EXHIBIT 10.2
================================================================================
AMENDED AND RESTATED LOAN AGREEMENT
dated as of September 30, 2004
among
T-3 ENERGY SERVICES, INC.
as Borrower
and
▇▇▇▇▇ FARGO ENERGY CAPITAL, INC.
as Lender
and as Agent for the Lenders
and
the Lenders
================================================================================
ARTICLE I Definitions................................................. 1
Section 1.1 Definitions................................................. 1
Section 1.2 Other Definitional Provisions............................... 14
ARTICLE II The Loan.................................................... 14
Section 2.1 Commitment.................................................. 14
Section 2.2 The Notes................................................... 15
Section 2.3 Repayment of Loans.......................................... 15
Section 2.4 Interest.................................................... 15
Section 2.5 Use of Proceeds............................................. 15
Section 2.6 Funding Procedure........................................... 15
Section 2.7 Method of Payment........................................... 16
Section 2.8 Voluntary Prepayment........................................ 16
Section 2.9 Mandatory Prepayment........................................ 16
Section 2.10 Pro Rata Treatment.......................................... 17
Section 2.11 Facility Fees............................................... 17
Section 2.12 Non-Receipt of Funds by the Agent........................... 17
Section 2.13 Withholding Tax Exemption................................... 18
Section 2.14 Computation of Interest..................................... 18
Section 2.15 Capital Adequacy............................................ 18
ARTICLE III Security.................................................... 19
Section 3.1 Collateral.................................................. 19
Section 3.2 Setoff...................................................... 20
ARTICLE IV Conditions Precedent........................................ 20
ARTICLE V Representations and Warranties.............................. 24
Section 5.1 Corporate Existence......................................... 24
Section 5.2 Projections; Financial Statements........................... 24
Section 5.3 Corporate Action: No Breach................................. 24
Section 5.4 Operation of Business....................................... 25
Section 5.5 Litigation and Judgments.................................... 25
Section 5.6 Rights in Properties: Liens................................. 25
Section 5.7 Enforceability.............................................. 25
Section 5.8 Approvals................................................... 25
Section 5.9 Debt........................................................ 25
Section 5.10 Taxes....................................................... 26
Section 5.11 Use of Proceeds: Margin Securities.......................... 26
Section 5.12 ERISA....................................................... 26
Section 5.13 Disclosure.................................................. 26
Section 5.14 Subsidiaries................................................ 27
Section 5.15 Agreements.................................................. 27
Section 5.16 Compliance with Laws........................................ 27
Section 5.17 Investment Company Act...................................... 27
Section 5.18 Public Utility Holding Company Act.......................... 27
Table of Contents
(continued)
Page
----
Section 5.19 Environmental Matters....................................... 27
ARTICLE VI Affirmative Covenants....................................... 29
Section 6.1 Reporting Requirements...................................... 29
Section 6.2 Maintenance of Existence: Conduct of Business............... 32
Section 6.3 Maintenance of Properties................................... 32
Section 6.4 Taxes and Claims............................................ 32
Section 6.5 Insurance................................................... 32
Section 6.6 Inspection Rights........................................... 32
Section 6.7 Keeping Books and Records................................... 32
Section 6.8 Compliance with Laws........................................ 32
Section 6.9 Compliance with Agreements.................................. 32
Section 6.10 Further Assurances.......................................... 33
Section 6.11 ERISA....................................................... 33
Section 6.12 Additional Material Subsidiaries as Guarantors: Additional
Designated Subsidiaries as Guarantors; Execution of
Additional Security Agreements-Guarantors................... 33
Section 6.13 Continuity of Operations.................................... 34
Section 6.14 Intercompany Notes.......................................... 34
Section 6.15 Additional Appraisals....................................... 34
ARTICLE VII Negative Covenants.......................................... 34
Section 7.1 Debt........................................................ 34
Section 7.2 Limitation on Liens......................................... 36
Section 7.3 Mergers, Dissolutions, Etc.................................. 37
Section 7.4 Loans and Investments....................................... 38
Section 7.5 Transactions With Affiliates................................ 38
Section 7.6 Disposition of Assets....................................... 39
Section 7.7 Sale and Leaseback.......................................... 39
Section 7.8 Nature of Business.......................................... 39
Section 7.9 Environmental Protection.................................... 40
Section 7.10 Accounting.................................................. 40
Section 7.11 Changes to Subordinated Debt................................ 40
Section 7.12 Restrictions on Certain Subsidiaries........................ 40
Section 7.13 Restricted Payments......................................... 41
ARTICLE VIII Financial Covenants......................................... 41
Section 8.1 Consolidated Net Worth...................................... 41
Section 8.2 Fixed Charge Coverage Ratio................................. 41
Section 8.3 Leverage Ratio.............................................. 42
Section 8.4 Senior Leverage Ratio....................................... 42
Section 8.5 Capital Expenditures........................................ 42
ii
Table of Contents
(continued)
Page
----
ARTICLE IX Default..................................................... 42
Section 9.1 Events of Default........................................... 42
Section 9.2 Remedies Upon Default....................................... 44
Section 9.3 Performance by the Agent.................................... 45
ARTICLE X The Agent................................................... 45
Section 10.1 Appointment, Powers and Immunities.......................... 45
Section 10.2 Rights of Agent as a Lender................................. 47
Section 10.3 Sharing of Payments, Etc.................................... 47
Section 10.4 Indemnification............................................. 47
Section 10.5 Independent Credit Decisions................................ 48
Section 10.6 Several Commitments......................................... 49
Section 10.7 Successor Agent............................................. 49
ARTICLE XI Miscellaneous............................................... 49
Section 11.1 Expenses.................................................... 49
Section 11.2 Indemnification............................................. 50
Section 11.3 Limitation of Liability..................................... 50
Section 11.4 No Duty..................................................... 51
Section 11.5 Lender Not Fiduciary........................................ 51
Section 11.6 No Waiver; Cumulative Remedies.............................. 51
Section 11.7 Successors and Assigns...................................... 51
Section 11.8 Survival.................................................... 54
Section 11.9 ENTIRE AGREEMENT; AMENDMENTS................................ 54
Section 11.10 Maximum Interest Rate....................................... 55
Section 11.11 Notices..................................................... 55
Section 11.12 GOVERNING LAW; VENUE; SERVICE OF PROCESS................. 56
Section 11.13 Counterparts................................................ 56
Section 11.14 Severability................................................ 56
Section 11.15 Headings.................................................... 56
Section 11.16 Non-Application of Chapter 346 of Texas Finance Code........ 57
Section 11.17 Construction................................................ 57
Section 11.18 Independence of Covenants................................... 57
Section 11.19 Waiver of Trial By Jury..................................... 57
Section 11.20 Amendment and Restatement; Release.......................... 57
ARTICLE XII Arbitration................................................. 58
Section 12.1 Arbitration................................................. 58
Section 12.2 Governing Rules............................................. 58
Section 12.3 No Waiver; Provisional Remedies, Self-Help and Foreclosure.. 58
Section 12.4 Arbitrator Qualifications and Powers Awards................. 59
Section 12.5 Judicial Review............................................. 59
Section 12.6 Miscellaneous............................................... 59
iii
Table of Contents
(continued)
Schedules
5.5 Litigation
5.10 Tax Matters
5.14 Subsidiaries
5.19 Environmental Matters
6.14 Intercompany Notes
7.1 Existing Permitted Debt
7.2 Existing Permitted Liens
7.5 Transaction with Affiliates
Exhibits
A Note
B Compliance Certificate
C Assignment and Acceptance
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT, dated as of September 30, 2004
(this "Agreement"), is among T-3 ENERGY SERVICES, INC., a Delaware corporation
(the "Borrower"), each of the banks or other lending institutions which is or
which may from time to time become a signatory hereto or any successor or
assignee thereof (individually, a "Lender" and, collectively, the "Lenders"),
and ▇▇▇▇▇ FARGO ENERGY CAPITAL, INC., a Texas corporation ("WFEC"), as agent for
itself and the other Lenders (in such capacity, together with its successors in
such capacity, the "Agent").
RECITALS:
The Borrower, the Agent and WFEC, as sole Lender, are party to that
certain Loan Agreement dated as of December 17, 2001 (as amended, modified or
supplemented from time to time to the date of this Agreement, the "Existing Loan
Agreement"), pursuant to which such Lender has extended credit to the Borrower
in the form of a single advance term loan in the original principal amount of
$12,000,000.
The Borrower has requested WFEC to renew, rearrange and extend such
$12,000,000 term loan and extend additional credit in the form of a single
advance term loan in the original principal amount of $3,000,000. WFEC, as the
sole initial lender, is willing to extend such credit to the Borrower upon the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and of the loans and extensions of credit hereinafter referred
to, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:
"AAA" has the meaning given to such term in Section 12.2 of this
Agreement.
"Additional Advance" means the advance of funds in the total amount of
$3,000,000 by the Agent on behalf of the Lenders to the Borrower pursuant to
Section 2.1.
"Affiliate" means, as to any Person, any other Person (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds 10% or more of any class of voting stock of such
Person; or (c) 10% or more of the voting stock of which is directly or
indirectly beneficially owned or held by the Person in question. The term
"control" means the
possession, directly or indirectly, of the power to direct or cause direction of
the management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise; provided, however, in no event shall any
of the Agent and the Lenders be deemed an Affiliate of the Borrower or any of
its Subsidiaries.
"Agent" has the meaning given to such term in the first paragraph of this
Agreement.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer") by
the Borrower or any of its Subsidiaries, directly or indirectly, in one or a
series of related transactions, to any Person other than the Borrower or any of
its Subsidiaries of (a) any Capital Stock of any of Borrower's Subsidiaries, (b)
all or substantially all of the properties and assets of the Borrower and its
Subsidiaries representing a division or line of business or (c) any other
properties or assets of the Borrower or any of its Subsidiaries, other than in
the ordinary course of business. For purposes of this definition, the term
"Asset Sale" does not include (a) any transfer of properties or assets between
or among the Borrower and the Guarantors pursuant to transactions that do not
violate any provision of this Agreement, or (b) the sale or issuance of the
Borrower's Capital Stock.
"Assignee" has the meaning given to such term in Section 11.7 (b).
"Assignment and Acceptance" means an Assignment and Acceptance, in
substantially the form attached hereto as Exhibit "C" with appropriate
completions.
"Authorized Representative" means any officer or employee of the Borrower
who has been designated in writing by the Borrower to the Agent to be an
Authorized Representative.
"Basle Accord" means the proposals for risk-based capital framework
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as amended, supplemented and
otherwise modified and in effect from time to time, or any replacement thereof.
"Borrower" has the meaning given to such term in the first paragraph of
this Agreement.
"Business Day" means any day on which commercial banks are not authorized
or required to close in Houston, Texas.
"Calculation Period" means the period of four Fiscal Quarters ended as of
such date or, if a calculation is performed on a date other than the last day of
any Fiscal Quarter, the period of twelve months ending on such date.
"Capital Expenditures" means, for any Person, all expenditures for assets
which, in accordance with GAAP, are properly classified as equipment, real
property, improvements, fixed
2
assets or a similar type of capitalized asset and which would be required to be
capitalized and shown on the balance sheet of such Person.
"Capital Lease Obligations" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP. For purposes of this Agreement, the amount of
such Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"Capital Stock" of any Person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents (however
designated) of such Person's equity interest (however designated).
"Cash Equivalent Investment" means, at any time, (a) any evidence of Debt,
maturing not more than one year after such time, issued or guaranteed by the
United States government or any agency thereof, (b) commercial paper, maturing
not more than one year from the date of issue, corporate demand notes or other
debt securities having a maturity or tender right less than one year from the
date of issuance thereof, in each case (unless issued by a Senior Lender or its
holding company) rated in one of the two highest rating categories by Standard &
Poor's Ratings Group or ▇▇▇▇▇'▇ Investors Service, Inc., (c) any certificate of
deposit (or time deposits represented by such certificates of deposit) or
bankers acceptance, maturing not more than one year after such time, or
overnight Federal Funds transactions that are issued or sold by a commercial
banking institution that is a member of the Federal Reserve System and has a
combined capital and surplus and undivided profits of not less than
$500,000,000, (d) any repurchase agreement entered into with any Senior Lender
(or other commercial banking institution of the stature referred to in clause
(c) which (i) is secured by a fully perfected security interest in any
obligation of the type described in any of clauses (a) through (c) and (ii) has
a market value at the time such repurchase agreement is entered into of not less
than 100% of the repurchase obligation of such Senior Lender (or other
commercial banking institution) thereunder and (e) investments in short-term
asset management accounts offered by any Senior Lender for the purpose of
investing in investment grade loans to any corporation (other than the Borrower
or an Affiliate of the Borrower) , state or municipality, in each case organized
under the laws of any state of the United States or of the District of Columbia.
"Cash Taxes" means, for any Person, the sum of all cash income taxes paid
or required to be paid during the period in question, as determined in
accordance with GAAP.
"Change of Control" means the occurrence of any transaction or event by
which any Person, or two or more Persons acting in concert, acquire beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Act
of 1934, as amended) of more than 50% of the outstanding shares of the
Borrower's voting stock.
3
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"Collateral" has the meaning given to such term in Section 3.1.
"Commitment" means as to each Lender the obligation of such Lender to
renew, rearrange and extend all of its portion of the Debt evidenced by the
Existing Note and fund all of its portion of the Additional Advance pursuant to
Section 2.1 in the principal amounts set forth opposite the name of such Lender
on the signature pages hereto or to the most recent amendment hereto under the
heading "Commitment" or on the signature pages of an Assignment and Acceptance,
as the case may be.
"Compliance Certificate" means a certificate, in substantially the form of
Exhibit "B" attached hereto, properly completed and signed by the Borrower.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) determined in conformity with GAAP of the Borrower and its
Subsidiaries.
"Consolidated Net Worth" means, at any particular time, all amounts which,
in conformity with GAAP, would be included as Stockholders' Equity on a
consolidated balance sheet of the Borrower and its Subsidiaries.
"Contingent Liabilities" means, as applied to any Person, those direct or
indirect liabilities of that Person which, in conformity with GAAP, would be
included as liabilities of that Person on a consolidated balance sheet of such
Person, with respect to any Debt, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary obligor")
including, without limitation, any obligation of such Person upon the occurrence
of certain circumstances, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, or (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof. The amount of any Contingent
Liabilities shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Liabilities
are made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the Borrower in good faith.
"Current Maturities" means as to any Person, at any date, the current
maturities of Funded Debt determined in accordance with GAAP.
4
"Debt" means as to any Person at any time (without duplication as to such
Person on a consolidated basis): (a) all obligations of such Person for borrowed
money, (b) all obligations of such Person evidenced by bonds, notes, debentures,
or other similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts payable
of such Person arising in the ordinary course of business that are not past due
by more than ninety (90) days or which are being contested in good faith and for
which adequate reserves have been established, (d) all Capital Lease Obligations
of such Person, (e) all obligations secured by a Lien existing on property owned
by such Person, whether or not the obligations secured thereby have been assumed
by such Person or are non-recourse to the credit of such Person, (f) all
reimbursement obligations of such Person (whether contingent or otherwise and
whether or not a request for funding has been made) in respect of letters of
credit, bankers' acceptances, surety or other bonds and similar instruments, (g)
all liabilities of such Person in respect of unfunded vested benefits under any
Plan, (h) all Contingent Liabilities and (i) all obligations under any
commodity, interest rate or currency swap, cap, floor, collar, forward agreement
or other exchange or protection agreement or any option with respect to any such
transaction.
"Default" means the occurrence of an event or condition which with notice
or lapse of time or both would become an Event of Default.
"Default Rate" means a rate of interest of 12% per annum.
"Dollars" and "$" mean lawful money of the United States of America.
"Domestic Guarantors" means (a) all the Material Subsidiaries which are
Domestic Subsidiaries, and (b) all other Domestic Subsidiaries which have been
designated by the Borrower to be Domestic Guarantors pursuant to the Senior
Credit Agreement.
"Domestic Subsidiary" means any Subsidiary of the Borrower which is
organized and existing under the laws of the United States of America or any
state thereof.
"EBITDA" means as to any Person, for any period, the sum of (a)
Consolidated Net Income for such period, plus (b) without duplication and to the
extent deducted in determining Consolidated Net Income for such period (i)
Interest Expense for such period, (ii) Tax Expense for such period, (iii)
Non-Cash Charges for such period, (iv) the amount of any amortization of, or
write-downs or write-offs of intangibles (including but not limited to,
goodwill) for such period, and (v) any charges taken in connection with the
prepayment, redemption or repurchase of Debt, minus (c) without duplication and
to the extent included in determining Consolidated Net Income for such period,
any extraordinary gains and extraordinary non-cash credits for such period, plus
(d) historical EBITDA of acquired entities for periods included in the
applicable Calculation Period in which such acquired entities were not
Subsidiaries of the Borrower, so long as the financial statements of such
acquired entities are in form and detail satisfactory to the Agent, minus (e)
historical EBITDA of sold entities for periods included in the applicable
Calculation Period in which such sold entities were Subsidiaries of the
Borrower.
5
"▇▇▇▇▇" means the Electronic Data Gathering, Analysis and Retrieval
program operated by the SEC pursuant to Regulation ST of the General Rules and
Regulations of the SEC under the Securities Act of 1933, and shall include any
successor program.
