as determined by Lender in good faith: (i) Lender shall have received
not less than ten (10) Business Days' prior written notice of the intention of
such Subsidiaries to so merge or consolidate, which notice shall set forth in
reasonable detail satisfactory to Lender, the persons that are merging or
consolidating, which person will be the surviving entity, the locations of the
assets of the persons that are merging or consolidating, and the material
agreements and documents relating to such merger or consolidation, (ii) Lender
shall have received such other information with respect to such merger or
consolidation as Lender may request, (iii) as of the effective date of the
merger or consolidation and after giving effect thereto,
63
no Default or Event of Default shall exist or have occurred, (iv) Lender shall
have received, true, correct and complete copies of all agreements, documents
and instruments relating to such merger or consolidation, including, but not
limited to, the certificate or certificates of merger to be filed with each
appropriate Secretary of State (with a copy as filed promptly after such
filing), (v) if one of the Subsidiaries that is merging or consolidating is an
Obligor or is Global, (A) the other Subsidiary that it is merging with must be
incorporated in a jurisdiction within the United States of America and (B) the
surviving corporation shall expressly confirm, ratify and assume the Obligations
and the Financing Agreements to which it is a party in writing, in form and
substance satisfactory to Lender, and the surviving corporation shall execute
and deliver such other agreements, documents and instruments as Lender may
request in connection therewith and (vi) if neither of the Subsidiaries that is
merging or consolidating is an Obligor, then in no event shall any Borrower or
Obligor make, or be required to make, any payment or incur any obligation or
liability in connection with such merger or consolidation or take any other
action which is otherwise prohibited hereunder in connection therewith; or
(b) sell, assign, lease, transfer, abandon or otherwise
dispose of any Capital Stock or Indebtedness to any other Person or any of its
assets to any other Person, except for
(i) sales of Inventory in the ordinary course of
business,
(ii) the sale or other disposition of Equipment
(including worn-out or obsolete Equipment or Equipment no longer used or useful
in the business of any Borrower or Guarantor) so long as such sales or other
dispositions do not involve Equipment having an aggregate fair market value in
excess of $1,000,000 for all such Equipment disposed of in any fiscal year of
Borrowers (excluding the value of worn-out or obsolete Equipment or Equipment no
longer used or useful in the business of any Borrower or Guarantor and sold in
the ordinary course of business) or as Lender may otherwise agree, and
(iii) the issuance and sale by any Borrower or
Guarantor of Capital Stock of such Borrower or Guarantor after the date hereof;
provided, that, (A) Lender shall have received not less than ten (10) Business
Days' prior written notice of such issuance and sale by such Borrower or
Guarantor, which notice shall specify the parties to whom such shares are to be
sold, the terms of such sale, the total amount which it is anticipated will be
realized from the issuance and sale of such stock and the net cash proceeds
which it is anticipated will be received by such Borrower or Guarantor from such
sale, (B) such Borrower or Guarantor shall not be required to pay any cash
dividends or repurchase or redeem such Capital Stock or make any other payments
in respect thereof, except as otherwise permitted in Section 9.11 hereof, (C)
the terms of such Capital Stock, and the terms and conditions of the purchase
and sale thereof, shall not include any terms that include any limitation on the
right of any Borrower to request or receive Loans or Letter of Credit
Accommodations or the right of any Borrower and Guarantor to amend or modify any
of the terms and conditions of this Agreement or any of the other Financing
Agreements or otherwise in any way relate to or affect the arrangements of
Borrowers and Guarantors with Lender or are more restrictive or burdensome to
any Borrower or Guarantor than the terms of any Capital Stock in effect on the
date hereof, (D) except as Lender may otherwise agree in writing, all of the
proceeds of the sale and issuance of such Capital Stock shall
64
be paid to Lender for application to the Obligations in such order and manner as
Lender may determine or to hold as cash collateral for the Obligations (without
permanent reduction in the Maximum Credit) and (E) as of the date of such
issuance and sale and after giving effect thereto, no Default or Event of
Default shall exist or have occurred,
(iv) the issuance of Capital Stock of any Borrower or
Guarantor consisting of common stock pursuant to an employee stock option or
grant or similar equity plan or 401(k) plans of such Borrower or Guarantor for
the benefit of its employees, directors and consultants, provided, that, in no
event shall such Borrower or Guarantor be required to issue, or shall such
Borrower or Guarantor issue, Capital Stock pursuant to such stock plans or
401(k) plans which would result in a Change of Control or other Event of
Default,
(c) wind up, liquidate or dissolve except that any Subsidiary
of Parent (other than a Borrower) may wind up, liquidate and dissolve, provided,
that, each of the following conditions is satisfied, (i) the winding up,
liquidation and dissolution of such Subsidiary shall not violate any law or any
order or decree of any court or other Governmental Authority in any material
respect and shall not conflict with or result in the breach of, or constitute a
default under, any indenture, mortgage, deed of trust, or any other agreement or
instrument to which any Borrower or Guarantor is a party or may be bound,
(ii) such winding up, liquidation or dissolution shall be done in accordance
with the requirements of all applicable laws and regulations, (iii) effective
upon such winding up, liquidation or dissolution, all of the assets and
properties of such Subsidiary shall be duly and validly transferred and assigned
to its immediate corporate parent, free and clear of any liens, restrictions or
encumbrances other than the security interest and liens of Lender (and Lender
shall have received such evidence thereof as Lender may require), and Lender
shall have received such deeds, assignments or other agreements as Lender may
request to evidence and confirm the transfer of such assets of such Subsidiary,
(iv) Lender shall have received all documents and agreements that such
Subsidiary or any Borrower or Guarantor has filed with any Governmental
Authority or as are otherwise required to effectuate such winding up,
liquidation or dissolution, (v) no Borrower or Guarantor shall assume any
Indebtedness, obligations or liabilities as a result of such winding up,
liquidation or dissolution, or otherwise become liable in respect of any
obligations or liabilities of the entity that is winding up, liquidating or
dissolving, unless such Indebtedness is otherwise expressly permitted hereunder,
(vi) Lender shall have received not less than ten (10) Business Days prior
written notice of the intention of such Subsidiary to wind up, liquidate or
dissolve, and (vii) as of the date of such winding up, liquidation or
dissolution and after giving effect thereto, no Default or Event of Default
shall exist or have occurred; or
(d) agree to do any of the foregoing.
9.8 Encumbrances. Each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties, including the Collateral, except:
(a) the security interests and liens of Lender;
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(b) liens securing the payment of taxes, assessments or other
governmental charges or levies either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower or Guarantor or Subsidiary, as the case may be
and with respect to which adequate reserves have been set aside on its books;
(c) non-consensual statutory liens (other than liens securing
the payment of taxes) arising in the ordinary course of such Borrower's,
Guarantor's or Subsidiary's business to the extent: (i) such liens secure
Indebtedness which is not overdue or (ii) such liens secure Indebtedness
relating to claims or liabilities which are fully insured and being defended at
the sole cost and expense and at the sole risk of the insurer or being contested
in good faith by appropriate proceedings diligently pursued and available to
such Borrower, Guarantor or such Subsidiary, in each case prior to the
commencement of foreclosure or other similar proceedings and with respect to
which adequate reserves have been set aside on its books;
(d) zoning restrictions, easements, licenses, covenants and
other restrictions affecting the use of Real Property which do not interfere in
any material respect with the use of such Real Property or ordinary conduct of
the business of such Borrower, Guarantor or such Subsidiary as presently
conducted thereon or materially impair the value of the Real Property which may
be subject thereto;
(e) purchase money security interests in Equipment (including
Capital Leases) and purchase money mortgages on Real Property to secure
Indebtedness permitted under Section 9.9(b) hereof;
(f) pledges and deposits of cash by any Borrower or Guarantor
after the date hereof in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social security
benefits consistent with the current practices of such Borrower or Guarantor as
of the date hereof;
(g) pledges and deposits of cash by any Borrower or Guarantor
after the date hereof to secure the performance of tenders, bids, leases, trade
contracts (other than for the repayment of Indebtedness), statutory obligations
and other similar obligations in each case in the ordinary course of business
consistent with the current practices of such Borrower or Guarantor as of the
date hereof; provided, that, in connection with any performance bonds issued by
a surety or other person, the issuer of such bond shall have waived in writing
any rights in or to, or other interest in, any of the Collateral in an
agreement, in form and substance satisfactory to Lender;
(h) liens arising from (i) operating leases and the
precautionary UCC financing statement filings in respect thereof and
(ii) equipment or other materials which are not owned by any Borrower or
Guarantor located on the premises of such Borrower or Guarantor (but not in
connection with, or as part of, the financing thereof) from time to time in the
ordinary course of business and consistent with current practices of such
Borrower or Guarantor and the precautionary UCC financing statement filings in
respect thereof;
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(i) judgments and other similar liens arising in connection
with court proceedings that do not constitute an Event of Default, provided,
that, (i) such liens are being contested in good faith and by appropriate
proceedings diligently pursued, (ii) adequate reserves or other appropriate
provision, if any, as are required by GAAP have been made therefor, (iii) a stay
of enforcement of any such liens is in effect and (iv) Lender may establish a
Reserve with respect thereto;
(j) the security interests in and liens upon assets of any
Subsidiary of Parent (other than any Borrower or Obligor) to secure Indebtedness
of such Subsidiary permitted under Section 9.9 hereof;
(k) the security interests in and liens upon the ▇▇▇▇▇▇▇ Road
Facility arising after the date hereof to secure Indebtedness permitted under
Section 9.9(h) below;
(l) the security interests in and liens upon any Real Property
and Equipment and fixtures located thereon and used in connection with the
operation thereof (other than the ▇▇▇▇▇▇▇ Road Facility and any Equipment and
fixtures at any time located on the ▇▇▇▇▇▇▇ Road Facility or otherwise at any
time constituting Collateral) arising after the date hereof to secure
Indebtedness permitted under Section 9.9(i) below; and
(m) the security interests and liens set forth on Schedule 8.4
to the Information Certificate.