"Effective Date" means the date on which all the conditions precedent set
forth in Article IV have been satisfied or waived in writing by the Agent and
the Lenders.
"Eligible Assignee" means any commercial bank, savings and loan
association; savings bank, finance company, insurance company, pension fund,
mutual fund, or other financial institution (whether a corporation, partnership,
or other entity) acceptable to the Agent, and having combined capital and
surplus of at least $500,000,000.
"Environmental Law" means any and all foreign, federal, state, and local
laws, regulations, requirements, ordinances, rules, orders, decrees, or
governmental restrictions pertaining to health, safety, the environment,
including, pollution and the protection of the environment, or the release of
any materials into the environment, including those related to hazardous
substances or wastes, air emissions and discharges to waste or public systems
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 et. seq., the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq., the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq., the Clean Air
Act, 42 U.S.C. Section 7401 et seq., the Clean Water Act, 33 U.S.C. Section 1251
et seq., and the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.,
as such laws, regulations, and requirements may be amended or supplemented from
time to time.
"Environmental Liabilities" means, as to any Person, all liabilities
(contingent or otherwise), obligations, responsibilities, Remedial Actions,
losses, damages, punitive damages, consequential damages, treble damages, costs,
and expenses (including, without limitation, all reasonable fees, disbursements
and expenses of counsel, expert and consulting fees and costs of investigation
and feasibility studies), fines, penalties, indemnities, sanctions, and interest
incurred as a result of any claim or demand, by any Person, whether based in
contract, tort, implied or express warranty, strict liability, criminal or civil
statute, including any Environmental Law, permit, order or agreement with any
Governmental Authority or other Person, arising from (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"Equity Interests" means, with respect to any Person, all of the shares of
capital stock of (or other ownership or equity interests in) such Person, all of
the warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or equity interests in)
such Person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or equity interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other
6
interests), and all of the other ownership or profit interests in such Person
(including partnership, member or trust interests therein), whether voting or
nonvoting, and whether or not such shares, warrants, options, rights or other
interests are outstanding on any date of determination.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is or
has been a member of the same controlled group of corporations (within the
meaning of Section 414 (b) of the Code) as the Borrower or is or has been under
common control with the Borrower within the meaning of Section 414 (b) or (c) of
the Code (and Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code).
"Event of Default" has the meaning specified in Section 9.1.
"Existing Loan Agreement" is defined in the recitals to this Agreement.
"Existing Note" means that certain Promissory Note dated December 17, 2001
in the principal amount of $12,000,000 made by the Borrower to the order of
WFEC.
"Facility Rate" means a rate of interest of 10% per annum.
"Federal Funds Rate" means, for any day, the rate per annum, (rounded
upwards, if necessary, to the nearest 1/16 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if such rate is not so published on such next
succeeding Business Day, the Federal Funds Rate for any day shall be the average
rate charged to the Agent on such day on such transactions as determined by the
Agent.
"First Reserve" means First Reserve Fund VIII, Limited Partnership, a
Delaware limited partnership.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries,
which period is the 12 month period ending on December 31 of each year.
"Fixed Charge Coverage Ratio" means as to any Person, at any date, the
ratio of (a) EBITDA for the Calculation Period, divided by (b) the sum of (i)
Current Maturities as of such date, plus (ii) cash Interest Expense for the
Calculation Period, plus (iii) Cash Taxes for the
7
Calculation Period, plus (iv) actual cash Maintenance Capital Expenditures for
the Calculation Period.
"Foreign Guarantors" means (a) all of the Material Subsidiaries and which
have executed a Guaranty Agreement, which are Foreign Subsidiaries, provided
that, no Foreign Subsidiary shall become a Foreign Guarantor under this clause
(a) if delivery of a Guaranty Agreement - Foreign by such Foreign Subsidiary
would result in material increased tax or similar liabilities for the Borrower
and its Subsidiaries on a consolidated basis, and (b) all other Foreign
Subsidiaries which have been designated by the Borrower to be Foreign Guarantors
pursuant to the Senior Credit Agreement and which have executed a Guaranty
Agreement.
"Foreign Subsidiary" means any Subsidiary of the Borrower which is
organized and existing under the laws of a jurisdiction other than the United
States of America or any state thereof.
"Funded Debt" means, at any time, the aggregate obligations of the
Borrower and its Subsidiaries (determined on a consolidated basis) for Debt for
borrowed money (including, without limitation, the Senior Debt, Debt governed by
this Agreement and the Subordinated Debt), plus Capital Lease Obligations.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
applied in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Governmental Authority" means any nation or government, any state or
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"Guarantors" means the Domestic Guarantors and the Foreign Guarantors.
"Guaranty Agreement" means a Guaranty Agreement-Domestic or a Guaranty
Agreement-Foreign, and "Guaranty Agreements" means the Guaranty
Agreements-Domestic and the Guaranty Agreements-Foreign.
"Guaranty Agreement-Domestic" means the Amended and Restated Guaranty
Agreement-Domestice Guarantord dated of even date herewithexecuted by each
Domestic Guarantor in favor of the Agent for the benefit of the Lenders, as the
same may be amended, restated, supplemented, or modified from time to time.
8
"Guaranty Agreement-Foreign" means a guarantee agreement in form and
substance satisfactory to the Agent executed by a Foreign Guarantor in favor of
the Agent, as the same may be amended, supplemented, or modified from time to
time.
"Hazardous Material" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law, including,
without limitation, asbestos, petroleum, and polychlorinated biphenyls.
"Institutional Debt" means unsecured Debt for borrowed money which may be
raised by the Borrower or any of its Subsidiaries in the private placement or
public debt markets pursuant to terms satisfactory to the Required Lenders, but
which shall exclude Subordinated Debt.
"Intercompany Notes" means those certain promissory notes described on
Schedule 6.14 and any other intercompany note executed at any time after the
Effective Date, as each such promissory note may be renewed, extended, amended,
restated, replaced, or otherwise modified from time to time. The term
"Intercompany Note" means any one of the Intercompany Notes.
"Intercreditor Agreement" means the intercreditor agreement dated of even
date herewith among the Borrower, the Agent, ▇▇▇▇▇ Fargo Energy Capital, Inc. as
sole provider of the Debt governed by this Agreement, ▇▇▇▇▇ Fargo Bank, as agent
for the Senior Lenders, and the Senior Lenders in form and substance
satisfactory to the Agent, setting forth the relative rights of the Agent, and
Lenders hereunder and the Senior Lenders, as providers of the Senior Debt.
"Interest Expense" means the sum of all interest expense (whether cash or
non-cash) paid or required by its terms to be paid during the period in
question, as determined in accordance with GAAP, with respect to the Funded Debt
of a Person or any portion thereof.
"Lender" has the meaning given to such term in the first paragraph of this
Agreement.
"Letter of Credit Liabilities" means, at any time, the aggregate undrawn
face amounts of all outstanding letters of credit issued for the account of the
Borrower or any of its Subsidiaries.
"Leverage Ratio" means, as to any Person, at any date, the ratio of (a)
Total Debt as of the last day of the Calculation Period divided by (b) EBITDA
for the Calculation Period.
"Lien" means any lien, mortgage, security interest, tax lien, financing
statement, pledge, charge, hypothecation, assignment, preference, priority, or
other encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or title retention agreement), whether arising
by contract, operation of law, or otherwise.
"Loans" means the loans and extensions of credit by the Lenders to or for
the benefit of the Borrower pursuant to this Agreement.
9
"Loan Documents" means this Agreement, the Intercreditor Agreement and all
promissory notes, security agreements, deeds of trust, assignments, guaranties,
and other instruments, documents, and agreements executed and delivered pursuant
to or in connection with this Agreement, as such instruments, documents, and
agreements may be amended, restated, modified, renewed, extended, or
supplemented from time to time.
"Maintenance Capital Expenditures" means all Capital Expenditures other
than those made for the original purchase of equipment, real property,
improvements, fixed assets or similar type of capitalized asset.
"Material Adverse Effect" means (a) a material adverse effect on (i) the
business, condition (financial or otherwise), operations, prospects, or
properties of the Borrower and its Subsidiaries, taken as a whole, (ii) the
ability of the Borrower and its Subsidiaries, taken as a whole, to perform their
respective obligations under this Agreement or any of the other Loan Documents,
or (iii) the validity or enforceability of this Agreement or any of the other
Loan Documents, or the rights or remedies of the Agent or the Lenders hereunder
or thereunder or (b) civil or criminal liability for the Agent or the Lenders
under Environmental Laws.
"Material Subsidiary" means any Subsidiary which constitutes a
"significant subsidiary" under Regulation SX of the Securities Exchange Act of
1934, as amended.
"Maturity Date" means September 30, 2008, or such earlier date on which
the Loans is accelerated as provided in this Agreement.
"Maximum Rate" means, with respect to any Lender, the maximum nonusurious
interest rate, if any, that at any time, or from time to time, may be contracted
for, taken, reserved, charged or received on the indebtedness created under this
Agreement, the Notes, or any other Loan Document under the laws which are
presently in effect in the United States and the State of Texas applicable to
the Lenders, such holders and such indebtedness or, to the extent permitted by
law, under such applicable laws of the United States and the State of Texas
which may hereafter be in effect and which allow a higher maximum nonusurious
interest rate than applicable laws now allow. To the extent that Chapter 303 of
the Texas Finance Code (the "Finance Code"), is relevant to any Lender or any
holder of the Notes for the purposes of determining the Maximum Rate, each such
Person shall determine such applicable legal rate under the Finance Code
pursuant to the "weekly ceiling," from time to time in effect, as referred to
and defined in Chapter 303 of the Finance Code; subject, however, to the
limitations on such applicable ceiling referred to and defined in Chapter 303 of
the Finance Code, and further subject to any right such Person may have
subsequently, under applicable law, to change the method of determining the
Maximum Rate. If no Maximum Rate is established by applicable law, then the
Maximum Rate shall be equal to 18% per annum.
"Mortgages" means mortgages or deeds of trust, as appropriate, executed by
Borrower or the applicable Subsidiary, as the case may be, in form and substance
satisfactory to Agent, granting a lien, subject to Permitted Liens and second in
priority only to the lien securing the
10
Senior Debt, to Agent for the ratable benefit of Lenders on all real property
owned by Borrower and each Subsidiary domiciled in the United States.
"Multiemployer Plan" means a multiemployer plan defined as such in Section
3(37) of ERISA to which contributions have been made by the Borrower or any
predecessor thereto or any ERISA Affiliate and which is covered by Title IV of
ERISA.
"Net Cash Proceeds" means, with respect to (a) any Asset Sale, (b) any
other transfer or disposition of any asset to a third party, (c) issuance of any
Institutional Debt or Subordinated Debt, or (d) issuance of any Capital Stock,
the aggregate amount of cash and Cash Equivalent Investments received by such
Person in connection with such transaction minus reasonable fees, costs and
expenses and related taxes paid or payable as a result of such transaction.
"Net Income" means, for any period, the net income (or loss) determined in
conformity with GAAP of the Borrower.
"Non-Cash Charges" means as to any Person, for any period, depreciation,
amortization and other non-cash charges, determined in accordance with GAAP.
"Notes" means the promissory notes of the Borrower payable to the order of
the Lenders, in substantially the form attached hereto as Exhibit "A" with
appropriate completions, and all extensions, renewals, replacements,
modifications, supplements or rearrangements thereof from time to time, and
"Note" means any one of the Notes.
"Obligated Party" means each Guarantor or any other Person who is or
becomes party to any agreement pursuant to which such Person guarantees or
secures payment and performance of the Obligations or any part thereof.
"Obligations" means all obligations, indebtedness and liabilities of the
Borrower and its Subsidiaries to the Agent, the Lenders, any of their respective
Affiliates, or any or some of them, arising pursuant to this Agreement or any of
the Loan Documents, now existing or hereafter arising, whether direct, indirect,
related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several,
or joint and several.
"Payment Date" means the last day of each March, June, September and
December, commencing December 31, 2004.
"Payor" has the meaning given to such term in Section 2.10.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Percentage" means at any time with respect to any Lender, such Lender's
portion, expressed as a percentage, of the aggregate outstanding amount of the
Loans.
11
"Permitted Liens" has the meaning assigned to it in Section 7.2.
"Person" means any individual, corporation, business trust, association,
company, partnership, joint venture, Governmental Authority, or other entity.
"Plan" means any employee benefit or other plan established or maintained
by the Borrower or any ERISA Affiliate.
"Pledge and Security Agreement" means (a) with respect to Borrower and
each Domestic Guarantor, the Amended and Restated Pledge and Security Agreement
dated of even date herewith, executed by the Borrower and each Domestic
Guarantor in favor of the Agent for the benefit of the Lenders; and (b) with
respect to each Foreign Guarantor, a pledge and security agreement executed by
such Foreign Guarantor in favor of the Agent in form and substance satisfactory
to the Agent; in each case, as the same may be amended, restated, supplemented
or modified from time to time.
"Principal Office" means the respective principal office of the Agent and
the Lenders, presently located for such Persons at the addresses shown under the
signature line of such Persons in this Agreement.
"Prohibited Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code.
"Register" has the meaning assigned to it in Section 11.7(d).
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as the same may be amended or supplemented from time to time.
"Regulatory Change" means, with respect to a Lender, any change after the
date of this Agreement in United States federal, state, or foreign laws or
regulations (including Regulation D) or the adoption or making after such date
of any interpretations, directives, or requests applying to a class of banks
including such Lender of or under any United States federal or state, or any
foreign, laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Release" means, as to any Person, any release, spill, emission, leaking,
pumping, injection, deposit, disposal, disbursement, leaching, or migration of
Hazardous Materials into the indoor or outdoor environment or into or out of
property owned by such Person, including, without limitation, the movement of
Hazardous Materials through or in the air, soil, surface water, ground water, or
property.
"Remedial Action" means all actions required to (a) clean up, remove,
treat, or otherwise address Hazardous Materials in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release of Hazardous Materials so that they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
12
environment, or (c) perform pre-remedial studies and investigations in
post-remedial monitoring and care.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"Required Lenders" means at any Lenders holding at least fifty-one percent
(51%) of the outstanding aggregate principal amount of the Loans (without regard
to any sale by a Lender of a participation in the Loans under Section 11.7(a)).
"Restricted Payment" means any dividend or other distribution (whether in
cash, securities or other property) with respect to any capital stock or other
Equity Interest of the Borrower or any Subsidiary, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such capital stock or other Equity Interest,
or on account of any return of capital to the Borrower's stockholders.
"SEC" means the Securities and Exchange Commission of the United States of
America, and includes any successor agency.
"Senior Credit Agreement" means that certain First Amended and Restated
Credit Agreement dated of even date herewith by and among the Borrower, as
borrower, ▇▇▇▇▇ Fargo Bank, as lender and agent, and the other lenders thereto,
as such Credit Agreement may be amended from time to time.
"Senior Debt" means the Debt of the Borrower governed by the Senior Credit
Agreement.
"Senior Lenders" means from time to time the Persons who are party to and
lenders under the Senior Credit Agreement.
"Senior Leverage Ratio" means, as to any Person, as of any date, the ratio
of (a) Senior Debt as of the last day of the Calculation Period to (b) EBITDA of
the Borrower and the Subsidiaries for the Calculation Period.
"Stockholders Equity" has the meaning given to such term under GAAP.
"Subordinated Debt" means Debt of a Person which has been subordinated to
the Obligations in form and substance and upon terms satisfactory to the Agent
and the Required Lenders.
"Subsidiary" means any Person of which or in which the Borrower and its
other Subsidiaries own or control, directly or indirectly, 50% or more of (a)
the combined voting power of all classes having general voting power under
ordinary circumstances to elect a majority of the directors or equivalent body
of such Person, if it is a corporation, (b) the capital interest or profits
interest of such Person, if it is a partnership, limited liability company,
joint
13
venture or similar entity, or (c) the beneficial interest of such Person, if it
is a trust, association or other unincorporated association or organization.
"Tax Expense" means, for any period, all expenses incurred during such
period by the Borrower and its Subsidiaries, on a consolidated basis, in
connection with income tax obligations, all as determined in accordance with
GAAP.
"Total Debt" means, as of the date of determination, the sum of (a) Funded
Debt, plus (b) Letter of Credit Liabilities, plus (c) Contingent Liabilities
with respect to Funded Debt.
"UCC" means the Uniform Commercial Code as in effect in the State of Texas
from time to time.
"▇▇▇▇▇ Fargo Bank" means ▇▇▇▇▇ Fargo Bank, National Association, a
national banking association.
"WFEC" has the meaning given to such term in the first paragraph of this
Agreement.
Section 1.1 Other Definitional Provisions. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein", and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless otherwise
specified, all Article and Section references pertain to this Agreement. All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP. Terms used herein that are defined in the UCC, unless
otherwise defined herein, shall have the meanings specified in the UCC.
ARTICLE II
The Loan
Section 2.1 Commitment. Subject to the terms and conditions of this
Agreement, each Lender severally agrees on the Effective Date to (a) renew,
rearrange and extend the full amount of its Commitment of all of the Debt
evidenced by the Existing Note, being $12,000,000 of principal, and (b) fund the
full amount of its Commitment of the Additional Advance to the Borrower. The
Borrower may not borrow, repay, and reborrow such Loans. Immediately upon a
Lender renewing, rearranging and extending the full amount of its Commitment of
all of the Debt evidenced by the Existing Note and funding the full amount of
its Commitment of the Additional Advance, its Commitment shall be automatically
terminated. The portion of the Additional Advance made by each Lender shall be
made at such Lender's Principal Office and the portion of the Loans maintained
by each Lender shall be maintained at such Lender's Principal Office.
14
Section 2.2 The Notes. The obligation of the Borrower to repay the Loans
and interest thereon shall be evidenced by a Note executed by the Borrower,
payable to the order of each Lender, in the principal amount of such Lender's
Commitment and dated the date hereof or such later date as may be required with
respect to transactions contemplated by Section 11.7.
Section 2.3 Repayment of Loans. To the extent not otherwise required to be
paid earlier as provided herein, the principal amount of the Loans shall be
repaid on the Maturity Date.
Section 2.4 Interest. The unpaid principal amount of the Loans shall bear
interest prior to maturity at the lesser of (a) the Maximum Rate or (b) the
Facility Rate. Accrued and unpaid interest on the Loans shall be due and payable
(a) on each Payment Date and (b) on the Maturity Date.
Notwithstanding the foregoing, after an Event of Default and during any
continuance thereof, at the Agent's election or at the request of the Required
Lenders, the Obligations shall bear interest at a rate per annum equal to the
Default Rate. Such interest shall be payable on the earlier of demand or the
Maturity Date, as appropriate, and shall accrue until the earlier of (i) waiver
or cure of the applicable Event of Default, (ii) agreement by the Required
Lenders to rescind the charging of interest at the Default Rate, or (iii)
payment in full of the Obligations. The Lenders shall not be required to
accelerate the maturity of the Loans or to exercise any other rights or remedies
under the Loan Documents.
Section 2.5 Use of Proceeds. The proceeds of the Loans shall be used by
the Borrower (a) to refinance Debt of the Borrower under the Existing Loan
Agreement, and (b) for acquisition of assets or Equity Interests in other
Persons permitted under this Agreement (or as otherwise agreed in writing by the
Required Lenders), (c) for general corporate and working capital purposes in the
ordinary course of business and (d) to finance fees and expenses incurred in
connection with the closing of the credit transactions described in this
Agreement and in the Senior Credit Agreement.
Section 2.6 Funding Procedure. On the Effective Date, the Agent shall
notify each Lender of the effectiveness of this Agreement. Promptly thereafter,
each Lender will make available to the Agent at the Principal Office in
immediately available funds, for the account of the Borrower, the full amount of
its Commitment of the Additional Advance. After the Agent's receipt of such
funds and subject to the other terms and conditions of this Agreement, the Agent
will make the Additional Advance available to the Borrower by either (i)
depositing the same, in immediately available funds, in an account of the
Borrower (designated by the Borrower) maintained with ▇▇▇▇▇ Fargo Bank at ▇▇▇▇▇
Fargo Bank's Principal Office, or (ii) transmitting the funds by wire transfer
according to instructions provided by the Borrower.
Section 2.7 Method of Payment. All payments of principal, interest, and
other amounts to be made by the Borrower under this Agreement and the other Loan
Documents shall be made to the Agent at its Principal Office for the account of
each Lender's Principal Office in Dollars and in immediately available funds,
without setoff, deduction, or counterclaim, not later than
15
11:00 A.M., Houston, Texas time on the date on which such payment shall become
due (each such payment made after such time on such due date to be deemed to
have been made on the next succeeding Business Day). The Borrower shall, at the
time of making each such payment, specify to the Agent the sums payable by the
Borrower under this Agreement and the other Loan Documents to which such payment
is to be applied (and in the event that the Borrower fails to so specify, or if
an Event of Default has occurred and is continuing, the Agent may apply such
payment to the Obligations in such order and manner as it may elect in its sole
discretion, subject to Section 2.10 hereof). Each payment received by the Agent
under this Agreement or any other Loan Document for the account of a Lender
shall be paid promptly to such Lender, in immediately available funds, for the
account of such Lender's Principal Office. Whenever any payment under this
Agreement or any other Loan Document shall be stated to be due on a day that is
not a Business Day, such payment may be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of the payment of interest and commitment fee, as the case may be.
Section 2.8 Voluntary Prepayment. In the event the Borrower desires to
prepay all, or a portion of the Loans, it shall notify the Agent in writing of
such desire and request that the Lenders submit to the Borrower, such amount or
amounts as each Lender determines are necessary to compensate it for any cost or
expense incurred by such Lender as a result of any prepayment, said cost or
expense to be the actual cost or expense charged to such Lender using its
customary breakage fee calculation (hereinafter referred to as "Breakage Fee").
Upon receipt of such written notice from the Borrower of its desire to make such
a prepayment, the Lenders shall obtain and furnish to the Agent and the
Borrower, within five (5) Business Days, in writing, the amount of the
respective Breakage Fee the Borrower is being charged, and upon receipt of the
amount of such charges if any, the Borrower shall make its proposed prepayment,
including therewith the Breakage Fee, within five (5) Business Days of receipt
of the written Breakage Fee amount from the Lenders. There shall be no other
premium or penalty for any prepayment.
Section 2.9 Mandatory Prepayment.
(a) At any time after the Senior Debt is repaid in full, the
Senior Lenders have no obligations to make further loans to the
Borrower pursuant to the Senior Credit Agreement and all letters of
credit issued pursuant to the Senior Credit Agreement have been cash
secured on a dollar for dollar basis, promptly upon receipt of the
Net Cash Proceeds from any Asset Sale or sale/leaseback transaction
with respect to the Borrower's or its Subsidiaries' motor vehicles,
or receipt of any insurance proceeds with respect to properties or
assets of the Borrower or any of its Subsidiaries, the Borrower
shall prepay the Loans in accordance with Section 2.9(c) in an
amount equal to 100% of the amount by which aggregate Net Cash
Proceeds received from such Asset Sales or insurance proceeds during
any twelve month period exceeds five percent of the Borrower's
Consolidated Net Worth, and 100% of the amount of Net Cash Proceeds
received from any such sale/leaseback transaction.
16
(b) At any time after the Senior Debt is repaid in full, the
Senior Lenders have no obligations to make further loans to the
Borrower pursuant to the Senior Credit Agreement and all letters of
credit issued pursuant to the Senior Credit Agreement have been cash
secured on a dollar for dollar basis, except as expressly set forth
in this Section 2.9(b), if the Borrower or any of its Subsidiaries
receives Net Cash Proceeds from the issuance of Capital Stock to any
Person, and if at such time, the Leverage Ratio equals or exceeds
3.50 to 1.00 (based on the most recent financial information in
Agent's possession at the time of such determination), the Borrower
shall prepay the Loans in accordance with Section 2.9(c) in a
principal amount equal to 50% of the amount by which aggregate Net
Cash Proceeds received from such issuances during any twelve month
period exceeds $2,000,000. Notwithstanding the foregoing, the
prepayment described above shall not be required in connection with
(i) an issuance of Capital Stock to First Reserve and (ii) an
issuance of Capital Stock made by April 30, 2006 to any other Person
who has made material investments in, or otherwise has long-term
experience in managing companies in, the Borrower's industry so long
as the aggregate Net Cash Proceeds received from such issuances
pursuant to clause (ii) of this sentence does not exceed
$20,000,000; provided, that, if the aggregate Net Cash Proceeds
received from such issuances pursuant to clause (ii) of this
sentence does exceed $20,000,000, the Borrower shall prepay the
Loans in accordance with Section 2.9(c) in a principal amount equal
to 50% of the amount of such excess.
(c) Any prepayment made under Sections 2.9(a) or (b) shall (i)
be applied first to accrued interest and the remainder to principal
and (ii) not be subject to any minimum payment provisions contained
in this Agreement.
Section 2.10 Pro Rata Treatment. Each payment and prepayment of principal
of or interest on the Loans by the Borrower shall be made to the Agent for the
account of the Lenders pro rata in accordance with the respective unpaid
principal amounts of the Loans.
Section 2.11 Facility Fee. Upon the execution and delivery of this
Agreement by the Lenders, the Borrower will pay the Lenders a facility fee of
$300,000.00.
Section 2.12 Non-Receipt of Funds by the Agent. Unless the Agent shall
have been notified by the Borrower prior to the date on which the Borrower is to
make a payment to the Agent for the account of one or more of the Lenders (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Borrower does not intend to make the Required
Payment to the Agent, the Agent may assume that the Required Payment has been
made and may, in reliance upon such assumption (but shall not be required to),
make the amount thereof available to the intended Lender on such date and, if
the Borrower has not in fact made the Required Payment to the Agent, the
recipient of such payment shall, on demand, pay to the Agent the amount made
available to it together with interest thereon in respect of the period
commencing on the date such amount was so made available by the Agent
17
until the date the Agent recovers such amount at a rate per annum equal to the
Federal Funds Rate for such period.
Section 2.13 Withholding Tax Exemption. Each Lender that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to the Borrower and the Agent two duly completed
copies of Form W-8BEN or W-8ECI, certifying in either case that such Lender is
entitled to receive payments from the Borrower under any Loan Document without
deduction or withholding of any United States federal income taxes. Each Lender
which so delivers a Form W-8BEN or W-8ECI further undertakes to deliver to the
Borrower and the Agent two additional copies of such form (or a successor form)
on or before the date such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form so delivered
by it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by the Borrower or the Agent, in each case certifying that
such Lender is entitled to receive payments from the Borrower under any Loan
Document without deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change in treaty, law
or regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender advises the Borrower and the Agent that it is not
capable of receiving such payments without any deduction or withholding of
United States federal income tax. Notwithstanding any provisions of this
agreement to the contrary, the Borrower shall make payments net of, and after
deductions for, taxes and shall not be required to increase any such amount
payable to any non-U.S. Lender that fails to comply with this section.
Section 2.14 Computation of Interest. Interest on the Loans and all other
amounts payable by the Borrower hereunder shall be computed on the basis of a
year of 365 or 366 days, as the case may be, and the actual number of days
elapsed (including the first day but excluding the last day).
Section 2.15 Capital Adequacy. If after the date hereof, any adoption or
implementation of any applicable law, rule, or regulation regarding capital
adequacy (including, without limitation, any law, rule, or regulation
implementing the Basle Accord), or any change therein, or any change in the
interpretation or administration thereof by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or compliance by a Lender (or its parent) with any guideline, request,
or directive regarding capital adequacy (whether or not having the force of law)
of any such central bank or other Governmental Authority (including, without
limitation, any guideline or other requirement implementing the Basle Accord),
has or would have the effect of reducing the rate of return on such Lender's (or
its parent's) capital as a consequence of its obligations hereunder or the
transactions contemplated hereby to a level below that which such Lender (or its
parent) could have achieved but for such adoption, implementation, change, or
compliance (taking into consideration such Lender's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, within ten Business Days after demand by such Lender (with a copy
to the Agent), the Borrower agrees to pay to such Lender (or its parent) such
additional amount or
18
amounts as will compensate such Lender for such reduction. Any such demand shall
be accompanied by a certificate of such Lender claiming compensation under this
Section and setting forth in reasonable detail the calculation of the additional
amount or amounts to be paid to it hereunder shall be conclusive (absent
manifest error), provided that the determination thereof is made on a reasonable
basis. In determining such amount or amounts, such Lender may use any reasonable
averaging and attribution methods.
ARTICLE III
Security
Section 3.1 Collateral. To secure full and complete payment and
performance of the Obligations, the Borrower and the Guarantors (as the case may
be) have executed and delivered the documents described below covering the
property and collateral described in this Section 3.1 (which, together with any
other property and collateral which may now or hereafter secure the Obligations
or any part thereof, is sometimes herein called the "Collateral"):
(a) The Borrower and the Domestic Guarantors have respectively
executed the Pledge and Security Agreement pursuant to which such
Persons have granted to the Agent for its benefit and the benefit of
the Lenders a security interest, subordinate in priority to Liens
securing the Senior Debt, in (i) all of such Persons' accounts
accessions, chattel paper, commercial tort claims, commodity
accounts, commodity contracts, deposit accounts, documents,
equipment, financial assets, fixtures, general intangibles, goods,
instruments, intellectual property, inventory, investment property,
letters of credit, letter of credit rights, payment intangibles,
licenses, permits, securities, securities accounts, security
entitlements, software, supporting obligations, cash and cash
accounts, (ii) 100% of the Capital Stock issued to such Persons by
any Domestic Subsidiary or Foreign Guarantor, (iii) 65% of the
Capital Stock issued to such Persons by any Foreign Subsidiary that
is not a Foreign Guarantor, (iv) promissory notes made by any
Subsidiary payable to the order of the Borrower or such Domestic
Guarantor, and (v) all products and proceeds related to any of the
above.
(b) The Borrower and the Domestic Guarantors have respectively
executed the Mortgages pursuant to which such Persons have granted
to the Agent for its benefit and the benefit of the Lenders a lien,
subordinate in priority to the Liens securing the Senior Debt, on
all unencumbered real property owned by such Persons.
(c) The Borrower and the Guarantors shall execute or
authenticate and cause to be executed or authenticated, such further
agreements, documents and instruments, including without limitation,
as applicable, financing statements under the UCC, as the Agent, in
its sole discretion, deems necessary or desirable to create,
preserve, evidence, and perfect its liens and security interests in
the Collateral.
19
Section 3.2 Setoff. If an Event of Default shall have occurred and is
continuing, the Agent and each Lender are hereby authorized at any time and from
time to time, without notice to the Borrower (any such notice being hereby
expressly waived by the Borrower), to set off and apply any and all deposits
(general, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Agent or such Lender to or for the credit
or the account of the Borrower against any and all of the obligations of the
Borrower now or hereafter existing under this Agreement, the Notes or any other
Loan Document, irrespective of whether or not the Agent or such Lender shall
have made any demand under this Agreement, the Notes or any other Loan Document
and although such Obligations may be unmatured. The Agent and each Lender agree
promptly to notify the Borrower (with a copy to the Agent) after any such setoff
and application, provided that the failure to give such notice shall not affect
the validity of such setoff and application. The rights and remedies of the
Agent and each Lender hereunder are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which the Agent and such
Lender may have.
ARTICLE IV
Conditions Precedent
This Agreement is not effective, and the obligation of each Lender to
renew, rearrange and extend the full amount of its Commitment of all of the Debt
evidenced by the Existing Note and fund the full amount of its Commitment of the
Additional Advance pursuant to Section 2.1 is subject to the condition precedent
that the Agent shall have received (or waived or postponed in writing the
requirement that it receive or to the extend the same is received by ▇▇▇▇▇ Fargo
Bank as agent for the Senior Lenders as indicated) on or before the day of the
renewal, rearrangement and extension of the Debt evidenced by the Existing Note
and the making of the Additional Advance all of the items set forth below in
form and substance satisfactory to the Agent.
(a) Certificate - Borrower. A certificate of the Secretary or an
Assistant Secretary or other appropriate officer of the Borrower
certifying (i) resolutions of the Board of Directors of the Borrower which
authorize the execution, delivery and performance by the Borrower of this
Agreement and the other Loan Documents to which the Borrower is or is to
be a party hereunder, (ii) the names and signatures of the officers of the
Borrower authorized to sign this Agreement and each of the other Loan
Documents to which the Borrower is or is to be a party hereunder, and
(iii) that the attached certificate of incorporation and the bylaws of the
Borrower are correct and complete copies. The Agent and the Lenders may
conclusively rely on such certificate until the Agent receives notice in
writing from the Borrower to the contrary.
(b) Certificate - Guarantors. A certificate of the Secretary or an
Assistant Secretary or other appropriate officer of each Guarantor
certifying (i) resolutions of the Board of Directors of such Guarantor or
actions of any other body which
20
authorize the execution, delivery and performance by such Guarantor of the
Loan Documents to which such Guarantor is or is to be a party hereunder,
(ii) the names and signatures of the officers of such Guarantor authorized
to sign the Loan Documents to which such Guarantor is or is to be a party
hereunder and (iii) that the articles or certificate of incorporation,
bylaws, partnership agreements, or other organizational documents of such
Guarantor have not been modified in any respect from the copies previously
provided to the Agent and the Lenders in connection with the Existing Loan
Agreement. The Agent and the Lenders may conclusively rely on such
certificate until they receive notice in writing from such Guarantor to
the contrary.
(c) Governmental Certificates - Borrower. Certificates of the
appropriate government officials of the state of organization of the
Borrower as to the existence and good standing of the Borrower.
(d) Governmental Certificates - Guarantors. Certificates of the
appropriate government officials of the jurisdiction of organization of
each Guarantor as to the existence and good standing of such Guarantor.
(e) Notes. The Notes executed by the Borrower.
(f) Pledge and Security Agreement. The Pledge and Security Agreement
executed by the Borrower and each Domestic Guarantor.
(g) Guaranty Agreements-Domestic Guarantors. The Guaranty Agreement
- Domestic executed by each Domestic Guarantor.
(h) Landlord Waivers. Landlord lien waivers or subordinations, as
the case may be, with respect to each location of equipment and inventory
of Borrower and the Guarantors which is leased by Borrower or any such
Guarantor and for which a landlord lien waiver or subordination is
required by the Agent in its sole discretion, to the extent not previously
delivered to the Agent in connection with the Existing Loan Agreement.
(i) Stock Certificates. Stock certificates and blank stock powers
with respect to the Capital Stock of T-3 Custom Coating Applicators, Inc.
and T-3 Investment Corporation III which shall be taken by ▇▇▇▇▇ Fargo
Bank as agent for the Senior Lenders with respect to the senior lien
position securing the Senior Debt.