9.9 Indebtedness. Each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, incur, create, assume, become or be liable in any
manner with respect to, or permit to exist, any Indebtedness, or guarantee,
assume, endorse, or otherwise become responsible for (directly or indirectly),
the Indebtedness, performance, obligations or dividends of any other Person,
except:
(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases)
arising after the date hereof to the extent secured by purchase money security
interests in Equipment (including Capital Leases) and purchase money mortgages
on Real Property not to exceed $5,000,000 in the aggregate in any fiscal year of
Parent so long as such security interests and mortgages do not apply to any
property of such Borrower, Guarantor or Subsidiary other than the Equipment or
Real Property so acquired, and the Indebtedness secured thereby does not exceed
the cost of the Equipment or Real Property so acquired, as the case may be;
(c) Indebtedness of Parent and P&O evidenced by or arising
under the Senior Notes as in effect on the date hereof or as permitted to be
amended pursuant to the terms hereof, provided, that:
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(i) the aggregate amount of such Indebtedness shall
not exceed $120,000,000 less the aggregate amount of all repayments or
redemptions, whether optional or mandatory, in respect thereof, plus interest
thereon at the rate provided for in the Senior Notes as in effect on the date
hereof,
(ii) the Obligations are and shall at all times
continue to be the "Permitted Subsidiary Refinancing Indebtedness" as such term
is defined in the Senior Indenture as in effect on the date hereof,
(iii) no Borrower or Guarantor or any Subsidiary of
any Borrower or Guarantor is or shall be a "Guarantor" as such term is defined
in the Senior Indenture as in effect on the date hereof;
(iv) P&O, Borrowers and Guarantors shall not,
directly or indirectly, make any payments in respect of such Indebtedness,
except that they may make (A) regularly scheduled payments of interest and fees,
if any, in respect of such Indebtedness when due in accordance with the terms of
the Senior Notes as in effect on the date hereof, (B) payments of principal in
respect of such Indebtedness when scheduled to mature in accordance with the
terms of the Senior Indenture as in effect on the date hereof and earlier to the
extent permitted under Section 9.9(c)(vi) below and (C) payments of reasonable
fees to the holders of the Senior Notes in connection with any amendment or
modification of the Senior Indenture that is permitted pursuant to Section
9.9(c)(v) below; provided, that, as of the date of the payment of any such fees
and after giving effect thereto, the aggregate amount of the Excess Availability
of Borrowers shall be not less than $7,500,000,
(v) P&O shall not, directly or indirectly, amend,
modify, alter or change in any material respect any terms of such Indebtedness
or any of the Senior Notes or the Senior Indenture or any related agreements,
documents and instruments, except that P&O may, after prior written notice to
Lender, amend, modify, alter or change the terms thereof so as to extend the
maturity thereof or defer the timing of any payments in respect thereof, or to
forgive or cancel any portion of such Indebtedness other than pursuant to
payments thereof, or to reduce the interest rate or any fees in connection
therewith,
(vi) P&O, Borrowers and Guarantors shall not,
directly or indirectly, redeem, retire, defease, purchase or otherwise acquire
such Indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, except that (A) P&O may redeem, retire, defease, purchase or otherwise
acquire such Indebtedness with proceeds of Loans used for the repayment of
Intercompany Indebtedness of a Borrower to Global that Global has used for the
repayment of Intercompany Indebtedness of Global to P&O, provided, that, as of
the date of any such redemption, retirement, defeasance, purchase or other
acquisition or any payment in respect thereof and after giving effect thereto,
(1) the aggregate amount of the Excess Availability of Borrowers for each of the
immediately preceding ten (10) consecutive days shall have been not less than
$7,500,000 and as of the date of any such payment and after giving effect
thereto, the aggregate amount of the Excess Availability of Borrowers shall be
not less than $7,500,000, (2) as of the date of any such payment, the P&O
Unrestricted Cash shall be less than $10,000,000
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and (3) as of the date of any such payment and after giving effect thereto, no
Default or Event of Default shall exist or have occurred and be continuing and
(B) P&O may, after prior telephonic notice to Lender (to be promptly confirmed
by P&O in writing to Lender), redeem, retire, defease, purchase or other acquire
such Indebtedness with the P&O Unrestricted Cash, and
(vii) P&O, Borrowers and Guarantors shall furnish to
Lender all written notices or demands in connection with such Indebtedness
either received by P&O, any Borrower or Guarantor or on its behalf, promptly
after the receipt thereof, or sent by P&O, any Borrower or Guarantor or on its
behalf, concurrently with the sending thereof, as the case may be;
(d) guarantees by any Borrower or Obligor of the Obligations
of Borrowers in favor of Lender;
(e) the Intercompany Indebtedness of any Borrower or Obligor
to any other Borrower or Obligor arising after the date hereof pursuant to loans
by any Borrower or Obligor permitted under Section 9.10(d) hereof;
(f) Intercompany Indebtedness owing by each Borrower to Global
and by Global to P&O arising pursuant to loans in immediately available funds by
Global to such Borrower and by P&O to Global under the Intercompany Credit
Facility of such Borrower with Global or Global with P&O, as the case may be;
provided, that, (i) all of the representations and warranties with respect to
such Intercompany Indebtedness set forth in Section 8.17 hereof are and shall
continue to be true and correct, (ii) the Intercompany Indebtedness shall not be
subordinated in right of payment to any guarantee, if any, by such Borrower of
the Indebtedness of P&O under the Senior Notes, (iii) the Indebtedness of a
Borrower to Lender arising pursuant to the Loans used to refinance such
Intercompany Indebtedness shall be scheduled to mature no earlier than the
Intercompany Indebtedness being refinanced with the proceeds of Loans, (iv) the
Indebtedness of a Borrower to Lender arising pursuant to the Loans used to
refinance such Intercompany Indebtedness shall have an Average Life (as such
term is defined in the Senior Indenture as in effect on the date hereof) at the
time it is incurred that is equal to or greater than the Average Life of the
Intercompany Indebtedness being refinanced, (v) the amount of the Loans used to
refinance such Intercompany Indebtedness of a Borrower is in an aggregate
principal amount not in excess of the aggregate principal amount of the then
outstanding amount of the Intercompany Indebtedness being refinanced with the
proceeds of such Loans and the Loans are not incurred to refinance outstanding
Indebtedness of another Subsidiary, and (vi) P&O, Global and Borrowers shall
not, directly or indirectly, amend, modify, alter or change in any material
respect any terms of such Intercompany Indebtedness or any of the Intercompany
Loan Documents;
(g) Indebtedness of any Foreign Subsidiary; provided, that,
(i) in no event shall Global, any Borrower or Obligor make, or be required to
make, any payment or incur any obligation or liability (contingent or otherwise)
in connection with any such Indebtedness and (ii) the occurrence of a default
with respect thereto shall not result in, or permit any holder of any
Indebtedness of Global, any Borrower or Obligor to declare a default on
Indebtedness of such Borrower or Obligor or cause the payment thereof to be
accelerated or payable prior to its stated maturity;
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(h) Indebtedness of Worldwide arising at any time after the
date hereof pursuant to a mortgage loan in immediately available funds by a
financial institution to Worldwide based on the value of the ▇▇▇▇▇▇▇ Road
Facility, provided, that:
(i) as to any such Indebtedness, (A) Lender shall
have received not less than thirty (30) days prior written notice of the
intention of Worldwide to incur such Indebtedness, which notice shall set forth
in reasonable detail satisfactory to Lender, the amount of such proposed
Indebtedness, the person to whom such Indebtedness is proposed to be owed, the
proposed interest rate, schedule of repayments and maturity date with respect
thereto and such other information with respect thereto as Lender may request,
(B) Lender shall have received true, correct and complete copies of all
agreements, documents and instruments evidencing or otherwise related to such
Indebtedness, as duly authorized, executed and delivered by the parties thereto,
(C) Lender shall have received a Collateral Access Agreement with respect to the
Real Property subject to the mortgage and lien to secure such Indebtedness from
the person to whom such Indebtedness is owed, duly authorized, executed and
delivered by such person, in form and substance satisfactory to Lender, (D) such
Indebtedness shall be incurred by Worldwide at commercially reasonable rates and
terms in a bona fide arm's length transaction, (E) such Indebtedness shall not
be owed to any shareholder, officer, director, agent, employee or other
Affiliate of any Borrower or Guarantor, (F) Worldwide shall cause the person to
whom such Indebtedness is owed to remit all of the proceeds of the loan giving
rise to such Indebtedness directly to Lender for application to the Obligations,
(G) in no event shall Worldwide or any other Borrower or Obligor make, or be
required to make, payments in respect of the principal balance of such
Indebtedness in any twelve (12) consecutive month period that in the aggregate
exceed the amount equal to twenty (20%) percent of the original principal amount
of such Indebtedness, (H) the Real Property, the value of which is the basis for
such loan, shall be the only collateral for such Indebtedness, (I) as of the
date of incurring such Indebtedness and after giving effect thereto, no Default
or Event of Default shall exist or have occurred, (J) in no event shall the net
cash proceeds received by Worldwide pursuant to such mortgage loan be less than
$7,500,000, (K) Lender may, at its option, establish a Reserve in the amount of
$5,000,000 upon Worldwide incurring such Indebtedness, and (L) Borrowers and
Guarantors shall furnish to Lender all notices or demands in connection with
such Indebtedness either received by any Borrower or Guarantor or on its behalf
promptly after the receipt thereof, or sent by any Borrower or Guarantor or on
its behalf, concurrently with the sending thereof, as the case may be; and
(ii) so long as each of the conditions set forth in
clause (i) above are satisfied, as determined by Lender in good faith, Lender
shall, upon the request of Borrower Agent and at Borrowers' expense, enter into
a subordination agreement with the person to whom such Indebtedness is owed, in
form and substance satisfactory to Lender, providing for the subordination of
the Mortgage with respect to such Real Property to the mortgage of such person
on such Real Property or if required by the person to whom such Indebtedness is
owed, execute and deliver to Borrower Agent a discharge and satisfaction of the
Mortgage with respect to such Real Property which is the collateral for such
Indebtedness;
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(i) Indebtedness of a Borrower arising at any time after the
date hereof pursuant to a loan in immediately available funds by a financial
institution to such Borrower secured by any of the Real Property of such
Borrower and any Equipment and fixtures in each case located on such Real
Property and related to the operation thereof and based on the value of such
Real Property, Equipment and fixtures owned by such Borrower, other than the
▇▇▇▇▇▇▇ Road Facility and the Equipment and fixtures at any time located thereon
or any Real Property, Equipment or fixtures at any time otherwise constituting
Collateral, provided, that, as to any such Indebtedness, (i) Lender shall have
received not less than thirty (30) days prior written notice of the intention of
such Borrower to incur such Indebtedness, which notice shall set forth in
reasonable detail satisfactory to Lender, the amount of such proposed
Indebtedness, the person to whom such Indebtedness is proposed to be owed, the
proposed interest rate, schedule of repayments and maturity date with respect
thereto and such other information with respect thereto as Lender may request,
(ii) Lender shall have received true, correct and complete copies of all
agreements, documents and instruments evidencing or otherwise related to such
Indebtedness, as duly authorized, executed and delivered by the parties thereto,
(iii) if any Collateral is or may be located at the Real Property securing such
Indebtedness, Lender shall have received a Collateral Access Agreement with
respect to such Real Property from the person to whom such Indebtedness is owed,
duly authorized, executed and delivered by such person, in form and substance
satisfactory to Lender, (iv) such Indebtedness shall be incurred by such
Borrower at commercially reasonable rates and terms in a bona fide arm's length
transaction, (v) such Indebtedness shall not be owed to any shareholder,
officer, director, agent, employee or other Affiliate of any Borrower or
Guarantor, (vi) Borrowers and Guarantors shall cause the person to whom such
Indebtedness is owed to remit all of the proceeds of the loan giving rise to
such Indebtedness directly to Lender for application to the Obligations, (vii)
in no event shall any Borrower or Obligor make, or be required to make,
payments in respect of the principal balance of such Indebtedness in any twelve
(12) consecutive month period that in the aggregate exceed the amount equal to
twenty (20%) percent of the original principal amount of such Indebtedness,
(viii) the Real Property and Equipment or fixtures, the value of which may be
the basis for such loan, shall be the only collateral for such Indebtedness,
(ix) as of the date of incurring such Indebtedness and after giving effect
thereto, no Default or Event of Default shall exist or have occurred, and (x)
Borrowers and Guarantors shall furnish to Lender all notices or demands in
connection with such Indebtedness either received by any Borrower or Guarantor
or on its behalf promptly after the receipt thereof, or sent by any Borrower or
Guarantor or on its behalf, concurrently with the sending thereof, as the case
may be;
(j) unsecured Indebtedness of any Borrower or Guarantor
arising after the date hereof to any third person (but not to any other Borrower
or Guarantor) pursuant to loans in immediately available funds by such person to
such Borrower or Guarantor, provided, that, each of the following conditions is
satisfied as determined by Lender: (i) the instrument evidencing or governing
the terms and conditions of such Indebtedness shall provide that such
Indebtedness is subject and subordinate in right of payment to the right of
Lender to receive the prior indefeasible payment and satisfaction in full
payment of all of the Obligations and the other terms and provisions relating to
such subordination shall otherwise be acceptable to Lender, (ii) Lender shall
have received not less than ten (10) days' prior written notice of the intention
of such Borrower or Guarantor to incur such Indebtedness, which notice shall set
forth in reasonable
71
detail satisfactory to Lender the amount of such Indebtedness, the person or
persons to whom such Indebtedness will be owed, the interest rate, the schedule
of repayments and maturity date with respect thereto and such other information
as Lender may request with respect thereto, (iii) Lender shall have received
true, correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness, (iv) except as Lender may
otherwise agree in writing, all of the proceeds of the loans or other
accommodations giving rise to such Indebtedness shall be paid to Lender for
application to the Obligations in such order and manner as Lender may determine,
(v) as of the date of incurring such Indebtedness and after giving effect
thereto, no Default or Event of Default shall exist or have occurred, (vi) such
Indebtedness shall be incurred by such Borrower or Guarantor at commercially
reasonable rates and terms in a bona fide arm's length transaction, (vii) in no
event shall any Borrower or Obligor make, or be required to make, payments in
respect of the principal balance of such Indebtedness in any twelve (12)
consecutive month period that in the aggregate exceed the amount equal to twenty
(20%) percent of the original principal amount of such Indebtedness, (viii) such
Borrower and Guarantor shall not, directly or indirectly, (A) amend, modify,
alter or change the terms of such Indebtedness or any agreement, document or
instrument related thereto, except, that, such Borrower or Guarantor may, after
prior written notice to Lender, amend, modify, alter or change the terms thereof
so as to extend the maturity thereof, or defer the timing of any payments in
respect thereof, or to forgive or cancel any portion of such Indebtedness (other
than pursuant to payments thereof), or to reduce the interest rate or any fees
in connection therewith, or (B) redeem, retire, defease, purchase or otherwise
acquire such Indebtedness (except pursuant to regularly scheduled payments
permitted herein), or set aside or otherwise deposit or invest any sums for such
purpose, and (ix) Borrowers and Guarantors shall furnish to Lender all notices
or demands in connection with such Indebtedness either received by any Borrower
or Guarantor or on its behalf promptly after the receipt thereof, or sent by any
Borrower or Guarantor or on its behalf concurrently with the sending thereof, as
the case may be; and
(k) Indebtedness of P&O arising after the date hereof issued
in exchange for, or the proceeds of which are used to refinance, replace or
substitute for Indebtedness permitted under Section 9.9(c) hereof (the
"Refinancing Indebtedness"); provided, that, as to any such Refinancing
Indebtedness, each of the following conditions is satisfied: (i) Lender shall
have received not less than ten (10) Business Days' prior written notice of the
intention to incur such Indebtedness, which notice shall set forth in reasonable
detail satisfactory to Lender, the amount of such Indebtedness, the schedule of
repayments and maturity date with respect thereto and such other information
with respect thereto as Lender may reasonably request, (ii) promptly upon
Lender's request, Lender shall have received true, correct and complete copies
of all agreements, documents and instruments evidencing or otherwise related to
such Indebtedness, as duly authorized, executed and delivered by the parties
thereto, (iii) the Refinancing Indebtedness shall have a Weighted Average Life
to Maturity and a final maturity equal to or greater than the Weighted Average
Life to Maturity and the final maturity, respectively, of the Indebtedness being
extended, refinanced, replaced, or substituted for, (iv) the Refinancing
Indebtedness shall rank in right of payment no more senior than, and be at least
subordinated (if subordinated) to, the Obligations as the Indebtedness being
refinanced, replaced or substituted for, (v) the Refinancing Indebtedness shall
not include terms and conditions with respect to Parent or any of it
Subsidiaries which are more burdensome or restrictive in any material respect
than those
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included in the Indebtedness so refinanced, replaced or substituted for, (vi)
such Indebtedness shall be incurred by P&O in a bona fide arm's length
transaction and on terms and conditions that are commercially reasonable,
(vii) the incurring of such Indebtedness shall not result in an Event of
Default, (viii) the principal amount of such Refinancing Indebtedness shall not
exceed the principal amount of $120,000,000 (plus the amount of reasonable
refinancing fees and expenses incurred in connection therewith outstanding on
the date of such event), (ix) the Refinancing Indebtedness shall be unsecured,
(x) P&O may only make payments of principal, interest and fees, if any, in
respect of such Indebtedness to the extent such payments would have been
permitted hereunder in respect of the Indebtedness so refinanced, replaced or
substituted for (and except as otherwise permitted below), (xi) P&O shall not,
directly or indirectly, (A) amend, modify, alter or change any terms of the
agreements with respect to such Refinancing Indebtedness, except that P&O may,
after prior written notice to Lender, amend, modify, alter or change the terms
thereof to the extent permitted with respect to the Indebtedness so refinanced,
replaced or substituted for, or (B) redeem, retire, defease, purchase or
otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest
any sums for such purpose (other than with Refinancing Indebtedness to the
extent permitted herein and to the extent permitted with respect to the
Indebtedness so refinanced, replaced or substituted for), and (xii) P&O shall
furnish to Lender copies of all notices or demands in connection with
Indebtedness received by any Borrower or Obligor or on its behalf promptly after
the receipt thereof or sent by any Borrower or Obligor on its behalf
concurrently with the sending thereof, as the case may be;
(l) the Indebtedness set forth on Schedule 9.9 to the
Information Certificate; provided, that, (i) P&O, Borrowers and Guarantors may
only make payments of principal and interest in respect of such Indebtedness
when due in accordance with the terms of the agreement or instrument evidencing
or giving rise to such Indebtedness as in effect on the date hereof, (ii) P&O,
Borrowers and Guarantors shall not, directly or indirectly, (A) amend, modify,
alter or change the terms of such Indebtedness or any agreement, document or
instrument related thereto as in effect on the date hereof except, that, P&O,
Borrowers and Guarantors may, after prior written notice to Lender, amend,
modify, alter or change the terms thereof so as to extend the maturity thereof,
or defer the timing of any payments in respect thereof, or to forgive or cancel
any portion of such Indebtedness (other than pursuant to payments thereof), or
to reduce the interest rate or any fees in connection therewith, or (B) redeem,
retire, defease, purchase or otherwise acquire such Indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose, and (iii) P&O,
Borrowers and Guarantors shall furnish to Lender all notices or demands in
connection with such Indebtedness either received by P&O, any Borrower or
Guarantor or on its behalf, promptly after the receipt thereof, or sent by P&O,
any Borrower or Guarantor or on its behalf, concurrently with the sending
thereof, as the case may be.