(j) Mortgages. With respect to real estate located at 103 and ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ Cypress ▇. ▇▇▇▇▇▇▇, Cypress,
Texas, and ▇▇▇▇ ▇▇▇▇▇▇ ▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, Mortgages (in form and
substance satisfactory to Agent) executed by Borrower or the applicable
Guarantor, and any other party indicated on such Mortgage as a party for
whom execution thereof is provided.
21
(k) Amendments to Mortgages. With respect to those Mortgages
previously delivered to the Agent in connection with the Existing Loan
Agreement, amendments to Mortgages in form and substance satisfactory to
the Agent.
(l) Real Estate Appraisal. Satisfactory appraisals of the real
estate secured by the Mortgages, to the extent not previously delivered to
the Agent in connection with the Existing Loan Agreement,.
(m) Title Insurance. With respect to each parcel of real estate
secured by the Mortgages executed on the date hereof, (a) a binding
commitment to issue a Mortgagee Policy of Title Insurance in form and
substance satisfactory to Agent in an amount not less than the appraised
value of the applicable real estate, insuring Agent's Lien on such real
estate to be second in priority to only the lien of the Senior Lenders,
which commitment shall be issued by Commonwealth Land Title Company and
contain such endorsements as Agent may require, and shall be subject only
to such exceptions as Agent shall approve in its sole discretion, and (b)
with respect to those Mortgages previously delivered to the Agent in
connection with the Existing Credit Agreement, proformas of title
insurance endorsements, in form and substance satisfactory to the Agent;
in each case, with all costs thereof to be paid by Borrower.
(n) Survey. With respect to each parcel of real estate secured by
the Mortgages, a survey with such certification as the Agent may require,
to the extent not previously delivered to the Agent in connection with the
Existing Loan Agreement.
(o) Environmental Site Assessment. With respect to real estate
located at 103 and ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ Cypress
▇. ▇▇▇▇▇▇▇, Cypress, Texas, and ▇▇▇▇ ▇▇▇▇▇▇ ▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, a
satisfactory Phase I and/or Phase II Environmental Site Assessment, to the
extent not previously delivered to the Agent in connection with the
Existing Loan Agreement.
(p) Opinion of Borrower's Counsel. A favorable opinion of legal
counsel to the Borrower and the Guarantors in such form as the Agent may
request, including without limitation opinions relating to the Loan
Documents.
(q) Financial Statements. Projected consolidated financial
statements of Borrower and its Subsidiaries, including income statements,
statements of cash flow, and balance sheets.
(r) Appraisals. An updated appraisal of the fixed assets of the
Borrower and each Guarantor, in form and substance satisfactory to the
Agent.
22
(s) Insurance Certificates. Certificates showing the existence of
all insurance policies required by Section 6.5, naming the Agent as loss
payee and additional insured.
(t) Senior Credit Agreement. The Senior Credit Agreement shall have
been executed and delivered by all parties thereto and all conditions
precedent to the effectiveness of the Senior Credit Agreement and the
initial loans thereunder have been satisfied or waived in writing by ▇▇▇▇▇
Fargo Bank as agent for the Senior Lenders.
(u) Intercreditor Agreement. The Intercreditor Agreement executed by
the Agent, WFEC as the sole Lender, ▇▇▇▇▇ Fargo Bank as agent for the
Senior Lenders, the Senior Lenders and the Borrower.
(v) Fees. Payment of all facility fees payable to the Lenders
pursuant to Section 2.11.
(w) UCC Searches. Uniform Commercial Code searches (as Agent shall
deem necessary or appropriate) showing all financing statements on file
against those Domestic Guarantors that have changed their names or
jurisdictions of organization since December 17, 2001.
(x) No Default. No Default or Event of Default shall have occurred
and be continuing, or would result from the renewal, rearrangement and
extension of the Debt evidenced by the Existing Note and the making of the
Additional Advance.
(y) Representations and Warranties. All of the representations and
warranties contained in Article V hereof and in the other Loan Documents
shall be true and correct on and as of the date of the renewal,
rearrangement and extension of the Debt evidenced by the Existing Note and
the making of the Additional Advance, as applicable with the same force
and effect as if such representations and warranties had been made on and
as of such date except for those that relate solely to a specific date.
(z) Additional Documentation. The Agent shall have received such
additional approvals, opinions, or documents as the Agent or its legal
counsel may request.
23
ARTICLE V
Representations and Warranties
To induce the Agent and the Lenders to enter into this Agreement, the
Borrower represents and warrants to each such Person that:
Section 5.1 Corporate Existence. The Borrower and each Subsidiary (a) is a
corporation, partnership or limited liability company duly organized, validly
existing, and in good standing to the extent applicable under the laws of the
jurisdiction of its incorporation or organization; (b) has all requisite
organizational power and authority to own its assets and carry on its business
as now being or as proposed to be conducted; and (c) is qualified to do business
in all jurisdictions in which the nature of its business makes such
qualification necessary and where failure to so qualify would have a Material
Adverse Effect. The Borrower and each Guarantor has the corporation, partnership
or limited liability company, as applicable, power and authority to execute,
deliver and perform its obligations under this Agreement and the other Loan
Documents to which it is or may become a party.
Section 5.2 Projections; Financial Statements. All financial information
delivered by the Borrower to the Agent before the date of this Agreement has
been prepared by the Borrower in good faith based upon reasonable assumptions
consistent with each other and all facts then known to the Borrower. The
Borrower has delivered to the Agent audited consolidated financial statements of
the Borrower and its Subsidiaries as at and for the fiscal year ended December
31, 2003 and its unaudited consolidated and consolidating financial statements
for the six month period ended June 30, 2004. Such financial statements have
been prepared in accordance with GAAP except as expressly noted therein, and
fairly present, on a consolidated basis, the financial condition of the Borrower
and its Subsidiaries as of the respective dates indicated therein and the
results of operations for the respective periods indicated therein. Neither the
Borrower nor any of its Subsidiaries has any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments, or unrealized
or anticipated losses from any unfavorable commitments except as referred to or
reflected on such financial statements. Since June 30, 2004, there has been no
event, occurrence or circumstance that has had a Material Adverse Effect.
Section 5.3 Corporate Action: No Breach. The execution, delivery, and
performance by the Borrower and its Subsidiaries of the Loan Documents to which
such Persons are or may become a party and compliance with the terms and
provisions hereof and thereof have been duly authorized by all requisite
organizational action on the part of such Persons and do not (a) violate or
conflict with, or result in a breach of, or require any consent under (i) the
articles of incorporation or bylaws or other organizational documents of such
Persons, (ii) any applicable law, rule, or regulation or any order, writ,
injunction, or decree of any Governmental Authority or arbitrator, or (iii) any
material agreement or instrument to which the Borrower or any of its
24
Subsidiaries is a party or by which any of them or any of their property is
bound or subject, or (b) constitute a default under any such agreement or
instrument, or result in the creation or imposition of any Lien (except as
provided in Article IV) upon any of the revenues or assets of the Borrower or
any Subsidiary.
Section 5.4 Operation of Business. The Borrower and each of its
Subsidiaries possess all material licenses, permits, franchises, patents,
copyrights, trademarks, and trade names, or rights thereto, material necessary
to conduct their respective businesses substantially as now conducted and as
presently proposed to be conducted, and the Borrower and each of its
Subsidiaries are not in violation of any valid rights of others with respect to
any of the foregoing in any respect that could reasonably be expected to have a
Material Adverse Effect.
Section 5.5 Litigation and Judgments. Except as disclosed on Schedule 5.5
hereto, there is no action, suit, investigation, or proceeding before or by any
Governmental Authority or arbitrator pending (in respect of which process has
been served on the Borrower or any of its Subsidiaries) , or to the knowledge of
the President, Chief Executive Officer or any Vice President of the Borrower,
threatened against or affecting the Borrower or any Subsidiary, that would, if
adversely determined, have a Material Adverse Effect. There are no outstanding
judgments against the Borrower or any Subsidiary, except as disclosed on
Schedule 5.5 hereto.
Section 5.6 Rights in Properties: Liens. The Borrower and each Subsidiary
have good and indefeasible title to or valid leasehold interests in all material
respects in their respective properties and assets, real and personal, including
the properties, assets and leasehold interests reflected in the financial
statements described in Section 5.2, and none of the properties, assets or
leasehold interests of the Borrower or any Subsidiary is subject to any Lien,
except as permitted by Section 7.2.
Section 5.7 Enforceability. This Agreement constitutes, and the other Loan
Documents to which the Borrower and its Subsidiaries are party, when delivered,
shall constitute legal, valid, and binding obligations of the Borrower and its
Subsidiaries as applicable, enforceable against the Borrower and its
Subsidiaries as applicable, in accordance with their respective terms, except as
limited by bankruptcy, insolvency, or other laws of general application relating
to the enforcement of creditors' rights and by general equitable principles.
Section 5.8 Approvals. No authorization, approval, or consent of, and no
filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by the Borrower
and its Subsidiaries of the Loan Documents to which the Borrower and its
Subsidiaries are or may become a party or the validity or enforceability
thereof, except for filings and recordings in respect of the Liens created
pursuant to Loan Documents and appropriate filings with the SEC.
Section 5.9 Debt. The Borrower and its Subsidiaries have no Debt, except
Debt permitted by Section 7.1.
25
Section 5.10 Taxes. The Borrower and each Subsidiary have filed all tax
returns (federal, state, local and foreign) required to be filed, including all
income, franchise, employment, property, and sales tax returns, and have paid
all of their respective liabilities for taxes, assessments, governmental charges
and other levies that are due and payable, in each case except for those
contested in good faith by appropriate proceedings and for which appropriate
reserves in accordance with GAAP are being maintained. Except as set forth on
Schedule 5.10, the Borrower knows of no pending investigation of the Borrower or
any Subsidiary by any taxing authority or of any pending but unassessed tax
liability of the Borrower or any Subsidiary.
Section 5.11 Use of Proceeds: Margin Securities. Neither the Borrower nor
any Subsidiary is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations U, or X of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Loans will be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying margin stock.
Section 5.12 ERISA. The Borrower and each Subsidiary are in compliance
with all applicable provisions of ERISA and the applicable provisions of the
Code relating thereto. No Reportable Event which is required to be reported to
the PBGC pursuant to Section 4043(b) of ERISA or Prohibited Transaction which
could reasonably be expected to have a Material Adverse Effect has occurred and
is continuing with respect to any Plan. No notice of intent to terminate a Plan
has been filed, nor has any Plan been terminated. No circumstances exist which
constitute grounds entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings. Neither the Borrower nor any ERISA Affiliate (nor any predecessor
to the Borrower or any ERISA Affiliate) has completely or partially withdrawn
from a Multiemployer Plan. The Borrower and each ERISA Affiliate have met their
minimum funding requirements under ERISA with respect to all of their Plans, and
the present value of all vested benefits under each Plan do not exceed the fair
market value of all Plan assets allocable to such benefits, as determined on the
most recent valuation date of the Plan and in accordance with ERISA. Neither the
Borrower nor any ERISA Affiliate has incurred any liability to the PBGC under
ERISA.
Section 5.13 Disclosure. No statement, information, report,
representation, or warranty made by the Borrower or any of its Subsidiaries in
this Agreement or in any other Loan Document or furnished to the Agent or any
Lender in connection with this Agreement or any of the transactions contemplated
hereby (but excluding all projections and proforma financial statements which
shall have been prepared in good faith and based upon reasonable assumptions)
contains any untrue statement of a material fact and all such statements,
information, reports, representations and warranties, taken as a whole, do not
omit to state any material fact necessary to make the statements herein or
therein not materially misleading. There is no fact known to the Borrower or any
of its Subsidiaries which has a Material Adverse Effect, or which could
reasonably be expected to have, in the reasonable judgment of the Borrower, in
the future a Material Adverse Effect, that has not been disclosed in writing to
the Agent.
26
Section 5.14 Subsidiaries; Material Subsidiaries. The Borrower has no
Subsidiaries other than those listed on Schedule 5.14 hereto, and Schedule 5.14
lists the jurisdiction of organization or incorporation of each Subsidiary and
the percentage of the Borrower's and its Subsidiaries' ownership of the
outstanding voting stock or other similar interests of each such Subsidiary. All
of the outstanding Capital Stock of each Subsidiary has been validly issued, is
fully paid, and is nonassessable. Except as may be agreed between the Borrower
and Agent in writing, all Material Subsidiaries of the Borrower are Guarantors.
Section 5.15 Agreements. Except as disclosed in SEC filings, neither the
Borrower nor any Guarantor is a party to any indenture, loan, or credit
agreement, or to any lease or other agreement or instrument, or subject to any
charter or corporate restriction which could reasonably be expected to have a
Material Adverse Effect. Neither the Borrower nor any Guarantor is in default in
any respect in the performance, observance, or fulfillment of any of the
obligations, covenants, or conditions contained in any agreement or instrument
material to its business to which it is a party where such default or the effect
thereof could reasonably be expected to result in a Material Adverse Effect.
Section 5.16 Compliance with Laws. Neither the Borrower nor any Subsidiary
is in violation of any law, rule, regulation, order, or decree of any
Governmental Authority or arbitrator except where such Person's failure to do so
could not reasonably be expected to result in a Material Adverse Effect.
Section 5.17 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" within the meaning of, or "controlled by"
an "investment company" within the meaning of, the Investment Company Act of
1940, as amended.
Section 5.18 Public Utility Holding Company Act. Neither the Borrower nor
any Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or a "public utility" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 5.19 Environmental Matters. Except as disclosed on Schedule 5.19
hereto:
(a) The Borrower, each Subsidiary, and all of their respective
properties, assets, and operations are in full compliance with all
Environmental Laws, except for occurrences of noncompliance which could
not in the aggregate, reasonably be expected to have a Material Adverse
Effect. The Borrower is not aware of, nor has the Borrower received notice
of, any past, present, or future conditions, events, activities,
practices, or incidents which may interfere with or prevent the compliance
or continued compliance of the Borrower and its Subsidiaries with all
Environmental Laws, except for occurrences of noncompliance which could
not in the aggregate, reasonably be expected to have a Material Adverse
Effect;
27
(b) The Borrower and each Subsidiary have obtained all permits,
licenses, and authorizations that are required under applicable
Environmental Laws, and all such permits are in effect and the Borrower
and its Subsidiaries are in compliance with all of the terms and
conditions of such permits, except where failure to obtain or comply with
such permits, licenses or authorizations could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect;
(c) No Hazardous Materials exist on, about, or within or have been
used, generated, stored, transported, disposed of on, or Released from any
of the properties or assets of the Borrower or any Subsidiary except (i)
in amounts that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect and (ii) for dynamite and other
explosives for which such Person possesses all licenses and permits
necessary to comply with all Environmental Laws and other federal, state,
local and foreign laws, regulations and requirements pertaining to the
use, possession, disposal, storage or sale thereof, and such use,
possession, disposal, storage or sale thereof is in compliance with
Environmental Laws and such other laws, regulations and requirements
except where failure to obtain or comply with such licenses or permits or
to comply with such laws, regulations or requirements could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect;
(d) Neither the Borrower nor any of its Subsidiaries nor any of
their respective currently or previously owned or leased properties or
operations is subject to any outstanding or, to the best of its knowledge,
threatened order from or agreement with any Governmental Authority or
other Person or subject to any judicial or docketed administrative
proceeding with respect to (i) failure to comply with Environmental Laws,
(ii) Remedial Action, or (iii) any Environmental Liabilities arising from
a Release or threatened Release, which, in the aggregate, could reasonably
be expected to have a Material Adverse Effect;
(e) There are no conditions or circumstances associated with the
currently or previously owned or leased properties or operations of the
Borrower or any of its Subsidiaries that could reasonably be expected to
have a Material Adverse Effect;
(f) Neither the Borrower nor any of its Subsidiaries is a treatment,
storage, or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et. seq. regulations
thereunder or any comparable provision of state law. The Borrower and its
Subsidiaries are in compliance with all applicable financial
responsibility requirements of all Environmental Laws except where failure
to be in such compliance could not reasonably be expected to have a
Material Adverse Effect;
(g) Neither the Borrower nor any of its Subsidiaries has filed or
failed to file any notice required under applicable Environmental Law
reporting a Release, which
28
Release or any aggregation thereof, or failure to file, could reasonably
be expected to have a Material Adverse Effect; and
(h) To the best of the Borrower's knowledge, no Lien arising under
any Environmental Law has attached to any property or revenues of the
Borrower or its Subsidiaries.
ARTICLE VI
Affirmative Covenants
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Lender has any commitment to lend hereunder,
the Borrower will perform and observe the following affirmative covenants:
Section 6.1 Reporting Requirements. The Borrower will furnish the items
set forth below to the Agent and the Lenders.