9.10 Loans, Investments, Etc. Each Borrower and Guarantor shall not,
and shall not permit any Subsidiary to, directly or indirectly, make any loans
or advance money or property to any person, or invest in (by capital
contribution, dividend or otherwise) or purchase or repurchase the Capital Stock
or Indebtedness or all or a substantial part of the assets or property of any
person, or form or acquire any Subsidiaries, or agree to do any of the
foregoing, except:
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(a) loans of money or property (other than Collateral) after
the date hereof by any Borrower or Guarantor to any Person (other than an
existing Affiliate of any Borrower or Guarantor as of the date hereof) or
investment after the date hereof by any Borrower or Guarantor by capital
contribution in any Person (other than an existing Affiliate of any Borrower or
Guarantor as of the date hereof), or the formation or acquisition after the date
hereof by any Borrower of any direct wholly-owned Subsidiary of such Borrower
after the date hereof; provided, that, as to any such loans or investments, or
the formation or acquisition of any such Subsidiary, each of the following
conditions is satisfied as determined by Lender:
(i) as of the date of any such loan or investment, or
the formation or acquisition of such Subsidiary or any payments in connection
with the formation or acquisition of such Subsidiary, and in each case after
giving effect thereto, no Default or Event of Default shall exist or have
occurred,
(ii) as of the date of any such loan or investment,
or the formation or acquisition of such Subsidiary or any payments in connection
with the formation or acquisition of such Subsidiary, and in each case after
giving effect thereto, the aggregate amount of the Excess Availability of
Borrowers shall have been not less than $7,500,000 for each of the immediately
preceding ten (10) consecutive days and as of the date of any such loan or
investment or formation or acquisition or any payment in connection therewith
and after giving effect thereto, the aggregate amount of the Excess Availability
of Borrowers shall be not less than $7,500,000,
(iii) in no event shall the proceeds of the Loans or
the loans under any Intercompany Credit Facility be used to make any payment in
connection with any such loan or investment, or the formation or acquisition of
such Subsidiary, unless as of the date thereof, the P&O Unrestricted Cash shall
be less than $10,000,000,
(iv) the Person receiving such loan or investment or
the Subsidiary formed or acquired, as the case may be, shall be engaged in a
business related, ancillary or complimentary to the business of Borrowers
permitted in this Agreement,
(v) in the case of an investment by capital
contribution, at Lender's option, the original stock certificate or other
instrument evidencing such capital contribution (or such other evidence as may
be issued in the case of a limited liability company) shall be promptly
delivered to Lender, together with such stock power, assignment or endorsement
as Lender may request, and promptly upon Lender's request, the Borrower or
Guarantor making such investment shall execute and deliver to Lender a pledge
and security agreement, in form and substance satisfactory to Lender, granting
to Lender a first priority pledge of, security interest in and lien upon all of
the issued and outstanding shares of such stock or other instrument or interest
(and in the case of a limited liability company take such other actions as
Lender shall require with respect to Lender's security interests therein),
(vi) in the case of loans of money or property, the
original of any promissory note or other instrument evidencing the Indebtedness
arising pursuant to such loans shall be delivered, or caused to be delivered, to
Lender, at Lender's option, together with an appropriate endorsement, in form
and substance satisfactory to Lender,
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(vii) in the case of the formation or acquisition by
a Borrower of any Subsidiary, as to any such Subsidiary, (A) the Borrower
forming such Subsidiary shall cause any such Subsidiary to execute and deliver
to Lender, the following (each in form and substance satisfactory to Lender),
(1) an absolute and unconditional guarantee of payment of the Obligations, (2) a
security agreement granting to Lender a first security interest and lien (except
as otherwise consented to in writing by Lender) upon all of the assets of any
such Subsidiary (other than the real property owned by such Subsidiary), and
(3) such other agreements, documents and instruments as Lender may require,
including, but not limited to, supplements and amendments hereto and other loan
agreements or instruments evidencing Indebtedness of such new Subsidiary to
Lender and (B) the Borrower forming such Subsidiary shall (1) execute and
deliver to Lender, a pledge and security agreement, in form and substance
satisfactory to Lender, granting to Lender a first pledge of and lien on all of
the issued and outstanding shares of Capital Stock of any such Subsidiary, and
(C) deliver the original stock certificates evidencing such shares of Capital
Stock (or such other evidence as may be issued in the case of a limited
liability company), together with stock powers with respect thereto duly
executed in blank (or the equivalent thereof in the case of a limited liability
company in which such interests are certificated, or otherwise take such actions
as Lender shall require with respect to Lender's security interests therein),
(viii) Lender shall have received (A) not less than
ten (10) Business Days' prior written notice thereof setting forth in reasonable
detail the nature and terms thereof, (B) true, correct and complete copies of
all agreements, documents and instruments relating thereto and (C) such other
information with respect thereto as Lender may request;
(b) loans of money or property (other than Collateral) after
the date hereof by any Borrower or Guarantor to an existing Affiliate of any
Borrower or Guarantor as of the date hereof (other than a Borrower or Guarantor)
or investment after the date hereof by any Borrower or Guarantor in an existing
Affiliate of any Borrower or Guarantor as of the date hereof (other than a
Borrower or Guarantor); provided, that, as to any such loans or investments,
each of the following conditions is satisfied as determined by Lender:
(i) as of the date of such loan or investment and
after giving effect thereto, no Default or Event of Default shall exist or have
occurred and be continuing,
(ii) as of the date of any such loan or investment
and after giving effect thereto, the aggregate amount of the Excess Availability
of Borrowers shall have been not less than $7,500,000 for each of the
immediately preceding ten (10) consecutive days and the aggregate amount of the
Excess Availability of Borrowers shall be not less than $7,500,000,
(iii) in no event shall the proceeds of the Loans or
the loans under any Intercompany Credit Facility be used to make any such loan
or investment, unless as of the date thereof, the P&O Unrestricted Cash shall be
less than $10,000,000,
(iv) in the case of an investment by capital
contribution, at Lender's option, the original stock certificate or other
instrument evidencing such capital contribution (or
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such other evidence as may be issued in the case of a limited liability company)
shall be promptly delivered to Lender, together with such stock power,
assignment or endorsement as Lender may request, and promptly upon Lender's
request, the Borrower or Guarantor making such investment shall execute and
deliver to Lender a pledge and security agreement, in form and substance
satisfactory to Lender, granting to Lender a first priority pledge of, security
interest in and lien upon all of the issued and outstanding shares of such stock
or other instrument or interest (and in the case of a limited liability company
take such other actions as Lender shall require with respect to Lender's
security interests therein),
(v) in the case of loans of money or property, the
original of any promissory note or other instrument evidencing the Indebtedness
arising pursuant to such loans shall be delivered, or caused to be delivered, to
Lender, at Lender's option, together with an appropriate endorsement, in form
and substance satisfactory to Lender,
(vi) Lender shall have received (A) not less than ten
(10) Business Days' prior written notice thereof setting forth in reasonable
detail the nature and terms thereof, (B) true, correct and complete copies of
all agreements, documents and instruments relating thereto and (C) such other
information with respect thereto as Lender may request, and
(vii) within forty-five (45) days after the end of
each fiscal month, Borrowers and Guarantors shall provide to Lender a report in
form and substance reasonably satisfactory to Lender of the outstanding amount
of such loans and investments as of the last day of the immediately preceding
month and indicating any loans or investments made and payments received during
the immediately preceding month;
(c) the purchase by any Borrower of all or a substantial part
of the assets or property of any Person located in the United States (other than
Capital Stock), provided, that, each of the following conditions is satisfied as
determined by Lender in good faith;
(i) as of the date of such purchase and after giving
effect thereto, no Default or Event of Default shall exist or have occurred and
be continuing,
(ii) as of the date of any payment in connection with
such acquisition and after giving effect thereto, the aggregate amount of the
Excess Availability of Borrowers shall have been not less than $7,500,000 for
each of the immediately preceding ten (10) consecutive days and the aggregate
amount of the Excess Availability of Borrowers shall be not less than
$7,500,000,
(iii) in no event shall the proceeds of the Loans or
the loans under any Intercompany Credit Facility be used to make any payment in
connection with any such loan or investment, unless as of the date thereof, the
P&O Unrestricted Cash shall be less than $10,000,000,
(iv) Lender shall have received not less than ten
(10) Business Days' prior written notice of the proposed acquisition and such
information with respect thereto as Lender
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may request, including (A) the proposed date and amount of the acquisition, (B)
a list and description of the assets to be acquired, and (C) the total purchase
price for the assets to be purchased (and the terms of payment of such purchase
price),
(v) promptly upon Lender's request, the Borrower
purchasing such assets shall deliver, or cause to be delivered to Lender, true,
correct and complete copies of all agreements, documents and instruments
relating to such acquisition,
(vi) the assets and properties being acquired by any
Borrower shall be substantially consistent with, and related to, the business of
such Borrower permitted in this Agreement,
(vii) the assets acquired by any Borrower shall be
free and clear of any security interest, mortgage, pledge, lien, charge or other
encumbrance (other than those permitted in this Agreement) and Lender shall have
received evidence satisfactory to it of the same,
(viii) the acquisition by any Borrower of such assets
shall not violate any law or regulation or any order or decree of any court or
Governmental Authority in any material respect and shall not and will not
conflict with or result in the breach of, or constitute a default in any respect
under, any material agreement, document or instrument to which such Borrower or
any Affiliate is a party or may be bound, or result in the creation or
imposition of, or the obligation to grant, any lien, charge or encumbrance upon
any of the property of such Borrower or any Affiliate or violate any provision
of the certificate of incorporation or by-laws of such Borrower,
(ix) such purchase shall be on commercially
reasonable prices and terms and in a bona fide arms' length transaction with a
person that is not an Affiliate of any Borrower or Guarantor,
(x) no Borrower or Guarantor shall become obligated
with respect to any Indebtedness, nor any of its property become subject to any
security interest or lien, pursuant to such acquisition unless such Borrower or
Guarantor could incur such Indebtedness or create such security interest or lien
hereunder or under the other Financing Agreements,
(xi) Lender shall have received, in form and
substance satisfactory to Lender, (A) evidence that Lender has valid and
perfected security interests in and liens upon all purchased assets to the
extent such assets constitute Collateral hereunder, (B) UCC financing
statements, (C) all Collateral Access Agreements and other consents, waivers,
acknowledgments and other agreements from third persons which Lender may
reasonably deem necessary or desirable in order to permit, protect and perfect
its security interests in and liens upon the assets purchased, (D) the agreement
of the seller consenting to the collateral assignment by the Borrower purchasing
such assets of all rights and remedies and claims for damages of such Borrower
relating to the Collateral (including, without limitation, any bulk sales
indemnification) under the agreements, documents and instruments relating to
such acquisition and (E) such other agreements, documents and instruments as
Lender may request in connection therewith,
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(xii) in no event shall any Accounts or Inventory so
acquired by any Borrower pursuant to such acquisition be deemed Eligible
Accounts or Eligible Inventory unless and until Lender shall have conducted a
field examination with respect thereto (and at Lender's option, at Borrowers'
expense, obtained an appraisal of such Inventory by an appraiser acceptable to
Lender and in form, scope and methodology to Lender and addressed to Lender and
upon which Lender is expressly permitted to rely, which appraisal shall be in
addition to any appraisals which Lender may obtain pursuant to its rights under
Section 7.3 hereof) and then only to the extent the criteria for Eligible
Accounts and Eligible Inventory set forth herein are satisfied with respect
thereto in accordance with this Agreement (or such other or additional criteria
as Lender may, at its option, establish with respect thereto in accordance with
this Agreement and subject to such Reserves as Lender may establish in
accordance with this Agreement), and upon the request of Lender, the Accounts
and Inventory acquired by such Borrower pursuant to such acquisition shall at
all times after such acquisition be separately identified and reported to Lender
in a manner satisfactory to Lender;
(d) loans by a Borrower or Obligor to another Borrower or
Obligor after the date hereof, provided, that,
(i) as to all of such loans, (A) within thirty (30)
days after the end of each fiscal month, Borrowers shall provide to Lender a
report in form and substance satisfactory to Lender of the outstanding amount of
such loans as of the last day of the immediately preceding month and indicating
any loans made and payments received during the immediately preceding month,
(B) the Indebtedness arising pursuant to any such loan shall not be evidenced by
a promissory note or other instrument, unless the single original of such note
or other instrument is promptly delivered to Lender upon its request to hold as
part of the Collateral, with such endorsement and/or assignment by the payee of
such note or other instrument as Lender may require, and (C) as of the date of
any such loan and after giving effect thereto, the Borrower or Obligor making
such loan shall be Solvent,
(ii) in no event shall any such loans be made with
the proceeds of any Loans or Letter of Credit Accommodations (provided, that,
proceeds of loans under any of the Intercompany Credit Facilities are not
proceeds of the Loans or Letter of Credit Accommodations);
(e) loans or advances of money or property by any Foreign
Subsidiary after the date hereof to any person, or the investment by any Foreign
Subsidiary after the date hereof in (by capital contribution, dividend or
otherwise), or the purchase or repurchase by any Foreign Subsidiary after the
date hereof of the Capital Stock or Indebtedness or all or a substantial part of
the assets or property of any person, or the formation or acquisition by any
Foreign Subsidiary after the date hereof of any Subsidiaries, or the agreement
of any Foreign Subsidiary after the date hereof to do any of the foregoing,
provided that, (i) as of the date of such loan or advance, or investment or
purchase or repurchase, or the formation or acquisition of any such Subsidiary
and after giving effect thereto, no Default or Event of Default shall exist or
have occurred and be continuing, (ii) in no event shall Global, any Borrower or
Obligor make, or be required to make, any payment or incur any obligation or
liability (contingent or otherwise) in connection with any
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such loan or advance, or investment or purchase or repurchase, or the formation
or acquisition of such Subsidiary or take any other action otherwise prohibited
hereunder, (iii) in the case of any loans or advances to Global, any Borrower or
Guarantor, (A) the Indebtedness arising pursuant to such loans shall be subject
to, and subordinate in right of payment to, the right of Lender to receive the
prior final payment and satisfaction in full of all of the Obligations on terms
and condition acceptable to Lender, (B) promptly upon Lender's request, Lender
shall have received a subordination agreement, in form and substance
satisfactory to Lender, providing for the terms of the terms of the
subordination in right of payment of such Indebtedness of Global, such Borrower
or Guarantor to the prior final payment and satisfaction in full of all of the
Obligations, duly authorized, executed and delivered by such Subsidiary and such
Borrower (or Guarantor), and (C) such Borrower or Guarantor shall not, directly
or indirectly make, or be required to make, any payments in respect of such
Indebtedness,
(f) the endorsement of instruments for collection or deposit
in the ordinary course of business;
(g) investments in cash or Cash Equivalents, provided, that,
(i) no Loans are then outstanding and (ii) the terms and conditions of Section
5.2 hereof shall have been satisfied with respect to the deposit account,
investment account or other account in which such cash or Cash Equivalents are
held;
(h) the existing equity investments of each Borrower,
Guarantor or any of their Subsidiaries as of the date hereof in their respective
Subsidiaries, provided, that, no Borrower or Guarantor shall have any further
obligations or liabilities to make any capital contributions or other additional
investments or other payments to or in or for the benefit of any of such
Subsidiaries;
(i) loans and advances by any Borrower or Guarantor to
employees of such Borrower or Guarantor not to exceed the principal amount of
$1,000,000 in the aggregate at any time outstanding for: (i) reasonably and
necessary work-related travel or other ordinary business expenses to be incurred
by such employee in connection with their work for such Borrower or Guarantor
and (ii) reasonable and necessary relocation expenses of such employees
(including home mortgage financing for relocated employees);
(j) stock or obligations issued to any Borrower or Guarantor
by any Person (or the representative of such Person) in respect of Indebtedness
of such Person owing to such Borrower or Guarantor in connection with the
insolvency, bankruptcy, receivership or reorganization of such Person or a
composition or readjustment of the debts of such Person; provided, that, the
original of any such stock or instrument evidencing such obligations shall be
promptly delivered to Lender, upon Lender's request, together with such stock
power, assignment or endorsement by such Borrower or Guarantor as Lender may
request;
(k) obligations of account debtors to any Borrower or
Guarantor arising from Accounts which are past due evidenced by a promissory
note made by such account debtor payable to such Borrower or Guarantor;
provided, that, promptly upon the receipt of the original
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of any such promissory note by such Borrower or Guarantor, such promissory note
shall be endorsed to the order of Lender by such Borrower or Guarantor and
promptly delivered to Lender as so endorsed; or
(l) the loans and advances set forth on Schedule 9.10 to the
Information Certificate; provided, that, as to such loans and advances, (i)
Borrowers and Guarantors shall not, directly or indirectly, amend, modify, alter
or change the terms of such loans and advances or any agreement, document or
instrument related thereto, (ii) as to any loans and advances set forth on
Schedule 9.10 to the Information Certificate by any Subsidiary of Parent that is
not a Borrower or Guarantor to a Borrower or Guarantor, no payments in respect
of the Indebtedness arising pursuant to such loans shall be made, or be required
to be made, by any Borrower or Guarantor to other Subsidiary of Parent, and
(iii) Borrowers and Guarantors shall furnish to Lender all notices or demands in
connection with such loans and advances either received by any Borrower or
Guarantor or on its behalf, promptly after the receipt thereof, or sent by any
Borrower or Guarantor or on its behalf, concurrently with the sending thereof,
as the case may be.
9.11 Dividends and Redemptions. Each Borrower and Guarantor shall not,
directly or indirectly, declare or pay any dividends on account of any shares of
class of any Capital Stock of such Borrower or Guarantor now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of
any class of Capital Stock (or set aside or otherwise deposit or invest any sums
for such purpose) for any consideration or apply or set apart any sum, or make
any other distribution (by reduction of capital or otherwise) in respect of any
such shares or agree to do any of the foregoing, except that:
(a) such Borrower, Guarantor or Subsidiary may declare and pay
such dividends or redeem, retire, defease, purchase or otherwise acquire any
shares of any class of Capital Stock for consideration in the form of shares of
common stock (so long as after giving effect thereto no Change of Control or
other Default or Event of Default shall exist or occur);
(b) Borrowers and Guarantors (other than Parent) may pay
dividends to their respective immediate corporate parent;
(c) Parent may pay annual dividends in respect of shares of
Capital Stock; provided, that,
(i) as of the date of the payment of any such
dividend and after giving effect thereto, no Default or Event of Default shall
exist or have occurred and be continuing,
(ii) as of the date of the payment of any such
dividend and after giving effect thereto, the aggregate amount of the Excess
Availability of Borrowers shall have been not less than $7,500,000 for each of
the immediately preceding ten (10) consecutive days and the aggregate amount of
the Excess Availability of Borrowers shall be not less than $7,500,000,
(iii) in no event shall the proceeds of the Loans or
the loans under any
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Intercompany Credit Facility be used to make any such payment, unless as of the
date thereof the P&O Unrestricted Cash shall be less than $10,000,000,
(iv) such dividend shall not violate any law or
regulation or the terms of any indenture, agreement or undertaking to which any
Borrower or Obligor or its or their property are bound,
(v) such dividend shall be paid out of legally
available funds therefor;
(d) Borrowers and Guarantors may repurchase Capital Stock
consisting of common stock held by employees pursuant to any employee stock
ownership plan thereof upon the termination, retirement or death of any such
employee in accordance with the provisions of such plan, provided, that, as to
any such repurchase, each of the following conditions is satisfied: (i) as of
the date of the payment for such repurchase and after giving effect thereto, no
Default or Event of Default shall exist or have occurred and be continuing,
(ii) such repurchase shall be paid with funds legally available therefor, (iii)
such repurchase shall not violate any law or regulation or the terms of any
indenture, agreement or undertaking to which such Borrower or Guarantor is a
party or by which such Borrower or Guarantor or its or their property are bound,
and (iv) the aggregate amount of all payments for such repurchases in any
calendar year shall not exceed $1,000,000.
9.12 Transactions with Affiliates. Each Borrower and Guarantor shall
not, directly or indirectly:
(a) purchase, acquire or lease any property from, or sell,
transfer or lease any property to, any officer, director or other Affiliate of
such Borrower or Guarantor, except in the ordinary course of and pursuant to the
reasonable requirements of such Borrower's or Guarantor's business (as the case
may be) and upon fair and reasonable terms no less favorable to such Borrower or
Guarantor than such Borrower or Guarantor would obtain in a comparable arm's
length transaction with an unaffiliated person; or
(b) make any payments of management, consulting or other fees
for management or similar services, or of any Indebtedness owing to any officer,
employee, shareholder, director or any other Affiliate of such Borrower or
Guarantor, except (i) reasonable compensation to officers, employees and
directors for services rendered to such Borrower or Guarantor in the ordinary
course of business, (ii) payments by any such Borrower or Guarantor to Parent or
ICO Technology for actual and necessary reasonable out-of-pocket legal and
accounting, insurance, marketing, corporate management, payroll and similar
types of services paid for by Parent or ICO Technology on behalf of such
Borrower or Guarantor, in the ordinary course of their respective businesses or
as the same may be directly attributable to such Borrower or Guarantor (and in
each case in accordance with the current practices of such persons as of the
date hereof) and for the payment of taxes by or on behalf of Parent to the
extent permitted under Section 2.3 hereof, and (iii) such other payments,
whether as loans, dividends or in respect of Indebtedness as are otherwise
permitted hereunder.
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9.13 Compliance with ERISA. Each Borrower and Guarantor shall, and
shall cause each of its ERISA Affiliates, to: (a) maintain each Plan in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other Federal and State law; (b) cause each Plan which is qualified
under Section 401(a) of the Code to maintain such qualification; (c) not
terminate any of such Plans so as to incur any material liability to the Pension
Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited
transaction involving any of such Plans or any trust created thereunder which
would subject such Borrower, Guarantor or such ERISA Affiliate to a material tax
or penalty or other liability on prohibited transactions imposed under Section
4975 of the Code or ERISA; (e) make all required contributions to any Plan which
it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or
the terms of such Plan; (f) not allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such Plan; or (g) allow
or suffer to exist any occurrence of a reportable event or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any such Plan that is a single employer plan, which
termination could result in any material liability to the Pension Benefit
Guaranty Corporation.
9.14 End of Fiscal Years; Fiscal Quarters. Parent and it Subsidiaries
shall, for financial reporting purposes, cause its, and each of its
Subsidiaries' (a) fiscal years to end on September 30 of each year and
(b) fiscal quarters to end on December 31, March 31, June 30, and September 30
of each year, except that Parent may, at its option, change such fiscal year end
upon not less than sixty (60) days prior written notice to Lender.
9.15 Change in Business. Each Borrower and Guarantor shall not engage
in any business other than the business of such Borrower or Guarantor on the
date hereof and any business reasonably related, ancillary or complimentary to
the business in which such Borrower or Guarantor is engaged on the date hereof.
ICO Minerals, Inc. does not have, and shall not acquire, any assets or property
or does not have, and shall not have or engage in, any operations or the conduct
of any business.
9.16 Limitation of Restrictions Affecting Subsidiaries. Each Borrower
and Guarantor shall not, directly, or indirectly, create or otherwise cause or
suffer to exist any encumbrance or restriction which prohibits or limits the
ability of any Subsidiary of such Borrower or Guarantor to (a) pay dividends or
make other distributions or pay any Indebtedness owed to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; (b) make loans or
advances to such Borrower or Guarantor or any Subsidiary of such Borrower or
Guarantor, (c) transfer any of its properties or assets to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; or (d) create, incur,
assume or suffer to exist any lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, other than encumbrances and
restrictions arising under (i) applicable law, (ii) this Agreement and the
Senior Indenture, (iii) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor, (iv) customary
restrictions on dispositions of real property interests found in reciprocal
easement agreements of such Borrower or Guarantor or any Subsidiary of such
Borrower or Guarantor, (v) any agreement relating to permitted Indebtedness
incurred by a Subsidiary of such Borrower or Guarantor prior to the date on
which such Subsidiary was acquired by Borrower or such Guarantor and
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outstanding on such acquisition date, and (vi) the extension or continuation of
contractual obligations in existence on the date hereof; provided, that, any
such encumbrances or restrictions contained in such extension or continuation
are no less favorable to Lender than those encumbrances and restrictions under
or pursuant to the contractual obligations so extended or continued.