(a) Annual Financial Statements. As soon as available, but in any
event no later than the earlier of (i) five (5) days after filing the
Borrower's Form 10 -- K Annual Report with the SEC, or (ii) 90 days after
the end of the Borrower's Fiscal Year, the Borrower's Form 10-K Annual
Report, including (i) the consolidated balance sheets of the Borrower and
its Subsidiaries, as of the end of such Fiscal Year and (ii) the
consolidated statements of earnings of the Borrower and its Subsidiaries
and consolidated statements of changes in shareholders' equity of the
Borrower and its Subsidiaries, and statements of changes in cash flows of
the Borrower and its Subsidiaries as of and through the end of such Fiscal
Year, all of which are prepared in accordance with GAAP, and certified by
independent certified public accountants acceptable to the Agent, whose
opinion shall be in scope and substance in accordance with generally
accepted auditing standards and shall be unqualified. Additionally,
concurrent with delivery of the information described above, the Borrower
shall deliver (A) the unaudited consolidating balance sheets of the
Borrower and its Subsidiaries, as of the end of such Fiscal Year and (B)
the unaudited consolidating statements of earnings of the Borrower and its
Subsidiaries and consolidating statements of changes in shareholders'
equity of the Borrower and its Subsidiaries and statements of changes in
cash flows of the Borrower and its Subsidiaries as of and through the end
of such Fiscal Year, all of which are prepared in accordance with GAAP,
and certified by the chief financial officer, chief accounting officer, or
another officer of the Borrower acceptable to the Agent.
(b) Quarterly 10-Q of the Borrower. As soon as available, but in any
event no later than the earlier of (i) five (5) days after filing the
Borrower's Form 10 -- Q Quarterly Report with the SEC, or (ii) 45 days
after the end of each Fiscal Quarter of
29
the Borrower, the Borrower's Form 10-Q Quarterly Report, including (i) the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries, as of the end of such Fiscal Quarter and (ii) the
consolidated and consolidating statements of earnings of the Borrower and
its Subsidiaries in consolidated and consolidating statements of changes
in shareholders' equity of the Borrower and its Subsidiaries, and
statements of changes in cash flows of the Borrower and its Subsidiaries
as of and through the end of such Fiscal Quarter, all of which are
prepared in accordance with GAAP, and certified by the chief financial
officer, chief accounting officer, or another officer of the Borrower
acceptable to the Agent.
(c) Compliance Certificate. Concurrently with the delivery of the
Form 10-K's or Form 1O-Q's, as applicable, referred to in subsections
6.1(a) and 6.1(b), a Compliance Certificate of the chief financial
officer, the chief accounting officer, the treasurer or the assistant
treasurer of the Borrower or another officer of the Borrower acceptable to
the Agent (i) stating, among other things, that no Default or Event of
Default has occurred and is continuing, or if a Default or Event of
Default has occurred and is continuing, a statement as to the nature
thereof and the action which is proposed to be taken with respect thereto,
and (ii) showing in reasonable detail the calculations demonstrating
compliance with Article VIII.
(d) Annual Projected Financial Statements and Capital Expenditure
Projections. As soon as available, but in any event no later than thirty
(30) days after the end of each Fiscal Year of the Borrower, projected
financial statements for the upcoming fiscal year of the Borrower and its
Subsidiaries, including projected Capital Expenditures, in form and detail
satisfactory to the Agent and prepared under the supervision of the chief
financial officer or the chief accounting officer of the Borrower or
another officer of the Borrower acceptable to the Agent.
(e) Notice of Litigation. Promptly after the service of process or
notice thereof, notice of all actions, suits, and proceedings before any
Governmental Authority or arbitrator affecting the Borrower or any
Subsidiary which could reasonably be expected to have a Material Adverse
Effect.
(f) Notice of Default. As soon as possible and in any event within
two days after any of the chief executive officer, the chief financial
officer, the chief accounting officer, the treasurer or any other employee
serving in a comparable capacity (regardless of title) of the Borrower or
any Guarantor obtains any knowledge, becomes aware or should have known
through the exercise of prudent business judgment of the occurrence of any
Default, a written notice setting forth the details of such Default and
the action that the Borrower has taken and proposes to take with respect
thereto.
(g) ERISA Reports. Upon the request of the Agent from time to time
copies of all reports, including annual reports, and notices which the
Borrower or any
30
Subsidiary files with or receives from the PBGC, the U.S. Department of
Labor under ERISA or the Internal Revenue Service under the Code; and as
soon as possible and in any event within five days after the Borrower or
any Subsidiary knows or has reason to know that any Reportable Event which
is required to be reported to the PBGC pursuant to Section 4043 (b) of
ERISA or Prohibited Transaction which could be reasonably expected to have
a Material Adverse Effect has occurred with respect to any Plan or that
the PBGC or the Borrower or any Subsidiary has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan, a
certificate of the chief financial officer of the Borrower setting forth
the details as to such Reportable Event or Prohibited Transaction or Plan
termination and the action that the Borrower proposes to take with respect
thereto.
(h) Notice of Material Adverse Effect. As soon as possible and in
any event within two days after any of the chief executive officer, the
chief financial officer, the chief accounting officer, the treasurer or
any other employee serving in a comparable capacity (regardless of title)
of the Borrower or any Guarantor obtains any knowledge, becomes aware or
should have known through the exercise of prudent business judgment of the
occurrence thereof, written notice of any matter that could reasonably be
expected to have a Material Adverse Effect.
(i) ▇▇▇▇▇ Filings. Promptly following the filing thereof, written
notice of each proxy statement or other document filed with ▇▇▇▇▇.
(j) Notice of Actual or Contingent Liabilities. As soon as possible,
and in any event within two Business Days after any of the chief executive
officer, the chief financial officer, the chief accounting officer, the
treasurer or any other employee serving in a comparable capacity
(regardless of title) of the Borrower or any Guarantor obtains any
knowledge, becomes aware or should have known through the exercise of
prudent business judgment of the occurrence thereof, written notice of any
actual or contingent liabilities which, if resolved adversely to such
Person could reasonably be expected to have a Material Adverse Effect.
(k) General Information. Within such a time period as Agent may
reasonably request, such additional information and statements, lists of
assets and liabilities, tax returns, financial statements, reporting
statements and any other reports with respect to the Borrower's or any
Subsidiary's financial condition, business operations and properties as
the Agent may reasonably request from time to time.
Section 6.2 Maintenance of Existence: Conduct of Business. Except as
provided in Section 7.3, the Borrower will preserve and maintain, and will cause
each Guarantor to preserve and maintain, its corporate existence and all of its
leases, privileges, licenses, permits, franchises, qualifications, and rights
that are necessary or desirable in the ordinary conduct of its business. The
Borrower will conduct, and will cause each Subsidiary to conduct, its businesses
in an orderly and efficient manner in accordance with good business practices.
31
Section 6.3 Maintenance of Properties. Subject to Sections 7.3 and 7.6,
the Borrower will maintain, keep, and preserve, and cause each Subsidiary to
maintain, keep, and preserve, in all material respects, all of its properties
(tangible and intangible) necessary in the proper conduct of its business in
good working order and condition (ordinary wear and tear excepted).
Section 6.4 Taxes and Claims. The Borrower will pay or discharge, and will
cause each Subsidiary to pay or discharge, at or before maturity or before
becoming delinquent all material taxes, levies, assessments, and governmental
charges imposed on it or its income or profits or any of its property; provided,
however, that neither the Borrower nor any Subsidiary shall be required to pay
or discharge any tax, levy, assessment, or governmental charge which is being
contested in good faith by appropriate proceedings diligently pursued, and for
which adequate reserves have been established to the extent required by GAAP.
Section 6.5 Insurance. The Borrower will maintain, and will cause each
Subsidiary to maintain, insurance with financially sound and reputable insurance
companies in such amounts and covering such risks as is usually carried by
corporations engaged in similar businesses and owning similar properties in the
same general areas in which the Borrower and its Subsidiaries operate, provided
that in any event the Borrower will maintain and will cause each Subsidiary to
maintain workmen's compensation insurance, property insurance, comprehensive
general liability insurance, and business interruption insurance with respect to
processing centers in accordance with the Borrower's and such Subsidiaries'
current practices reasonably satisfactory to the Agent.
Section 6.6 Inspection Rights. At any reasonable time during business
hours and from time to time, provided that so long as no Event of Default exists
the Borrower will permit, and will cause each Subsidiary to permit,
representatives of the Agent and the Lenders to examine, copy, and make extracts
from its books and records, to visit and inspect its properties, and to discuss
its business, operations, and financial condition with its officers, employees,
and independent certified public accountants.
Section 6.7 Keeping Books and Records. The Borrower will maintain, and
will cause each Subsidiary to maintain, proper books of record and account in
which full, true, and correct entries in conformity with GAAP shall be made of
all dealings and transactions in relation to its business and activities.
Section 6.8 Compliance with Laws. The Borrower will comply, and will cause
each Subsidiary to comply with all applicable laws, rules, regulations, orders,
and decrees of any Governmental Authority or arbitrator if its failure to comply
could reasonably be expected to result in a Material Adverse Effect.
Section 6.9 Compliance with Agreements. The Borrower will comply, and will
cause each Subsidiary to comply with all agreements, contracts, and instruments
binding on it or affecting its properties or business if its failure to comply
could reasonably be expected to result in a Material Adverse Effect.
32
Section 6.10 Further Assurances. The Borrower will, and will cause each
Subsidiary to, execute and deliver such further agreements and instruments and
take such further action as may be requested by the Agent or any Lender to carry
out the provisions and purposes of this Agreement and the other Loan Documents
to create, preserve, and perfect the Liens of the Agent in the Collateral.
Section 6.11 ERISA. The Borrower will comply, and will cause each
Subsidiary to comply, with all minimum funding requirements, and all other
material requirements of ERISA and the applicable provisions of the Code
relating thereto, if applicable, so as not to give rise to any liability
thereunder if its failure to comply could reasonably be expected to result in a
Material Adverse Effect.
Section 6.12 Additional Material Subsidiaries as Guarantors: Additional
Designated Subsidiaries as Guarantors; Execution of Additional Security
Agreements-Guarantors.
(a) The Borrower will cause each Material Subsidiary created or
acquired after the Effective Date to execute (i) a Guaranty
Agreement-Foreign if such Material Subsidiary is a Foreign Subsidiary (and
such Subsidiary qualifies as a Foreign Guarantor) and (ii) a Guaranty
Supplement in substantially the form of Exhibit A to the Guaranty
Agreement-Domestic if such Material Subsidiary is a Domestic Subsidiary.
The Borrower will cause each such Material Subsidiary to deliver such
Guaranty Agreement to the Agent.
(b) If any Subsidiary which was not determined to be a Material
Subsidiary on the Effective Date, but upon its creation or acquisition
becomes a Material Subsidiary, the Borrower will promptly give the Agent
notice of such event and will cause such Material Subsidiary to execute
and deliver to the Agent a Guaranty Agreement-Foreign (if such Material
Subsidiary is a Foreign Subsidiary and qualifies as a Foreign Guarantor)
or a Guaranty Supplement in substantially the form of Exhibit A to the
Guaranty Agreement-Domestic (if such Material Subsidiary is a Domestic
Subsidiary), unless the Required Lenders determine that such Material
Subsidiary is not to be a Guarantor.
(c) Contemporaneously with the delivery by any Material Subsidiary
of a Guaranty Agreement pursuant to paragraph (a) or (b) of this Section
6.12, such Material Subsidiary will execute and deliver to the Agent (i) a
Pledge and Security Agreement if such Material Subsidiary is a Foreign
Subsidiary, (ii) a Security Agreement Supplement and substantially the
form of Exhibit G to the Pledge and Security Agreement if such Material
Subsidiary is a Domestic Subsidiary, and (iii) uniform commercial code or
other applicable financing statements or documents with respect to
security interest granted by the document executed in connection with
clause (i) or (ii) of this Section 6.12(c), as applicable.
33
Section 6.13 Continuity of Operations. Subject to Sections 7.3 and 7.6,
the Borrower will continue to conduct, and will cause each of the Guarantors to
continue to conduct, its primary businesses as conducted as of the Effective
Date and to continue its operations in such businesses.
Section 6.14 Intercompany Notes.
(a) All loans and other advances made by the Borrower or any of its
Subsidiaries to the Borrower or any of the Borrower's other Subsidiaries
shall be evidenced by an Intercompany Note.
(b) Each Intercompany Note shall be subordinated to the Notes on
terms and conditions reasonably satisfactory to the Required Lenders.
(c) No Intercompany Note shall be renewed, extended, amended,
restated, replaced, or otherwise modified without the Required Lenders'
prior written consent.
Section 6.15 Additional Appraisals. The Borrower shall promptly pay, upon
demnd, the costs and expenses associated with any appraisal on machinery,
equipment, real property and other fixed assets of Borrower and its
Subsidiaries, which appraisals may be required by the Agent in its sole
discretion no more frequently than once during each Fiscal Year.
ARTICLE VII
Negative Covenants
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Lender has any commitment to lend hereunder,
the Borrower will observe the following negative covenants:
Section 7.1 Debt. The Borrower will not incur, create, assume, or permit
to exist, and will not permit any Subsidiary to incur, create, assume, or permit
to exist, any Debt, except:
(a) Debt and Contingent Liabilities pursuant to the Loan Documents;
(b) Existing Debt and Contingent Liabilities described on Schedule
7.1 hereto;
(c) Extensions, renewals, refundings, amendments or replacements of
Debt permitted by clauses (a) and (b) above or clause (d) below provided
that no such extension, renewal, refunding or replacement shall (i) if
such Debt is Subordinated Debt, amend or modify any subordination
provisions, if any, contained in the original Debt so that the Debt, as
extended, renewed or replaced, is no longer Subordinated
34
Debt, (ii) shorten the fixed maturity of the Debt being refinanced, (iii)
increase the principal amount of the Debt being financed by an amount
greater than the lesser of (A) reasonable fees and expenses incurred in
connection with such refinancing and (B) an amount equal to five percent
(5.00%) of the principal amount of the Debt being refinanced, or (iv)
increase the rate of interest to a rate greater than the current market
rate at the time of the extension, renewal, refunding or replacement of
the original Debt;
(d) Subordinated Debt so long as the Borrower has delivered a
Compliance Certificate concurrently with the issuance thereof
demonstrating pro forma compliance with Sections 8.1, 8.2 and 8.3 of this
Agreement;
(e) Additional purchase money Debt and Capital Lease Obligations in
an aggregate principal amount not to exceed $1,000,000 at any time
outstanding;
(f) Debt of the Borrower to a Guarantor or of a Guarantor to the
Borrower, so long as such Debt is evidenced by an Intercompany Note and
does not exceed the Revolving Credit Commitments (as defined in the Senior
Credit Agreement), in the aggregate, outstanding at any time;
(g) Debt of the Borrower to a Subsidiary which is not a Guarantor or
of a Subsidiary to another Subsidiary which is not a Guarantor so long as
such Debt is evidenced by an Intercompany Note and does not exceed
$2,000,000, in the aggregate, outstanding at any time;
(h) Obligations of the Borrower or any Subsidiary under real estate
leases entered into in the ordinary course of business;
(i) Contingent Obligations under any guaranty by the Borrower or any
Subsidiary of obligations as lessee under any lease which is otherwise
permitted under this Agreement;
(j) Debt constituting deposits to secure the performance of bids,
trade contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds and performance bonds and other
obligations of a like nature that are incurred in the ordinary course of
business, not to exceed $2,000,000 in the aggregate at any time
outstanding;
(k) indemnities arising under agreements entered into by the
Borrower or any Subsidiary in the ordinary course of business;
(l) Debt arising on account of deferred Taxes, deferred workers
compensation liabilities or deferred employee medical liabilities; and
35
(m) Additional Debt other than described in Sections 7.1(a)
through 7.1(l) in an aggregate principal amount not to exceed
$2,500,000 at any time outstanding.
Section 7.2 Limitation on Liens. The Borrower will not incur, create,
assume, or permit to exist, and will not permit any Subsidiary to incur, create,
assume, or permit to exist, any Lien upon any of their respective properties,
assets, or revenues, whether now owned or hereafter acquired, except the
following (herein referred to as "Permitted Liens"):
(a) Liens disclosed on Schedule 7.2 hereto;
(b) Liens in favor of the Agent for the benefit of the
Lenders;
(c) Encumbrances consisting of minor easements, zoning
restrictions, or other restrictions on the use of property that do
not (individually or in the aggregate) materially affect the value
of the assets encumbered thereby or materially impair the ability of
the Borrower or its Subsidiaries to use such assets in their
respective businesses;
(d) Liens for taxes, assessments, or other governmental
charges which are not delinquent for longer than ninety (90) days or
which are being contested in good faith and for which adequate
reserves have been established;
(e) Liens of landlords, tenants, vendors, mechanics,
materialmen, warehousemen, carriers, or other similar statutory
Liens securing obligations that are not delinquent for longer than
ninety (90) days and are incurred in the ordinary course of business
or which are being contested in good faith and for which adequate
reserves have been established;
(f) Liens resulting from good faith deposits to secure
payments of workmen's compensation or other social security programs
or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, or contracts (other than for payment
of Debt), or leases made in the ordinary course of business;
(g) Liens incurred in connection with Debt permitted under
Section 7.1(e), so long as such Liens only extend to the assets
being acquired with the proceeds of such Debt;
(h) Liens incurred in connection with the Senior Debt;
(i) Inchoate Liens arising under ERISA;
(j) Rights of set-off or banker's liens created by law in
favor of commercial banks;
(k) Liens to be discharged and released on the Effective Date;
36
(l) precautionary UCC filings regarding operating leases
entered into in the ordinary course of business; and
(m) Liens securing Debt permitted by Section 7.1(d), so long
as (i) the Agent has, in its reasonable credit judgment, consented
to the granting of any such Lien, and (ii) the aggregate principal
amount of the Debt secured by all such Liens shall not, at any time,
exceed $20,000,000.