9.17 Minimum EBITDA. At any time that the aggregate amount of the
Excess Availability of Borrowers is less than $10,000,000, (a) on and before
January 1, 2003, (i) the EBITDA of Borrowers (on a combined basis) for the
immediately preceding six (6) consecutive months (treated as a single accounting
period), without including in such calculation the $1,840,000 charge for
litigation taken in December, 2001, shall be not less than $5,000,000 and (ii)
the EBITDA of Parent and its Subsidiaries, on a consolidated basis, for the
immediately preceding six (6) consecutive months (treated as a single accounting
period), without including in such calculation the $1,840,000 charge for
litigation taken in December, 2001, shall be not less than $10,000,000 and (b)
after January 1, 2003, (i) the EBITDA of Borrowers (on a combined basis), for
the immediately preceding twelve (12) consecutive month period (treated as a
single accounting period) shall be not less than $10,000,000 and (ii) the EBITDA
of Parent and its Subsidiaries, on a consolidated basis, for the immediately
preceding twelve (12) consecutive month period (treated as a single accounting
period) shall be not less than $18,000,000. In addition, such calculations shall
not include charges after the date hereof of up to $2,400,000 in the aggregate
taken in connection with the settlement of occupational health claims and any
charges after the date hereof for expenses paid for solely with the Capital
Stock of Parent.
9.18 License Agreements.
(a) Each Borrower and Guarantor shall (i) promptly and
faithfully observe and perform all of the material terms, covenants, conditions
and provisions of the material License Agreements to which it is a party to be
observed and performed by it, at the times set forth therein, if any, (ii) not
do, permit, suffer or refrain from doing anything that could reasonably be
expected to result in a default under or breach of any of the terms of any
material License Agreement, (iii) not cancel, surrender, modify, amend, waive or
release any material License Agreement in any material respect or any term,
provision or right of the licensee thereunder in any material respect, or
consent to or permit to occur any of the foregoing; except, that, subject to
Section 9.18(b) below, such Borrower or Guarantor may cancel, surrender or
release any material License Agreement in the ordinary course of the business of
such Borrower or Guarantor; provided, that, such Borrower or Guarantor (as the
case may be) shall give Lender not less than thirty (30) days prior written
notice of its intention to so cancel, surrender and release any such material
License Agreement, (iv) give Lender prompt written notice of any material
License Agreement entered into by such Borrower or Guarantor after the date
hereof, together with a true, correct and complete copy thereof and such other
information with respect thereto as Lender may request, (v) give Lender prompt
written notice of any material breach of any obligation, or any default, by any
party under any material License Agreement, and deliver to Lender (promptly upon
the receipt thereof by such Borrower or Guarantor in the case of a notice to
such Borrower or Guarantor and concurrently with the sending thereof in the case
of a notice from such Borrower or Guarantor) a copy of each notice of default
and every other notice and other
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communication received or delivered by such Borrower or Guarantor in connection
with any material License Agreement which relates to the right of such Borrower
or Guarantor to continue to use the property subject to such License Agreement,
and (vi) furnish to Lender, promptly upon the request of Lender, such
information and evidence as Lender may reasonably require from time to time
concerning the observance, performance and compliance by such Borrower or
Guarantor or the other party or parties thereto with the material terms,
covenants or provisions of any material License Agreement.
(b) Each Borrower and Guarantor will either exercise any
option to renew or extend the term of each material License Agreement to which
it is a party in such manner as will cause the term of such material License
Agreement to be effectively renewed or extended for the period provided by such
option and give prompt written notice thereof to Lender or give Lender prior
written notice that such Borrower or Guarantor does not intend to renew or
extend the term of any such material License Agreement or that the term thereof
shall otherwise be expiring, not less than sixty (60) days prior to the date of
any such non-renewal or expiration. In the event of the failure of such Borrower
or Guarantor to extend or renew any material License Agreement to which it is a
party, Lender shall have, and is hereby granted, the irrevocable right and
authority, at its option, to renew or extend the term of such material License
Agreement, whether in its own name and behalf, or in the name and behalf of a
designee or nominee of Lender or in the name and behalf of such Borrower or
Guarantor, as Lender shall determine at any time that an Event of Default shall
exist or have occurred and be continuing. Lender may, but shall not be required
to, perform any or all of such obligations of such Borrower or Guarantor under
any of the License Agreements, including, but not limited to, the payment of any
or all sums due from such Borrower or Guarantor thereunder. Any sums so paid by
Lender shall constitute part of the Obligations.
9.19 Proceeds of Dividends and Loans. P&O and Global shall direct and
cause all proceeds of any dividends or other distributions or loans or advances
made to it from any Subsidiary of Parent to be sent directly by such Subsidiary
to the person that such Subsidiary is required to pay any proceeds of such
dividends or other distributions or loans or advances to under the terms hereof,
provided, that, if for any reason any such proceeds are paid to P&O, such
proceeds shall only be deposited in a deposit account subject to a Deposit
Account Control Agreement, in form and substance satisfactory to Lender, by and
among P&O, Lender and the bank at which such deposit account is maintained. So
long as no Default or Event of Default shall exist or have occurred, the funds
in such deposit account shall only be used for the purposes set forth in
Sections 2.3(a)(ii)(A), (B) or (C). All proceeds of any dividends or other
distributions to Global shall be used only to make contemporaneous payments of
dividends or other distributions by Global to P&O which shall either be sent
directly to the person to whom P&O is required to pay such amounts under the
terms hereof or shall be deposited into the same deposit account of P&O that is
subject to such Deposit Account Control Agreement.
9.20 Costs and Expenses. Borrowers and Guarantors shall pay to Lender
on demand all costs, expenses, filing fees and taxes paid or payable in
connection with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Lender's rights in the Collateral, this Agreement, the other
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Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all costs and reasonable expenses of filing or recording
(including Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) costs and reasonable expenses and fees for insurance premiums,
appraisal fees and search fees, costs and reasonable expenses of remitting loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining the Blocked Accounts, together with Lender's customary charges and
fees with respect thereto; (c) charges, fees or reasonable expenses charged by
any bank or issuer in connection with the Letter of Credit Accommodations; (d)
costs and expenses of preserving and protecting the Collateral; (e) costs and
expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the security interests and liens of Lender, selling or
otherwise realizing upon the Collateral, and otherwise enforcing the provisions
of this Agreement and the other Financing Agreements or defending any claims
made or threatened against Lender arising out of the transactions contemplated
hereby and thereby (including preparations for and consultations concerning any
such matters); (f) all reasonable out-of-pocket expenses and costs heretofore
and from time to time hereafter incurred by Lender during the course of periodic
field examinations of the Collateral and such Borrower's or Guarantor's
operations, plus a per diem charge at the rate of $750 per person per day for
Lender's examiners in the field and office; and (g) the reasonable fees and
disbursements of counsel (including legal assistants) to Lender in connection
with any of the foregoing.
9.21 Further Assurances. At the request of Lender at any time and from
time to time, Borrowers and Guarantors shall, at their expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements. Lender may at any time and from time to time request a certificate
from an officer of any Borrower or Guarantor representing that all conditions
precedent to the making of Loans and providing Letter of Credit Accommodations
contained herein are satisfied. In the event of such request by Lender, Lender
may, at Lender's option, cease to make any further Loans or provide any further
Letter of Credit Accommodations until Lender has received such certificate and,
in addition, Lender has determined that such conditions are satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) any Borrower fails to pay any of the Obligations when
due or (ii) any Borrower or Obligor fails to perform any of the covenants
contained in Sections 9.3, 9.4, 9.13, 9.14, 9.15, and 9.16 of this Agreement and
such failure shall continue for twenty (20) days;
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provided, that, such twenty (20) day period shall not apply in the case of: (A)
any failure to observe any such covenant which is not capable of being cured at
all or within such twenty (20) day period or which has been the subject of a
prior failure within a six (6) month period or (B) an intentional breach by any
Borrower or Obligor of any such covenant or (iii) any Borrower or Obligor fails
to perform any of the terms, covenants, conditions or provisions contained in
this Agreement or any of the other Financing Agreements other than those
described in Sections 10.1(a)(i) and 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by
any Borrower or Guarantor in this Agreement, the other Financing Agreements or
any other written agreement, schedule, confirmatory assignment or otherwise
shall when made or deemed made be false or misleading;
(c) any Obligor revokes or terminates, or purports to revoke
or terminate, or fails to perform any of the terms, covenants, conditions or
provisions of any guarantee, endorsement or other agreement of such party in
favor of Lender;
(d) any judgment for the payment of money is rendered against
any Borrower or Obligor in excess of $1,000,000 in any one case or in excess of
$2,000,000 in the aggregate (to the extent not covered by insurance where the
insurer has assumed responsibility in writing for such judgment and provided,
that, for purposes of this clause (d) any order of a court approving a
settlement agreed to by Worldwide of occupational health claims requiring
payments by a Borrower of up to the aggregate amount of $2,400,000 shall not be
deemed a judgment, without limiting any other rights or remedies of Lender with
respect thereto) and shall remain undischarged or unvacated for a period in
excess of thirty (30) days or execution shall at any time not be effectively
stayed, or any judgment other than for the payment of money, or injunction,
attachment, garnishment or execution is rendered against any Borrower or Obligor
or any of the Collateral having a value in excess of $1,000,000;
(e) any Borrower or Obligor, which is a partnership, limited
liability company, limited liability partnership or a corporation, dissolves or
suspends or discontinues doing business (except as permitted under Section 9.7
hereof);
(f) any Borrower or Obligor makes an assignment for the
benefit of creditors, makes or sends notice of a bulk transfer or calls a
meeting of its creditors or principal creditors in connection with a moratorium
or adjustment of the Indebtedness due to them;
(g) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or Obligor or all or any part of its
properties and such petition or application is not dismissed within forty-five
(45) days after the date of its filing or any Borrower or Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
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(h) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or Obligor or for all or any part of its
property;
(i) any default in respect of any Indebtedness of any Borrower
or Obligor (other than Indebtedness owing to Lender hereunder), in any case in
an amount in excess of $5,000,000, which default continues for more than the
applicable cure period, if any, with respect thereto and/or is not waived in
writing by the other parties thereto, or any default by any Borrower or Obligor
under any Material Contract, which default continues for more than the
applicable cure period, if any, with respect thereto and/or is not waived in
writing by the other parties thereto;
(j) any material provision hereof or of any of the other
Financing Agreements shall for any reason cease to be valid, binding and
enforceable with respect to any party hereto or thereto (other than Lender) in
accordance with its terms, or any such party shall challenge the enforceability
hereof or thereof, or shall assert in writing, or take any action or fail to
take any action based on the assertion that any provision hereof or of any of
the other Financing Agreements has ceased to be or is otherwise not valid,
binding or enforceable in accordance with its terms, or any security interest
provided for herein or in any of the other Financing Agreements shall cease to
be a valid and perfected first priority security interest in any of the
Collateral purported to be subject thereto (except as otherwise permitted herein
or therein);
(k) an ERISA Event shall occur which results in or could
reasonably be expected to result in liability of any Borrower in an aggregate
amount in excess of $1,000,000;
(l) any Change of Control;
(m) the indictment by any Governmental Authority, or as Lender
may reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of any Borrower or Obligor of which any Borrower, Obligor
or Lender receives notice, in either case, as to which there is a reasonable
possibility of an adverse determination, in the good faith determination of
Lender, under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against such Borrower or Obligor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of (i) any of the Collateral having a value in excess of
$1,000,000 or (ii) any other property of any Borrower or Guarantor which is
necessary or material to the conduct of its business;
(n) there shall be a material adverse change in the business,
assets or prospects of Borrowers and Guarantors (taken as a whole) after the
date hereof; or
(o) there shall be an event of default under any of the other
Financing Agreements.
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10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and
is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the UCC and other applicable law, all
of which rights and remedies may be exercised without notice to or consent by
any Borrower or Obligor, except as such notice or consent is expressly provided
for hereunder or required by applicable law. All rights, remedies and powers
granted to Lender hereunder, under any of the other Financing Agreements, the
UCC or other applicable law, are cumulative, not exclusive and enforceable, in
Lender's discretion, alternatively, successively, or concurrently on any one or
more occasions, and shall include, without limitation, the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach by
any Borrower or Obligor of this Agreement or any of the other Financing
Agreements. Lender may, at any time or times, proceed directly against any
Borrower or Obligor to collect the Obligations without prior recourse to the
Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion,
(i) accelerate the payment of all Obligations and demand immediate payment
thereof to Lender, (provided, that, upon the occurrence of any Event of Default
described in Sections 10.1(g) and 10.1(h), all Obligations shall automatically
become immediately due and payable), (ii) with or without judicial process or
the aid or assistance of others, enter upon any premises on or in which any of
the Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(iii) require any Borrower or Obligor, at Borrowers' expense, to assemble and
make available to Lender any part or all of the Collateral at any place and time
designated by Lender, (iv) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, (v) remove any or all of the Collateral
from any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (vi) sell, lease, transfer, assign, deliver or otherwise dispose of any
and all Collateral (including entering into contracts with respect thereto,
public or private sales at any exchange, broker's board, at any office of Lender
or elsewhere) at such prices or terms as Lender may deem reasonable, for cash,
upon credit or for future delivery, with the Lender having the right to purchase
the whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of any Borrower or
Obligor, which right or equity of redemption is hereby expressly waived and
released by Borrowers and Obligors and/or (vii) terminate this Agreement. If any
of the Collateral is sold or leased by Lender upon credit terms or for future
delivery, the Obligations shall not be reduced as a result thereof until payment
therefor is finally collected by Lender. If notice of disposition of Collateral
is required by law, ten (10) days prior notice by Lender to Borrower Agent
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrowers and Obligors waive any
other notice. In the event Lender institutes an action to recover any Collateral
or seeks recovery of any Collateral by way of prejudgment remedy, each Borrower
and Obligor waives the posting of any bond which might otherwise be required. At
any time an Event of Default exists or has occurred and is continuing, upon
Lender's request, Borrowers will either, as Lender shall specify, furnish cash
collateral to the issuer to be used to
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secure and fund Lender's reimbursement obligations to the issuer in connection
with any Letter of Credit Accommodations or furnish cash collateral to Lender
for the Letter of Credit Accommodations. Such cash collateral shall be in the
amount equal to one hundred ten (110%) percent of the amount of the Letter of
Credit Accommodations plus the amount of any fees and expenses payable in
connection therewith through the end of the latest expiration date of such
Letter of Credit Accommodations.
(c) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
and other obligors in respect thereof that the Receivables have been assigned to
Lender and that Lender has a security interest therein and Lender may direct any
or all account debtors and other obligors to make payment of Receivables
directly to Lender, (ii) extend the time of payment of, compromise, settle or
adjust for cash, credit, return of merchandise or otherwise, and upon any terms
or conditions, any and all Receivables or other obligations included in the
Collateral and thereby discharge or release the account debtor or any other
party or parties in any way liable for payment thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Receivables or
such other obligations, but without any duty to do so, and Lender shall not be
liable for its or their failure to collect or enforce the payment thereof nor
for the negligence of its or their Lenders or attorneys with respect thereto and
(iv) take whatever other action Lender may in good ▇▇▇▇▇ ▇▇▇▇ necessary or
desirable for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Lender and are payable directly
and only to Lender and Borrowers and Guarantors shall deliver to Lender such
originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Lender may require. In
the event any account debtor returns Inventory when an Event of Default exists
or has occurred and is continuing, Borrowers and Guarantors shall, upon Lender's
request, hold the returned Inventory in trust for Lender, segregate all returned
Inventory from all of its other property, dispose of the returned Inventory
solely according to Lender's instructions, and not issue any credits, discounts
or allowances with respect thereto without Lender's prior written consent.
(d) To the extent that applicable law imposes duties on Lender
to exercise remedies in a commercially reasonable manner (which duties cannot be
waived under such law), each Borrower and Guarantor acknowledges and agrees that
it is not commercially unreasonable for Lender (i) to fail to incur expenses
reasonably deemed significant by Lender to prepare Collateral for disposition or
otherwise to complete raw material or work in process into finished goods or
other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain consents of any Governmental Authority
or other third party for the collection or disposition of Collateral to be
collected or disposed of, (iii) to fail to exercise collection remedies against
account debtors, secondary obligors or other persons obligated on Collateral or
to remove liens or encumbrances on or any adverse claims against Collateral,
(iv) to exercise collection remedies against account debtors and other persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (v) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of
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a specialized nature, (vi) to contact other persons, whether or not in the same
business as any Borrower or Guarantor, for expressions of interest in acquiring
all or any portion of the Collateral, (vii) to hire one or more professional
auctioneers to assist in the disposition of Collateral, whether or not the
collateral is of a specialized nature, (viii) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (ix) to dispose of assets in
wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Lenders against
risks of loss, collection or disposition of Collateral or to provide to Lender a
guaranteed return from the collection or disposition of Collateral, or (xii) to
the extent deemed appropriate by Lender, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist
Lender in the collection or disposition of any of the Collateral. Each Borrower
and Guarantor acknowledges that the purpose of this Section is to provide
non-exhaustive indications of what actions or omissions by Lender would not be
commercially unreasonable in the exercise by any Lender of remedies against the
Collateral and that other actions or omissions by Lender shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section. Without limitation of the foregoing, nothing contained in this Section
shall be construed to grant any rights to any Borrower or Guarantor or to impose
any duties on Lender that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this Section.
(e) For the purpose of enabling Lender to exercise the rights
and remedies hereunder, each Borrower and Obligor hereby grants to Lender, to
the extent assignable, an irrevocable, non-exclusive license (exercisable at any
time an Event of Default shall exist or have occurred and for so long as the
same is continuing) without payment of royalty or other compensation to any
Borrower or Obligor, to use, assign, license or sublicense any of the
trademarks, service-marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by any Borrower or
Obligor, wherever the same maybe located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout thereof.
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, enforce the rights of any Borrower or
Obligor against any account debtor, secondary obligor or other obligor in
respect of any of the Accounts or other Receivables. Without limiting the
generality of the foregoing, Lender may at such time or times (i) notify any or
all account debtors, secondary obligors or other obligors in respect thereof
that the Receivables have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors, secondary
obligors and other obligors to make payment of Receivables directly to Lender,
(ii) extend the time of payment of, compromise, settle or adjust for cash,
credit, return of merchandise or otherwise, and upon any terms or conditions,
any and all Receivables or other obligations included in the Collateral and
thereby discharge or release the account debtor or any secondary obligors or
other obligors in respect thereof without affecting any of the Obligations,
(iii) demand, collect or enforce payment of any Receivables or such other
obligations, but without any duty to do so, and Lender shall not be
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liable for any failure to collect or enforce the payment thereof nor for the
negligence of its Lenders or attorneys with respect thereto and (iv) take
whatever other action Lender may deem necessary or desirable for the protection
of its interests. At any time that an Event of Default exists or has occurred
and is continuing, at Lender's request, all invoices and statements sent to any
account debtor shall state that the Accounts and such other obligations have
been assigned to Lender and are payable directly and only to Lender and
Borrowers and Obligors shall deliver to Lender such originals of documents
evidencing the sale and delivery of goods or the performance of services giving
rise to any Accounts as Lender may require. In the event any account debtor
returns Inventory when an Event of Default exists or has occurred and is
continuing, Borrowers shall, upon Lender's request, hold the returned Inventory
in trust for Lender, segregate all returned Inventory from all of its other
property, dispose of the returned Inventory solely according to Lender's
instructions, and not issue any credits, discounts or allowances with respect
thereto without Lender's prior written consent.
(g) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrowers and Guarantors shall
remain liable to Lender for the payment of any deficiency with interest at the
highest rate provided for herein and all costs and expenses of collection or
enforcement, including attorneys' fees and expenses.
(h) Without limiting the foregoing, upon the occurrence of a
Default or an Event of Default, Lender may, at Lender's option, without notice,
(i) cease making Loans or arranging for Letter of Credit Accommodations or
reduce the lending formulas or amounts of Loans and Letter of Credit
Accommodations available to Borrowers and/or (ii) terminate any provision of
this Agreement providing for any future Loans or Letter of Credit Accommodations
to be made by Lender to Borrowers and/or (iii) establish such Reserves as Lender
determines without limitation or restriction notwithstanding anything to the
contrary contained herein.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements (other than the Mortgage to the
extent provided therein) and any dispute arising out of the relationship between
the parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the internal laws of the State of Texas but excluding any principles
of conflicts of law or other rule of law that would cause the application of the
law of any jurisdiction other than the laws of the State of Texas.
(b) Borrowers, Obligors and Lender irrevocably consent and
submit to the non-exclusive jurisdiction of the District Court of the State of
Texas and the United States District Court for the Northern District of Texas,
whichever Lender may elect, and waive any objection
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based on venue or forum non conveniens with respect to any action instituted
therein arising under this Agreement or any of the other Financing Agreements or
in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above (except that Lender shall have the
right to bring any action or proceeding against any Borrower or Obligor or its
or their property in the courts of any other jurisdiction which Lender deems
necessary or appropriate in order to realize on the Collateral or to otherwise
enforce its rights against any Borrower or Obligor or its or their property).
(c) Each Borrower and Obligor hereby waives personal service
of any and all process upon it and consents that all such service of process may
be made by certified mail (return receipt requested) directed to its address set
forth herein and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at Lender's
option, by service upon any Borrower or Obligor (or Borrower Agent on behalf of
such Borrower or Obligor) in any other manner provided under the rules of any
such courts. Within thirty (30) days after such service, such Borrower or
Obligor shall appear in answer to such process, failing which such Borrower or
Obligor shall be deemed in default and judgment may be entered by Lender against
such Borrower or Obligor for the amount of the claim and other relief requested.
(d) BORROWERS, OBLIGORS AND LENDER EACH HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)
ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR
THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.