Section 7.3 Mergers, Dissolutions, Etc. The Borrower will not, and will
not permit any Subsidiary to, be a party to any merger or consolidation, or
purchase or otherwise acquire all or substantially all of the assets or any
stock of any class of, or any partnership or joint venture interest in, any
other Person, or sell, transfer, convey or lease all or any substantial part of
its assets, or sell or assign with or without recourse any receivables, except
for the following:
(a) any other such merger or consolidation, sale, transfer,
conveyance, lease or assignment of or by any Subsidiary of the
Borrower into the Borrower or into, with or to any other Subsidiary
of the Borrower; provided that (i) if such event involves the
Borrower, the Borrower shall be the surviving corporation, (ii) if
such event involves a Guarantor, a Guarantor shall be the surviving
corporation and (iii) no Default or Event of Default shall exist at
such time;
(b) any such purchase or other acquisition by the Borrower of
the assets or stock of any Guarantor or any Subsidiary of the
Borrower, or by any Guarantor or any Subsidiary of the Borrower of
the assets or stock of any Subsidiary of the Borrower;
(c) any such merger or consolidation of the Borrower or a
Subsidiary of the Borrower into, with or to any other Person or any
such purchase or other acquisition by the Borrower or any Subsidiary
of the Borrower of the assets or stock of any other Person where (i)
immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and
be continuing; (ii) the Borrower and its Subsidiaries, taken as a
whole, are in pro forma compliance with all the terms and conditions
of this Agreement, including without limitation the financial
covenants set forth in Article VIII taking into account such
purchase or acquisition; (iii) such Person (or its board of
directors or similar body) has approved such acquisition or other
purchase; and (iv) if, after giving effect to such purchase or other
acquisition, the Leverage Ratio is greater than 2.50 to 1.00 (based
on the most recent financial statements in Agent's possession), then
for such transactions under this clause (iv) (A) the aggregate
consideration to be paid or Funded Debt incurred (or assumed) by the
Borrower and its Subsidiaries in connection with any single purchase
or acquisition is not greater than $15,000,000 and (B) taking into
account and including all such transactions since the Effective
Date, the aggregate consideration to be paid or Funded Debt incurred
(or assumed) by the Borrower and its Subsidiaries in connection with
all such purchases or acquisitions is not greater than $50,000,000;
37
(d) investments in joint ventures, partnerships and other
entities not exceeding in the aggregate $2,000,000; and
(e) transactions permitted under Section 7.6.
Section 7.4 Loans and Investments. The Borrower will not make, and will
not permit any Subsidiary to make, any advance, loan, extension of credit, or
capital contribution to or investment in, or purchase, or permit any Subsidiary
to purchase, any stock, bonds, notes, debentures or other securities of, any
Person, except:
(a) advances or loans to, or investments in, Subsidiaries
(other than the Borrower and the Guarantors), so long as such
advances, loans, or investments made after the Effective Date do not
exceed, in the aggregate, $500,000;
(b) any bonds or other obligations of the United States of
America which, as to principal and interest, constitute direct
obligations or are guaranteed by the United States of America;
(c) any bonds, debentures, participation certificates, notes
or other obligations of any agency or corporation or instrumentality
of the United States of America, the obligations of which are
unconditionally guaranteed by the United States of America;
(d) interest bearing accounts, interest bearing deposits,
Eurodollar investments, or certificates of deposit issued by or
bankers acceptances drawn or accepted by, banks or trust companies,
including the Agent, organized under the laws of the United States
or any state thereof, but only with institutions whose capital and
surplus is in excess of $500,000,000;
(e) investments described in Section 7.3(d); and
(f) advances or loans to any employee of the Borrower or any
Subsidiary (i) in the ordinary course of business consistent with
past practices for travel and entertainment expenses, relocation
costs and similar purposes of up to $100,000 for any employee and up
to $200,000 in the aggregate at any one time outstanding, and (ii)
to finance the exercise of stock options up to $100,000 for any
employee and up to $300,000 in the aggregate at any one time
outstanding.
Section 7.5 Transactions With Affiliates. Except as disclosed on Schedule
10.5, the Borrower will not enter into, and will not permit any Subsidiary to
enter into, any transaction, including, without limitation, the purchase, sale,
or exchange of property or the rendering of any service, with any Affiliate of
the Borrower or any Subsidiary, except in the ordinary course of and pursuant to
the reasonable requirements of the Borrower's or such Subsidiary 's business and
upon fair and reasonable terms no less favorable to the Borrower or such
Subsidiary than would be obtained in a comparable arm's-length transaction with
a Person not an Affiliate of the
38
Borrower or such Subsidiary; provided that the foregoing shall not prohibit the
Borrower or the Subsidiaries from entering into management contracts with
Affiliates upon fair and reasonable terms in the ordinary course of business or
from entering into transactions permitted by this Agreement.
Section 7.6 Disposition of Assets. Subject to Sections 6.2, 6.3 and 7.3,
the Borrower will not sell, lease, assign, transfer, or otherwise dispose of any
of its assets, nor permit any Subsidiary to do so with any of its assets, except
(a) dispositions of inventory in the ordinary course of business, (b) transfers
of condemned property to the Governmental Authority that has condemned such
property, (c) transfers of property that have been subject to casualty, (d)
licenses or sublicenses of software in the ordinary course of business, and (e)
the disposition of certain real property and improvements located thereon,
located in (i) ▇▇▇▇ ▇▇▇▇▇▇ ▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, (ii) ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, (▇▇▇) ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇, and (iv) ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, and (f) without duplication of clauses (a) through
(e) above, dispositions of personal property of the Borrower and the
Subsidiaries made in the best business judgment of the Borrower, if (i) no Event
of Default has occurred and is continuing, (ii) no Event of Default would arise
as a result of any such disposition, and (iii) the aggregate book value of all
such assets disposed of in reliance on this Section 7.6(e) shall not exceed in
any Fiscal Year 5% of the Borrower's Consolidated Net Worth, and (iv) the
Borrower shall have delivered to the Agent (a) a summary of (x) the terms of the
proposed disposition, including without limitation, a description of the
Property to be sold, the current book value of such Property by class, and the
consideration received for such Property, (y) the effect of such disposition on
the Borrower's trailing twelve-month financial performance, and (z) changes to
the appraised value of the assets of the Borrower and its Subsidiaries; and (b)
to the extent such disposition consists of a sale of a Subsidiary (or a division
of any Subsidiary), consolidating, company-prepared financial statements of
Borrower and its Subsidiaries (both including and excluding the Subsidiary or
division that is to be sold) for the latest Fiscal Year end and for the
year-to-date, which financial statements shall include, without limitation,
balance sheets, statements of income and retained earnings and of cash flows,
all of which shall be prepared in accordance with GAAP.
Section 7.7 Sale and Leaseback. Other than a sale/leaseback arrangement
with respect to all of the Borrower's and its Subsidiaries' motor vehicles, the
Borrower will not enter into, and will not permit any Subsidiary to enter into,
any arrangement or series of arrangements with any Person pursuant to which any
of them leases from such Person or group of Persons real or personal property
that has been or is to be sold or transferred, directly or indirectly, by any of
them to such Person, except that the Borrower and the Subsidiaries may enter
into such arrangements as long as the aggregate book value of the property sold
and which at any time remains subject to a lease does not exceed $1,000,000.
Section 7.8 Nature of Business. The Borrower will not, and will not permit
any Guarantor to, engage in any business other than the businesses in which they
are engaged as of the date hereof and other businesses reasonably related
thereto.
39
Section 7.9 Environmental Protection. If, as a result thereof, a Material
Adverse Effect could be reasonably be expected to result therefrom, the Borrower
will not, and will not permit any Subsidiary to, (a) use (or permit any tenant
to use) any of their respective properties or assets for the handling,
processing, storage, transportation, or disposal of any Hazardous Material
except in compliance with Environmental Law, (b) generate any Hazardous Material
except in compliance with Environmental Law, (c) conduct any activity that is
likely to cause a Release or threatened Release of any Hazardous Material, or
(d) otherwise conduct any activity or use any of their respective properties or
assets in any manner that is likely to violate in any material respect any
Environmental Law or create any Environmental Liabilities for which the Borrower
or any of its Subsidiaries would be responsible.
Section 7.10 Accounting. The Borrower will not, and will not permit any of
its Subsidiaries to, make any material change (a) in accounting treatment or
reporting practices, except as required or permitted by GAAP, or (b) in tax
reporting treatment, except as required or permitted by law.
Section 7.11 Changes to Subordinated Debt. The Borrower will not agree,
and will not permit any of its Subsidiaries to agree, to any change or amendment
to the terms of any agreement, document or instrument evidencing or executed in
connection with any Subordinated Debt if the effect of such change or amendment
is to: (a) increase the interest rate on such Subordinated Debt, (b) change the
dates upon which payments of principal or interest are due on such Subordinated
Debt other than to extend such dates, (c) change any default or event of default
or covenant other than to delete or make less restrictive any default or
covenant provision therein, or add any covenant with respect to such
Subordinated Debt, (d) change the redemption or prepayment provisions of such
Subordinated Debt other than to extend the dates therefor or to reduce the
premiums payable in connection therewith, (e) grant any security, collateral or
guaranty (or additional security, collateral or guaranty, as the case may be) to
secure payment of such Subordinated Debt, (f) change any of the terms of
subordination thereof, or (g) change or amend any other term if such change or
amendment would materially increase the obligations of the obligor or confer
additional material rights to the holder of such Subordinated Debt in a manner
adverse to the Borrower or the Lenders.
Section 7.12 Restrictions on Certain Subsidiaries. Notwithstanding any
other provision of the Agreement, the Borrower will not permit (a) any of T-3
Management LP, Inc., Cor-Val LP, Inc., Preferred Industries LP, Inc., or O&M
Equipment LP, Inc. to: (i) incur, create or assume any Debt, (ii) grant any
Liens on its assets, (iii) incur, create or assume any liabilities other than
liabilities arising by operation of law and the costs of maintaining its
corporate existence, or (iv) engage in any trade or business other than acting
as a limited partner in the limited partnership in which it currently acts as a
limited partner, (b) T-3 Investment Corporation IV, The ▇▇▇ Group, Inc.,
▇▇▇▇▇▇▇▇ Metal Forming, Inc., T-3 Investment Corporation V, T-3 Investment
Corporation VI, and T-3 Machine Tools, Inc. to: (i) incur, create or assume any
Debt, (ii) grant any Liens on its assets, (iii) incur, create or assume any
liabilities other than liabilities arising by operation of law or the costs of
maintaining its corporate
40
existence, and (c) T-3 Investment Corporation IV to engage in any trade or
business other than acting as a stockholder in T-3 Investment Corporation III.
Section 7.13 Restricted Payments. The Borrower will not, nor will it
permit any Subsidiary to, declare or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
or issue or sell any Equity Interests, except that (i) each Subsidiary may make
Restricted Payments to the Borrower or any Guarantor, ratably according to their
respective holdings of the type of Equity Interest in respect of which such
Restricted Payment is being made, and (ii) so long as no Default or Event of
Default shall have occurred and be continuing at the time of any action
described below or would result therefrom:
(a) the Borrower and each Subsidiary may declare and make
dividend payments or other distributions payable solely in the
common stock or other common Equity Interests of such Person;
(b) the Borrower may purchase, redeem or otherwise acquire
Equity Interests issued by it with the proceeds received from the
substantially concurrent issue of new shares of its common stock or
other common Equity Interests; and
(c) the Borrower may issue and sell shares of its common
stock.
ARTICLE VIII
Financial Covenants
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Lender has any commitment to lend hereunder,
the Borrower will observe and perform the following financial covenants:
Section 8.1 Consolidated Net Worth. The Borrower will at all times
maintain a Consolidated Net Worth in an amount which is not less than the sum of
(a) 90% of Consolidated Net Worth as of the Effective Date, plus (b) 50% of Net
Income during the period beginning on the Effective Date and ending on the date
on which such calculation is made, plus (c) 100% of the sum of the net proceeds
of any Equity Interests issued by the Borrower after the Effective Date, minus
(d) the amount of any write-downs of goodwill, to the extent such amounts are
deducted in calculating Net Income. Consolidated Net Worth shall be calculated
and tested quarterly as of the last day of each Fiscal Quarter.
Section 8.2 Fixed Charge Coverage Ratio. The Borrower and its Subsidiaries
will at all times maintain, on a consolidated basis, a Fixed Charge Coverage
Ratio of not less than 1.25 to 1.00. The Fixed Charge Coverage Ratio shall be
calculated and tested quarterly as of the last day of each Fiscal Quarter for
the Calculation Period ending on the last day of such Fiscal Quarter.
41
Section 8.3 Leverage Ratio. The Borrower and its Subsidiaries will
maintain at all times, on a consolidated basis, a Leverage Ratio of not greater
than (a) for Fiscal Quarters ending during the period commencing on the date
hereof and ending on June 30, 2006, 4.375 to 1.00, and (b) for the Fiscal
Quarter ending September 30, 2006 and for each Fiscal Quarter thereafter, 4.125
to 1.00. The Leverage Ratio shall be calculated and tested quarterly as of the
last day of each Fiscal Quarter for the Calculation Period ending on the last
day of such Fiscal Quarter.
Section 8.4 Senior Leverage Ratio. The Borrower and its Subsidiaries will
maintain at all times, on a consolidated basis, a Senior Leverage Ratio of not
greater than (a) for Fiscal Quarters ending during the period commencing on the
date hereof and ending on June 30, 2006, 3.50 to 1.00, and (b) for the Fiscal
Quarter ending September 30, 2006 and for each Fiscal Quarter thereafter, 3.25
to 1.00. The Senior Leverage Ratio shall be calculated and tested quarterly as
of the last day of each Fiscal Quarter for the Calculation Period ending on the
last day of such Fiscal Quarter.
Section 8.5 Capital Expenditures. The Borrower will not make, and will not
permit any of its Subsidiaries to make, Capital Expenditures during any Fiscal
Year which exceed, in the aggregate, twenty-five percent (25%) of EBITDA for the
Borrower and its Subsidiaries for the immediately preceding Fiscal Year.
ARTICLE IX
Default
Section 9.1 Events of Default. Each of the following shall be deemed an
"Event of Default":
(a) The Borrower shall fail to pay (I) any interest or
principal portion of the Obligations when due or (ii) any other
portion of the Obligations.
(b) Any representation or warranty made or deemed made by the
Borrower or any Obligated Party (or any of their respective
officers) in any Loan Document or in any certificate, report,
notice, or financial statement furnished at any time in connection
with this Agreement shall be false, misleading, or erroneous in any
material respect when made or deemed to have been made.
(c) The Borrower or any Obligated Party shall fail to perform,
observe, or comply with (i) any covenant, agreement, or term
contained in Sections 6.2, 6.3, 6.4, 6.7, 6.8, 6.9, 6.11, 6.13 and
6.14 of this Agreement and such failure shall continue for twenty
(20) days after the occurrence thereof, or (ii) any other covenant,
agreement, or term contained in this Agreement or in any other Loan
Document.
42
(d) The Borrower or any Obligated Party shall commence a
voluntary proceeding seeking liquidation, reorganization, or other
relief with respect to itself or its debts under any bankruptcy,
insolvency, or other similar law nor or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian, or other similar official of it or a substantial part of
its property or shall consent to any such relief or to the
appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it or shall
make a general assignment for the benefit of creditors or shall
generally fail to pay its debts as they become due or shall take any
corporate action to authorize any of the foregoing.
(e) An involuntary proceeding shall be commenced against the
Borrower or any Obligated Party seeking liquidation, reorganization,
or other relief with respect to it or its debts under any
bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian, or other similar official for its or a
substantial part of its property, and such involuntary proceeding
shall remain undismissed and unstayed for a period of 60 days.
(f) The Borrower or any Obligated Party shall fail to
discharge within a period of thirty (30) days after the commencement
thereof any attachment, sequestration, or similar proceeding or
proceedings involving an aggregate amount in excess of $2,250,000
against any of its assets or properties.
(g) A final judgment or judgments for the payment of money in
excess of $2,250,000 in the aggregate shall be rendered by a court
or courts against the Borrower, any of its Subsidiaries, or any
Obligated Party and the same shall not be discharged (or provision
shall not be made for such discharge), or a stay of execution
thereof shall not be procured, within thirty (30) days from the date
of entry thereof and the Borrower or the relevant Subsidiary or
Obligated Party shall not, within said period of 30 days, or such
longer period during which execution of the same shall have been
stayed, appealed therefrom and cause the execution thereof to be
stayed during such appeal.
(h) The Borrower, any Subsidiary, or any Obligated Party shall
be in default under any agreement, instrument or other document
evidencing or in any way related to any Debt (other than the
Obligations or the Senior Debt) in excess of $2,250,000, which
default permits any holder of such Debt to accelerate the maturity
of such Debt or require all or any portion of such Debt to be
prepaid prior to the stated maturity thereof, whether or not the
maturity of such Debt shall actually have been accelerated or such
prepayment shall actually have been demanded.
(i) The Senior Lenders or the agent for the Senior Lenders
shall have accelerated the maturity of the Senior Debt or required
all or any portion of such Debt be prepaid prior to the stated
maturity thereof.