BORROWERS, OBLIGORS AND LENDER HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY
AND THAT ANY BORROWER, ANY OBLIGOR OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF
A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to any Borrower or
Obligor (whether in tort, contract, equity or otherwise) for losses suffered by
such Borrower or Obligor in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this Agreement, or
any act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on
Lender, that the losses were the result of acts or omissions constituting gross
negligence or willful misconduct. In any such litigation, Lender shall be
entitled to the benefit of the rebuttable presumption that it
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acted in good faith and with the exercise of ordinary care in the performance by
it of the terms of this Agreement. Each Borrower and Obligor: (i) certifies that
neither Lender nor any representative, Lender or attorney acting for or on
behalf of Lender has represented, expressly or otherwise, that Lender would not,
in the event of litigation, seek to enforce any of the waivers provided for in
this Agreement or any of the other Financing Agreements and (ii) acknowledges
that in entering into this Agreement and the other Financing Agreements, Lender
is relying upon, among other things, the waivers and certifications set forth in
this Section 11.1 and elsewhere herein and therein.
11.2 Waiver of Notices. Each Borrower and Guarantor hereby expressly
waives demand, presentment, protest and notice of protest and notice of dishonor
with respect to any and all instruments and chattel paper, included in or
evidencing any of the Obligations or the Collateral, and any and all other
demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein. No notice to or demand on any Borrower or Guarantor which
Lender may elect to give shall entitle such Borrower or Guarantor to any other
or further notice or demand in the same, similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrowers. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Each Borrower and Guarantor waives all
rights to interpose any claims, deductions, setoffs or counterclaims of any
nature (other then compulsory counterclaims) in any action or proceeding with
respect to this Agreement, the Obligations, the Collateral or any matter arising
therefrom or relating hereto or thereto.
11.5 Indemnification. Each Borrower and Guarantor shall, jointly and
severally, indemnify and hold Lender, and its officers, directors, agents,
employees, advisors and counsel and their respective Affiliates (each such
person being an "Indemnitee"), harmless from and against any and all losses,
claims, damages, liabilities, costs or expenses (including attorneys' fees and
expenses) imposed on, incurred by or asserted against any of them in connection
with any litigation, investigation, claim or proceeding commenced or threatened
related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Financing Agreements,
or any undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel (including as a result of the ordinary negligence of any of them),
except that Borrowers
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and Guarantors shall not have any obligation under this Section 11.4 to
indemnify an Indemnitee with respect to a matter covered hereby resulting from
the gross negligence or wilful misconduct of such Indemnitee as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction
(but without limiting the obligations of Borrowers or Guarantors as to any other
Indemnitee). To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section may be unenforceable because it violates any
law or public policy, Borrowers and Guarantors shall pay the maximum portion
which it is permitted to pay under applicable law to Lender in satisfaction of
indemnified matters under this Section. To the extent permitted by applicable
law, no Borrower or Guarantor shall assert, and each Borrower and Guarantor
hereby waives, any claim against any Indemnitee, on any theory of liability, for
special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this
Agreement, any of the other Financing Agreements or any undertaking or
transaction contemplated hereby. All amounts due under this Section shall be
payable upon demand. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three (3) years
from the date hereof (the "Maturity Date"). In addition, Borrowers may terminate
this Agreement at any time upon ten (10) days prior written notice to Lender
(which notice shall be irrevocable) and Lender may, at its option, terminate
this Agreement at any time on or after an Event of Default; provided, that, in
each case, this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the Maturity Date or any other effective date of
termination of the Financing Agreements, Borrowers shall pay to Lender all
outstanding and unpaid Obligations and shall furnish cash collateral to Lender
(or at Lender's option, a letter of credit issued for the account of Borrowers
and at Borrowers' expense, in form and substance satisfactory to Lender, by an
issuer acceptable to Lender and payable to Lender as beneficiary) in such
amounts as Lender determines are reasonably necessary to secure Lender and
Lenders from loss, cost, damage or expense, including attorneys' fees and
expenses, in connection with any contingent Obligations, including issued and
outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Lender has not yet
received final and indefeasible payment. The amount of such cash collateral (or
letter of credit, as Lender may determine) as to any Letter of Credit
Accommodations shall be in the amount equal to one hundred five (105%) percent
of the amount of the Letter of Credit Accommodations plus the amount of any fees
and expenses payable in connection therewith through the end of the latest
expiration date of such Letter of Credit Accommodations. Such payments in
respect of the Obligations and cash collateral shall be remitted by wire
transfer in Federal funds to the Lender Payment Account or such other bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower Agent for such purpose. Interest shall be due until and
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including the next Business Day, if the amounts so paid by Borrowers to the
Lender Payment Account or other bank account designated by Lender are received
in such bank account later than 12:00 noon, Dallas, Texas time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower or Obligor of its respective
duties, obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally discharged and
paid, and Lender's continuing security interest in the Collateral and the rights
and remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid. Accordingly, each Borrower and Guarantor
waives any rights it may have under the UCC to demand the filing of termination
statements with respect to the Collateral and Lender shall not be required to
send such termination statements to Borrowers or Guarantors, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations paid and satisfied
in full in immediately available funds.
(c) If for any reason this Agreement is terminated prior to
the Maturity Date, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender's lost profits as a result thereof, Borrowers
agree to pay to Lender, upon the effective date of such termination, an early
termination fee in the amount equal to one-half (1/2%) percent of the Maximum
Credit. Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrowers and
Guarantors agree that it is reasonable under the circumstances currently
existing. In addition, Lender shall be entitled to such early termination fee
upon the occurrence of any Event of Default described in Sections 10.1(g) and
10.1(h) hereof, even if Lender does not exercise the right to terminate this
Agreement, but elects, at its option, to provide financing to any Borrower or
permit the use of cash collateral under the United States Bankruptcy Code. The
early termination fee provided for in this Section 12.1 shall be deemed included
in the Obligations.
12.2 Interpretative Provisions.
(a) All terms used herein which are defined in Article 1,
Article 8 or Article 9 of the UCC shall have the meanings given therein unless
otherwise defined in this Agreement.
(b) All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires.
(c) All references to any Borrower, Guarantor or other Obligor
and Lender pursuant to the definitions set forth in the recitals hereto, or to
any other person herein, shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this
Agreement" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not any
95
particular provision of this Agreement and as this Agreement now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(e) The word "including" when used in this Agreement shall
mean "including, without limitation".
(f) An Event of Default shall exist or continue or be
continuing until such Event of Default is waived in accordance with Section 11.3
or is cured in a manner satisfactory to Lender, if such Event of Default is
capable of being cured as determined by Lender.
(g) All references to the term "good faith" used herein when
applicable to Lender shall mean, notwithstanding anything to the contrary
contained herein or in the UCC, honesty in fact in the conduct or transaction
concerned. Borrowers and Obligors shall have the burden of proving any lack of
good faith on the part of Lender alleged by any Borrower or Obligor at any time.
(h) Any accounting term used in this Agreement shall have,
unless otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Parent and each Borrower and
Guarantor most recently received by Lender prior to the date hereof.
(i) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including", the
words "to" and "until" each mean "to but excluding" and the word "through" means
"to and including".
(j) Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
(k) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(l) This Agreement and other Financing Agreements may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms.
(m) This Agreement and the other Financing Agreements are the
result of negotiations among and have been reviewed by counsel to Lender,
Borrowers and Obligors, and
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are the products of all parties. Accordingly, this Agreement and the other
Financing Agreements shall not be construed against Lender merely because of
Lender's involvement in their preparation.
12.3 Notices. All notices, requests and demands hereunder shall be in
writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing. All notices, requests and
demands upon the parties are to be given to the following addresses (or to such
other address as any party may designate by notice in accordance with this
Section):
If to any Borrower or Obligor: ICO, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇ ▇. ▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇
2300 First City Tower
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone No.:▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
If to Lender: Congress Financial Corporation
(Southwest)
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Portfolio Manager
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
12.4 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.5 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender and Borrowers and their respective
successors and assigns, except that Borrowers may not assign their rights under
this Agreement, the other Financing Agreements and
97
any other document referred to herein or therein without the prior written
consent of Lender. Any such purported assignment without such express prior
written consent shall be void. Lender may, after notice to Borrower Agent,
assign its rights and delegate its obligations under this Agreement and the
other Financing Agreements and further may assign, or sell participations in,
all or any part of the Loans, the Letter of Credit Accommodations or any other
interest herein to another financial institution or other person, in which
event, the assignee or Participant shall have, to the extent of such assignment
or participation, the same rights and benefits as it would have if it were the
Lender hereunder, except as otherwise provided by the terms of such assignment
or participation.
12.6 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
12.7 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile shall have the same force and effect
as the delivery of an original executed counterpart of this Agreement or any of
such other Financing Agreements. Any party delivering an executed counterpart of
any such agreement by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.
12.8 Nonapplicability of Article 346 of Texas Finance Code et seq.
Borrowers, Guarantors and Lender hereby agree that the provisions of Chapter 346
of the Texas Finance Code (regulating certain revolving credit loans and
revolving tri-party accounts) shall not apply to this Agreement or any of the
other Financing Agreements or the transactions contemplated thereby.
12.9 DTPA WAIVER. EACH BORROWER AND GUARANTOR HEREBY WAIVES ALL
PROVISIONS OF THE DECEPTIVE TRADE PRACTICE - CONSUMER PROTECTION ACT (TEX. BUS.
& COM. CODE ▇▇▇. SECTION 17.01 ET SEQ. (▇▇▇▇▇▇ SUPP. 1987), OTHER THAN SECTION
17.555 THEREOF PERTAINING TO CONTRIBUTION AND INDEMNITY, AND EXPRESSLY WARRANTS
AND REPRESENTS THAT EACH BORROWER (a) HAS ASSETS OF $5,000,000 OR MORE, (b) HAS
KNOWLEDGE AND EXPERIENCE IN THE MERITS AND RISKS OF THIS TRANSACTION, (c) IS NOT
IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO LENDER, AND (d) HAS
BEEN REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.
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12.10 ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER
FINANCING AGREEMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE
SAME MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
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IN WITNESS WHEREOF, Lender, Borrowers, Guarantors, P&O and Global have
caused these presents to be duly executed as of the day and year first above
written.
LENDER BORROWERS
------ ---------
CONGRESS FINANCIAL CORPORATION ICO WORLDWIDE, INC.
(SOUTHWEST)
By: /s/ ▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇ ▇. ▇▇▇▇
------------------------------------ -----------------------------------
Title: Executive Vice President Title: Treasurer
--------------------------------- --------------------------------
WEDCO, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Title: Treasurer
--------------------------------
BAYSHORE INDUSTRIAL, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Title: Treasurer
--------------------------------
GUARANTORS
WEDCO TECHNOLOGY, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Title: Treasurer
--------------------------------
WEDCO PETROCHEMICAL, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Title: Treasurer
--------------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
ICO POLYMERS, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Title: Treasurer
--------------------------------
ICO, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Title: Senior Vice President, Chief
Accounting Officer and
Treasurer
--------------------------------
ICO TECHNOLOGY, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Title: President
--------------------------------
AGREED:
ICO P&O, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Title: Treasurer
--------------------------------
ICO GLOBAL SERVICES, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Title: President
--------------------------------