43
(j) This Agreement or any other Loan Document shall cease to
be in full force and effect or shall be declared null and void or
the validity or enforceability thereof shall be contested or
challenged by the Borrower, any Subsidiary, any Obligated Party or
any of their respective shareholders, or the Borrower or any
Obligated Party shall deny that it has any further liability or
obligation under any of the Loan Documents, or any lien or security
interest created by the Loan Documents shall for any reason cease to
be a valid, first priority perfected security interest in and lien
upon any of the Collateral purported to be covered thereby.
(k) The Borrower, any of its Subsidiaries, or any Obligated
Party, or any of their properties, revenues, or assets, shall become
subject to an order of forfeiture, seizure, or divestiture and the
same shall not have been discharged within thirty (30) days from the
date of entry thereof.
(l) A Change of Control shall have occurred.
(m) Any of the following events shall occur or exist with
respect to the Borrower or any ERISA Affiliate: (i) any Prohibited
Transaction involving any Plan; (ii) any Reportable Event with
respect to any Plan; (iii) the filing under Section 4041 of ERISA of
a notice of intent to terminate any Plan or the termination of any
Plan; (iv) any event or circumstance that might constitute grounds
entitling the PBGC to institute proceedings under Section 4042 of
ERISA for the termination of, or for the appointment of a trustee to
administer, any Plan, or the institution by the PBGC of any such
proceedings; or (v) complete or partial withdrawal under Section
4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization, insolvency, or termination of any Multiemployer
Plan; and in each case above, such event or condition, together with
all other events or conditions, if any, have subjected or could in
the reasonable opinion of Required Banks subject the Borrower to any
tax, penalty, or other liability to a Plan, a Multiemployer Plan,
the PBGC, or otherwise (or any combination thereof) which in the
aggregate exceed or could reasonably be expected to exceed
$2,250,000.
(n) Any event or circumstance shall occur or exist that causes
a Material Adverse Effect.
Section 9.2 Remedies Upon Default. If any Event of Default shall occur and
be continuing, the Agent may (and if directed by Required Lenders, shall)
without notice terminate any commitment to lend hereunder and declare the
Obligations or any part thereof to be immediately due and payable, and the same
shall thereupon become immediately due and payable, without notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, protest, or other formalities of any
kind, all of which are hereby expressly waived by the Borrower; provided,
however, that upon the occurrence of an Event of Default under Section 9.1 (d)
or Section 9.1(e), any commitment of the lenders to lend hereunder shall
automatically terminate, and the Obligations shall become
44
immediately due and payable without notice, demand, presentment, notice of
dishonor, notice of acceleration, notice of intent to accelerate, notice of
intent to demand, protest, or other formalities of any kind, all of which are
hereby expressly waived by the Borrower. Except as otherwise expressly set forth
herein, if any Event of Default shall occur and be continuing, the Agent may
exercise all rights and remedies available to it in law or in equity, under the
Loan Documents, or otherwise.
Section 9.3 Performance by the Agent. If the Borrower shall fail to
perform any covenant or agreement contained in any of the Loan Documents, the
Agent may, at the direction of the Required Lenders, perform or attempt to
perform such covenant or agreement on behalf of the Borrower. In such event, the
Borrower shall, at the request of the Agent, promptly pay any amount expended by
the Agent or the Lenders in connection with such performance or attempted
performance to the Agent, together with interest thereon at the Default Rate
from and including the date of such expenditure to but excluding the date such
expenditure is paid in full. Notwithstanding the foregoing, it is expressly
agreed that neither the Agent nor any Lender shall have any liability or
responsibility for the performance of any obligation of the Borrower under this
Agreement or any other Loan Document except for Agent's gross negligence or
willful misconduct.
ARTICLE X
The Agent
Section 10.1 Appointment, Powers and Immunities. In order to expedite the
various transactions contemplated by this Agreement, the Lenders hereby
irrevocably appoint and authorize Agent to act as their agent hereunder and
under each of the other Loan Documents. The Agent consents to such appointment
and agrees to perform the duties of the Agent as specified herein. The Lenders
authorize and direct the Agent to take such action in their name and on their
behalf under the terms and provisions of the Loan Documents and to exercise such
rights and powers thereunder as are specifically delegated to or required of the
Agent for the Lenders, together with such rights and powers as are reasonably
incidental thereto. The Agent is hereby expressly authorized to act as the Agent
on behalf of the Lenders:
(a) To receive on behalf of each of the Lenders and the Agent
any payment of principal, interest, fees or other amounts paid
pursuant to this Agreement and the Notes, and to distribute to each
Lender and the Agent, or any or some of them its share of all
payments so received as provided in this Agreement;
(b) To receive all documents and items to be furnished under
the Loan Documents;
(c) To act as nominee for and on behalf of the Lenders and the
Agent in and under the Loan Documents.
45
(d) To arrange for the means whereby the funds of the Lenders
are to be made available to the Borrower;
(e) To distribute to the Lenders information, requests,
notices, payments, prepayments, documents and other items received
from the Borrower, the other Obligated Parties, and other Persons;
(f) To execute and deliver to the Borrower, the other
Obligated Parties, and other Persons, all requests, demands,
approvals, notices, and consents received from the Lenders;
(g) To the extent permitted by the Loan Documents, to exercise
on behalf of itself and each Lender all rights and remedies of
Lenders upon the occurrence of any Event of Default;
(h) To enter into the Intercreditor Agreement;
(i) To accept, execute, and deliver any security documents as
the secured party, including, without limitation all financing
statements; and
(j) To take such other actions as may be requested by Required
Lenders.
Neither the Agent nor any of its Affiliates, officers, directors,
employees, attorneys, or agents shall be liable for any action taken or omitted
to be taken by any of them hereunder or otherwise in connection with this
Agreement or any of the other Loan Documents except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
preceding sentence, the Agent (i) may treat the payee of any Note as the holder
thereof until the Agent receives an Assignment and Acceptance signed by such
payee; (ii) shall have no duties or responsibilities except those expressly set
forth in this Agreement and the other Loan Documents, and shall not by reason of
this Agreement or any other Loan Document be a trustee or fiduciary for any
Lender; (iii) shall not be required to initiate any litigation or collection
proceedings hereunder or under any other Loan Document except to the extent
requested by the Required Lenders; (iv) shall not be responsible to the Lenders
for any recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or any certificate or other document
referred to or provided for in, or received by any of them under, this Agreement
or any other Loan Document or for the value, validity, effectiveness,
enforceability, or sufficiency of this Agreement or any other Loan Document or
any other document referred to or provided for herein or therein or for any
failure by any Person to perform any of its obligations hereunder or thereunder;
(v) may consult with legal counsel (including counsel for the Borrower),
independent public accountants, and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants, or experts; and (vi)
shall incur no liability under or in respect of any Loan Document by acting upon
any notice, consent, certificate, or other instrument or writing believed by it
to be genuine and signed or sent by the
46
proper party or parties. As to any matters not expressly provided for by this
Agreement, the Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with instructions signed by the
Required Lenders, and such instructions of the Required Lenders and any action
taken or failure to act pursuant thereto shall be binding on all of the Lenders;
provided, however, that the Agent shall not be required to take any action which
exposes the Agent to personal liability or which is contrary to this Agreement
or any other Loan Document or applicable law.
Section 10.2 Rights of Agent as a Lender. With respect to its Commitment
hereunder, the portion of the Loans funded by it and the Note issued to it, the
Agent in its capacity as a Lender hereunder shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not acting as the Agent and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Agent in its individual capacity. The
Agent and its Affiliates may (without having to account therefor to any Lender)
accept deposits from, lend money to, act as trustee under indentures of, provide
merchant banking services to, and generally engage in any kind of business with
the Borrower, any of its Subsidiaries, any other Obligated Party, and any other
Person who may do business with or own securities of the Borrower, any
Subsidiary, or any other Obligated Party, all as if it were not acting as the
Agent and without any duty to account therefor to the Lenders.
Section 10.3 Sharing of Payments, Etc. If any Lender shall obtain any
payment of any principal of or interest on the Loans made by it under this
Agreement or payment of any other obligation under the Loan Documents then owed
by the Borrower or any other Obligated Party to such Lender, whether voluntary,
involuntary, through the exercise of any right of setoff, banker's lien,
counterclaim or similar right, or otherwise, in excess of its pro rata share,
such Lender shall promptly purchase from the other Lenders participations in
those portions of the Loans held by them hereunder in such amounts, and make
such other adjustments from time to time as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of the other
Lenders in accordance with its pro rata portion thereof. To such end, all of the
Lenders shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if all or any portion of such excess payment
is thereafter rescinded or must otherwise be restored. The Borrower agrees, to
the fullest extent it may effectively do so under applicable law, that any
Lender so purchasing a participation in those portions of the Loans made by the
other Lenders may exercise all rights of setoff, banker's lien, counterclaim, or
similar rights with respect to such participation as fully as if such Lender
were a direct holder of those portions of the Loans to the Borrower in the
amount of such participation. Nothing contained herein shall require any Lender
to exercise any such right or shall affect the right of any Lender to exercise,
and retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Borrower.
Section 10.4 Indemnification. THE LENDERS HEREBY AGREE TO INDEMNIFY THE
AGENT FROM AND HOLD THE AGENT HARMLESS AGAINST (TO THE EXTENT NOT REIMBURSED
UNDER SECTIONS 11.1 AND 11.2, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE
BORROWER UNDER SECTIONS 11.1 AND 11.2), RATABLY IN
47
ACCORDANCE WITH THEIR RESPECTIVE COMMITMENTS, ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES,
SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY
KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED
AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY THE AGENT UNDER OR IN
RESPECT OF ANY OF THE LOAN DOCUMENTS; PROVIDED, THAT NO LENDER SHALL BE LIABLE
FOR ANY PORTION OF THE FOREGOING TO THE EXTENT CAUSED BY THE AGENT'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, IT IS THE
EXPRESS INTENTION OF THE LENDERS THAT THE AGENT SHALL BE INDEMNIFIED HEREUNDER
FROM AND HELD HARMLESS AGAINST ALL OF SUCH LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES
(INCLUDING ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE
OF THE AGENT. WITHOUT LIMITING ANY OTHER PROVISION OF THIS SECTION, EACH LENDER
AGREES TO REIMBURSE THE AGENT PROMPTLY UPON DEMAND FOR ITS PRO RATA SHARE
(CALCULATED ON THE BASIS OF THE COMMITMENTS) OF ANY AND ALL OUT-OF-POCKET
EXPENSES (INCLUDING ATTORNEYS' FEES) INCURRED BY THE AGENT IN CONNECTION WITH
THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT OR
ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF,
OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THE LOAN
DOCUMENTS, TO THE EXTENT THAT THE AGENT IS NOT REIMBURSED FOR SUCH EXPENSES BY
THE BORROWER.
Section 10.5 Independent Credit Decisions. Each Lender agrees that it has
independently and without reliance on the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of the Borrower and the Obligated Parties and decision to enter
into this Agreement and that it will, independently and without reliance upon
the Agent or any other Lender, and based upon such documents and information as
it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the
other Loan Documents. The Agent shall not be required to keep itself informed as
to the performance or observance by the Borrower or any Obligated Party of this
Agreement or any other Loan Document or to inspect the properties or books of
the Borrower or any Obligated Party. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Agent hereunder or under the other Loan Documents, the Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
financial information concerning the affairs, financial condition or business of
the Borrower or any
48
Obligated Party (or any of their Affiliates) which may come into the possession
of the Agent or any of its Affiliates.
Section 10.6 Several Commitments. The commitments to lend and other
obligations of the Lenders under this Agreement are several. The default by the
Lender in renewing, rearranging and extending the Debt evidenced by the Existing
Note and funding the Additional Advance in accordance with its Commitment
hereunder shall not relieve the other Lenders of their obligations under this
Agreement. In the event of any default by any Lender in making its portion of
the Additional Advance, each nondefaulting Lender shall be obligated to make its
portion of the Additional Advance but shall not be obligated to advance the
amount which the defaulting Lender was required to advance hereunder. In no
event shall any Lender be required to advance an amount or amounts which shall
in the aggregate exceed such Lender's Commitment, as applicable. No Lender shall
be responsible for any act or omission of any other Lender.
Section 10.7 Successor Agent. Subject to the appointment and acceptance of
a successor Agent as provided below, the Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower and the Agent may be removed at
any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders (with the consent of the Borrower,
with consent will not be unreasonably withheld) will have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders and shall have accepted such appointment within thirty (30)
days after the retiring Agent's giving notice of resignation or the Required
Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent, which shall be a commercial bank
organized under the laws of the United States of America or any State thereof
and having combined capital and surplus of at least $500,000,000.00. Upon the
acceptance of its appointment as successor Agent, such successor Agent shall
thereupon succeed to and become vested with all rights, powers, privileges,
immunities, and duties of the resigning or removed Agent, and the resigning or
removed Agent shall be discharged from its duties and obligations under this
Agreement and the other Loan Documents. After any Agent's resignation or removal
as Agent, the provisions of this Article X shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was the Agent.
ARTICLE XI
Miscellaneous
Section 11.1 Expenses. Borrower hereby agrees to pay on demand (a) all
reasonable costs and expenses of the Agent in connection with the preparation,
negotiation, execution, and delivery of this Agreement and the other Loan
Documents and any and all amendments, modifications, renewals, extensions, and
supplements thereof and thereto, including, without limitation, the reasonable
fees and expenses of legal counsel for the Agent and the Lenders, (b) all
reasonable costs and expenses of the Agent and the Lenders in connection with
any
49
Default and the enforcement of this Agreement or any other Loan Document,
including, without limitation, the reasonable fees and expenses of legal counsel
for the Agent and the Lenders, (c) all transfer, stamp, documentary, or other
similar taxes, assessments, or charges levied by any Governmental Authority in
respect of this Agreement or any of the other Loan Documents, (d) all costs,
expenses, assessments, and other charges incurred in connection with any filing,
registration, recording, or perfection of any security interest or Lien
contemplated by this Agreement or any other Loan Document, and (e) all other
reasonable costs and expenses incurred by the Agent and the Lenders in
connection with this Agreement or any other Loan Document, including, without
limitation, all costs, expenses, and other charges incurred in connection with
obtaining audit, or appraisal in respect of the Collateral.
Section 11.2 Indemnification. THE BORROWER SHALL INDEMNIFY EACH OF THE
AGENT AND THE LENDERS AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS
AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENT,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) TO WHICH ANY OF
THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A)
THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR
ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY THE BORROWER OF ANY
REPRESENTATION, WARRANTY, COVENANT, CONTAINED IN ANY OF THE LOAN DOCUMENTS, (D)
THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY
HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF THE PROPERTIES
OR ASSETS OF THE BORROWER OR ANY SUBSIDIARY, OR (E) ANY INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED
INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, RELATING TO ANY OF THE
FOREGOING.
Section 11.3 Limitation of Liability. Neither the Agent or the Lenders nor
any Affiliate, officer, director, employee, attorney, or agent of the Agent or
the Lenders shall have any liability with respect to, and the Borrower hereby
waives, releases, and agrees not to ▇▇▇ any of them upon, any claim for any
special, indirect, incidental, or consequential damages suffered or incurred by
the Borrower in connection with, arising out of, or in any way related to, this
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Agreement or any of the other Loan Documents. The Borrower
hereby waives, releases, and agrees not to ▇▇▇ the Agent or the Lenders or any
of such Person's Affiliates, officers, directors, employees, attorneys, or
agents for punitive damages in respect of any claim in connection with, arising
out of, or in any way related to, this Agreement or any of the other Loan
Documents, or any of the transactions contemplated by this Agreement or any of
the other Loan Documents. Nothing contained in this Section shall affect the
rights of
50
the Borrower to collect actual damages awarded to them against any of the
Agents, the Lenders or any Affiliate of any of the foregoing Persons.
Section 11.4 No Duty. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by any of the Agent or the Lenders
shall have the right to act exclusively in the interest of such Persons and
shall have no duty of disclosure, duty of loyalty, duty of care, or other duty
or obligation of any type or nature whatsoever to the Borrower or any of the
Borrower's shareholders or any other Person.
Section 11.5 Lender Not Fiduciary. The relationship between the Borrower,
on one hand, and the Agent and the Lenders, on the other hand, is solely that of
debtor and creditor, and no such Person has any fiduciary or other special
relationship with the Borrower, and no term or condition of any of the Loan
Documents shall be construed so as to deem the relationship between the Borrower
and such Persons to be other than that of debtor and creditor.
Section 11.6 No Waiver; Cumulative Remedies. No failure on the part of any
of the Agent or the Lenders to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power, or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided for in this Agreement and the other
Loan Documents are cumulative and not exclusive of any rights and remedies
provided by law.
Section 11.7 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns. The Borrower may not assign or transfer any of its rights
or obligations hereunder without the prior written consent of the
Agent and all of the Lenders. Any Lender may sell participations to
one or more banks or other institutions in or to all or a portion of
its rights and obligations under this Agreement and the other Loan
Documents (including, without limitation, all or a portion of its
Commitment and its Percentage of outstanding principal of the
Loans); provided, however, that (i) such Lender's obligations under
this Agreement and the other Loan Documents (including, without
limitation, its Commitment and its Percentage of outstanding
principal of the Loans) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the Borrower for the performance
of such obligations, (iii) such Lender shall remain the holder of
its Note for all purposes of this Agreement, and (iv) the Borrower
shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement and the other Loan Documents. Participants have no rights
under the Loan Documents except as provided below. Subject to the
following, each Lender may obtain, on behalf of its participants,
the benefits of Section 2.14 with respect to all participations in
its part of the Obligations outstanding from time to time, so long
as Borrower is not obligated to pay any amount in excess of the
amount
51
that would be due to that Lender under Section 2.14 calculated as
though no participations have been made. No Lender may sell any
participating interest under which the participant has any rights to
approve any amendment, modification, or waiver of any Loan Document
except as to matters in Section 11.7(a), (b) and (c).
(b) The Borrower and each of the Lenders agree that any Lender
(the "Assigning Lender") may, with the Agent's consent (which
consent shall not be unreasonably withheld) and unless an Event of
Default has occurred, the Borrower's consent, which consent of the
Borrower shall not be unreasonably withheld or delayed, at any time
assign to one or more Eligible Assignees all, or a proportionate
part of all, of its rights and obligations under this Agreement and
the other Loan Documents (including, without limitation, its
Commitment and its Percentage of outstanding principal of the Loans)
(each an "Assignee"); provided, however, that (i) except in the case
of an assignment of all of a Lender's rights and obligations under
this Agreement and the other Loan Documents, the amount of the
Commitment and the amount of outstanding principal of the Loans of
the Assigning Lender being assigned pursuant to each assignment
(determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than
$5,000,000, and (ii) the parties to each such assignment shall
execute and deliver to the Agent for its acceptance and recording in
the Register (as defined below), an Assignment and Acceptance,
together with the Note subject to such assignment, and a processing
and recordation fee of $5,000 to be paid by the Assignee. Upon such
execution, delivery, acceptance, and recording, from and after the
effective date specified in each Assignment and Acceptance, which
effective date shall be at least five Business Days after the
execution thereof, or, if so specified in such Assignment and
Acceptance, the date of acceptance thereof by the Agent, (x) the
assignee thereunder shall be a party hereto as a "Lender" and, to
the extent that rights and obligations hereunder have been assigned
to it pursuant to such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder and under the Loan Documents
and (y) the Lender that is an assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement and the
other Loan Documents (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of a Lender's
rights and obligations under the Loan Documents, such Lender shall
cease to be a party thereto); provided that the Obligations of the
Borrower under Sections 2.14, 11.1 and 11.2 shall continue to apply
to such Lender.
(c) By executing and delivering an Assignment and Acceptance,
the Lender that is an assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such Assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties, or representations made in or
in connection with the Loan Documents or the execution,
52
legality, validity, and enforceability, genuineness, sufficiency, or
value of the Loan Documents or any other instrument or document
furnished pursuant thereto; (ii) such Assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any Obligated
Party or the performance or observance by the Borrower or any
Obligated Party of its obligations under the Loan Documents; (iii)
such assignee confirms that it has received a copy of the other Loan
Documents, together with copies of the current financial statements
dated a date acceptable to such assignee and such other documents
and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon the
Agent or such assignor and based on such documents and information
as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement
and the other Loan Documents; (v) such assignee confirms that it is
an Eligible Assignee; (vi) such assignee appoints and authorizes the
Agent to take such action as agent on its behalf and exercise such
powers under the Loan Documents as are delegated to the Agent by the
terms thereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all of the obligations which
by the terms of the Loan Documents are required to be performed by
it as a Lender.
(d) The Agent shall maintain at its Principal Office a copy of
each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the
Lenders and the Commitment of and principal amount of the Loans
owing to, each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Agent and the
Lenders may treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes under the Loan Documents. The
Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable
prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an Assigning Lender and assignee representing that it is an
Eligible Assignee, together with any Note subject to such
assignment, the Agent shall, if such Assignment and Acceptance has
been completed and is in the form satisfactory to the Agent in its
sole discretion, (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register, and (iii)
give prompt written notice thereof to the Borrower. Within five (5)
Business Days after its receipt of such notice, the Borrower, at its
expense, shall execute and deliver to the Agent in exchange for the
surrendered Note, a new Note to the order of such Eligible Assignee
in an amount equal to the amount of outstanding principal of the
Loans assumed by it pursuant to such Assignment and Acceptance and,
if the Assigning Lender has retained a portion of its portion of the
Loans, a new Note to the order of the Assigning Lender in an
53
amount equal to the amount of outstanding principal of the Loans
retained by it hereunder (each such promissory note shall constitute
a "Note", as applicable, for purposes of the Loan Documents). Such
new Notes shall be in an aggregate principal amount of the
surrendered Notes, shall be dated the last interest payment date
prior to the effective date of such Assignment and Acceptance, and
shall otherwise be in substantially the form of the Notes initially
issued pursuant hereto with appropriate changes.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to
this Section, disclose to the assignee or participant or proposed
assignee or participant, any information relating to the Borrower or
its Subsidiaries furnished to such Lender by or on behalf of the
Borrower or its Subsidiaries.
Section 11.8 Survival. All representations and warranties made in this
Agreement or any other Loan Documents or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by any of the Agent or the Lenders or any closing shall affect the
representations and warranties or the right of any such Person to rely upon
them. Without prejudice to the survival of any other obligation of the Borrower
hereunder, the obligations of the Borrower under Sections 2.14, 11.1 and 11.2
shall survive repayment of the Notes and termination of the Lenders' commitments
to lend hereunder.
Section 11.9 ENTIRE AGREEMENT; AMENDMENTS. THIS AGREEMENT, THE NOTES AND
THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT
AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement or the Notes shall in any event be effective unless the same
shall be in writing and signed and delivered by the Borrower and the Required
Lenders, and then any such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No amendment, modification, waiver or consent shall change the Percentage
of any Lender without the consent of such Lender. No amendment, modification,
waiver or consent shall (a) extend or increase the amount of the Commitments,
(b) extend the date for payment of any principal of or interest on the Loans or
any fees or other amounts payable hereunder, (c) reduce the principal amount of
the Loans, the rate of interest thereof or any fees or other amounts payable
hereunder, (d) release a Guaranty Agreement or all or substantially all of the
Collateral, or (e) reduce the aggregate Percentage required to effect an
amendment, modification, waiver or consent without, in each case, the consent of
all Lenders. No provisions of Article X or other provision of this Agreement
54
affecting the Agent in its capacity as such shall be amended, modified or waived
without the consent of the Agent. If, in connection with any proposed amendment,
waiver or consent (a "Proposed Change"):
(i) requiring the consent of all Lenders, the consent of
Required Lenders is obtained, but the consent of other Lenders is
not obtained (any such Lender whose consent is not obtained as
described in this clause (I) and in clause (ii) below being referred
to as a "Non-Consenting Lender"), or
(ii) requiring the consent of Required Lenders, the consent of
Required Lenders is obtained,
then, so long as the Agent is not a Non-Consenting Lender, at the Borrower's
request, the Agent or an Eligible Assignee shall have the right (but not the
obligation) with the Agent's approval, to purchase from the Non-Consenting
Lenders' outstanding Percentage of the Loans for an amount equal to the
principal balances thereof and all accrued interest and fees with respect
thereto through the date of sale pursuant to Assignment and Acceptance(s),
without premium or discount.
Section 11.10 Maximum Interest Rate. No provision of this Agreement or any
other Loan Document shall require the payment or the collection of interest in
excess of the maximum amount permitted by applicable law. If any excess of
interest in such respect is hereby provided for, or shall be adjudicated to be
so provided, in any Loan Document or otherwise in connection with this loan
transaction, the provisions of this Section shall govern and prevail and neither
the Borrower nor the sureties, guarantors, successors, or assigns of the
Borrower shall be obligated to pay the excess amount of such interest or any
other excess sum paid for the use, forbearance, or detention of sums loaned
pursuant hereto. In the event any of the Agent or the Lenders ever receives,
collects, or applies as interest any such sum, such amount which would be in
excess of the maximum amount permitted by applicable law shall be applied as a
payment and reduction of the principal of the indebtedness evidenced by the
Notes; and, if the principal of the Notes has been paid in full, any remaining
excess shall forthwith be paid to the Borrower. In determining whether or not
the interest paid or payable exceeds the Maximum Rate, the Borrower and the
Agent and the Lenders shall, to the extent permitted by applicable law, (a)
characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (b) exclude voluntary prepayments and the effects thereof; and
(c) amortize, prorate, allocate, and spread in equal or unequal parts the total
amount of interest throughout the entire contemplated term of the indebtedness
evidenced by the Notes so that interest for the entire term does not exceed the
Maximum Rate.
Section 11.11 Notices. All notices and other communications provided for
in this Agreement and the other Loan Documents to which the Borrower is a party
shall be in writing and may be telecopied (faxed), mailed by certified mail
return receipt requested, or delivered to the intended recipient at the "Address
for Notices" specified below its name on the signature pages hereof; or, as to
any party at such other address as shall be designated by such party in a
55
notice to the other party given in accordance with this Section. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopy, subject to telephone
confirmation of receipt, or when personally delivered to, in the case of a
mailed notice, when duly deposited in the mails, in each case given or addressed
as aforesaid; provided, however, notices to the Agent pursuant to Article II
shall not be effective until received by the Agent.
Section 11.12 GOVERNING LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AGREEMENT
HAS BEEN ENTERED INTO IN ▇▇▇▇▇▇ COUNTY, TEXAS, AND IT SHALL BE PERFORMABLE FOR
ALL PURPOSES IN ▇▇▇▇▇▇ COUNTY, TEXAS. SUBJECT TO SECTION 11.19, ANY ACTION OR
PROCEEDING AGAINST THE BORROWER UNDER OR IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN ▇▇▇▇▇▇ COUNTY, TEXAS.
THE BORROWER HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE
VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY
SUCH COURT IS AN INCONVENIENT FORUM. THE BORROWER AGREES THAT SERVICE OF PROCESS
UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
AT ITS ADDRESS SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 11.11. NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT
THE RIGHT OF THE AGENT OR THE LENDERS TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR, SUBJECT TO SECTION 11.19, SHALL LIMIT THE RIGHT OF SUCH
PERSONS TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR WITH RESPECT
TO ANY OF ITS PROPERTY IN COURTS IN OTHER JURISDICTIONS. SUBJECT TO SECTION
11.19, ANY ACTION OR PROCEEDING BY THE BORROWER AGAINST ANY OF THE AGENT OR THE
LENDERS SHALL BE BROUGHT ONLY IN A COURT LOCATED IN ▇▇▇▇▇▇ COUNTY, TEXAS.
Section 11.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.14 Severability. Any provision of this Agreement by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 11.15 Headings. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
56
Section 11.16 Non-Application of Chapter 346 of Texas Finance Code. The
provisions of Chapter 346 of the Texas Finance Code are specifically declared by
the parties hereto not to be applicable to this Agreement or any of the other
Loan Documents or to the transactions contemplated hereby.
Section 11.17 Construction. The Borrower, the Agent and the Lenders
acknowledge that each of them has had the benefit of legal counsel of its own
choice and has been afforded an opportunity to review this Agreement and the
other Loan Documents with its legal counsel and that this Agreement and the
other Loan Documents shall be construed as if jointly drafted by the Borrower,
the Agent and the Lenders.
Section 11.18 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default if such action is taken or such condition
exists.
Section 11.19 WAIVER OF TRIAL BY JURY. TO THE FULLEST EXTENT PERMITTED, BY
APPLICABLE LAW, EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT
OR OTHERWISE) BETWEEN OR AMONG THE BORROWER AND ANY OTHER PARTY TO THIS
AGREEMENT ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENTS, OR ANY RELATIONSHIP BETWEEN ANY OTHER PARTY TO THIS AGREEMENT AND THE
BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANKS TO PROVIDE THE
FINANCING DESCRIBED IN THIS AGREEMENT.
Section 11.20 Amendment and Restatement; Release. This Agreement amends
and restates in its entirety the Existing Credit Agreement. The execution of
this Agreement and the other Loan Documents executed in connection herewith does
not extinguish the indebtedness outstanding in connection with the Existing
Credit Agreement nor does it constitute a novation with respect to such
indebtedness. THE BORROWER REPRESENTS AND WARRANTS THAT AS OF THE DATE HEREOF
THERE ARE NO CLAIMS OR OFFSETS AGAINST OR DEFENSES OR COUNTERCLAIMS TO ITS OR
ANY OBLIGATED PARTIES' OBLIGATIONS UNDER THE EXISTING CREDIT AGREEMENT OR THE
OTHER LOAN DOCUMENTS. TO INDUCE THE AGENT AND THE LENDERS TO ENTER INTO THIS
AGREEMENT, THE BORROWER AND, BY THE EXECUTION OF THE LOAN DOCUMENTS TO WHICH IT
IS A PARTY, EACH GUARANTOR WAIVES ANY AND ALL CLAIMS, OFFSETS, DEFENSES OR
COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE DATE HEREOF AND
HEREBY RELEASES THE AGENT, THE LENDERS AND THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND ATTORNEYS (COLLECTIVELY, THE
57
"RELEASED PARTIES") FROM ANY AND ALL OBLIGATIONS, INDEBTEDNESS, LIABILITY,
CLAIMS, RIGHTS, CAUSES OF ACTION OR DEMANDS WHATSOEVER, WHETHER KNOWN OR
UNKNOWN, SUSPECTED OR UNSUSPECTED WHICH THE BORROWER OR ANY GUARANTOR EVER HAD,
NOW HAS, CLAIMS TO HAVE OR MAY HAVE AGAINST ANY RELEASED PARTY ARISING PRIOR TO
THE DATE HEREOF OR FROM OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.
ARTICLE XII
Arbitration
Section 12.1 Arbitration. Upon the demand of any party, any Dispute shall
be resolved by binding arbitration (except as set forth in Section 12.5 below)
in accordance with the terms of this Agreement. A "Dispute" shall mean any
action, dispute, claim or controversy of any kind, whether in contract or tort,
statutory or common law, legal or equitable, now existing or hereafter arising
under or in connection with, or in any way pertaining to, any of the Loan
Documents, or any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related directly or
indirectly to any of the Loan Documents, including without limitation, any of
the foregoing arising in connection with the exercise of any self-help,
ancillary or other remedies pursuant to any of the Loan Documents. Any party may
by summary proceedings bring an action in court to compel arbitration of a
Dispute. Any party who fails or refuses to submit to arbitration following a
lawful demand by any other party shall bear all costs and expenses incurred by
such other party in compelling arbitration of any Dispute.
Section 12.2 Governing Rules. Arbitration proceedings shall be
administered by the American Arbitration Association ("AAA") or such other
administrator as the parties shall mutually agree upon in accordance with the
AAA Commercial Arbitration Rules. All Disputes submitted to arbitration shall be
resolved in accordance with the Federal Arbitration Act (Title 9 of the United
States Code), notwithstanding any conflicting choice of law provision in any of
the Loan Documents. The arbitration shall be conducted at a location in Texas
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. Section 91 or any similar applicable state law.
Section 12.3 No Waiver; Provisional Remedies, Self-Help and Foreclosure.
No provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain
58
provisional or ancillary remedies, including without limitation injunctive
relief, sequestration, attachment, garnishment or the appointment of a receiver,
from a court of competent jurisdiction before, after or during the pendency of
any arbitration or other proceeding. The exercise of any such remedy shall not
waive the right of any party to compel arbitration hereunder.
Section 12.4 Arbitrator Qualifications and Powers Awards. Arbitrators must
be active members of the State Bar of Texas with expertise in the substantive
laws applicable to the subject matter of the Dispute. Arbitrators are empowered
to resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the State of Texas, (ii) may grant any
remedy or relief that a court of the State of Texas could order or grant within
the scope hereof and such ancillary relief as is necessary to make effective any
award, and (iii) shall have the power to award recovery of all costs and fees,
to impose sanctions and to take such other actions as they deem necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Texas Rules of Civil Procedure or other applicable law. Any Dispute in which the
amount in controversy is $5,000,000 or less shall be decided by a single
arbitrator who shall not render an award of greater than $5,000,000 (including
damages, costs, fees and expenses). By submission to a single arbitrator, each
party expressly waives any right or claim to recover more than $5,000,000. Any
Dispute in which the amount in controversy exceeds $5,000,000 shall be decided
by majority vote of a panel of three arbitrators; provided however, that all
three arbitrators must actively participate in all hearings and deliberations.
Section 12.5 Judicial Review. Notwithstanding anything herein to the
contrary, in any arbitration in which the amount in controversy exceeds
$25,000,000, the arbitrators shall be required to make specific, written
findings of fact and conclusions of law. In such arbitrations (i) the
arbitrators shall not have the power to make any award which is not supported by
substantial evidence or which is based on legal error, (ii) an award shall not
be binding upon the parties unless the findings of fact are supported by
substantial evidence and the conclusions of law are not erroneous under the
substantive law of the State of Texas, and (iii) the parties shall have in
addition to the grounds referred to in the Federal Arbitration Act for vacating,
modifying or correcting an award the right to judicial review of (A) whether the
findings of fact rendered by the arbitrators are supported by substantial
evidence, and (B) whether the conclusions of law are erroneous under the
substantive law of the State of Texas. Judgment confirming an award in such a
proceeding may be entered only if a court determines the award is supported by
substantial evidence and not based on legal error under the substantive law of
the State of Texas.
Section 12.6 Miscellaneous. To the maximum extent practicable, the AAA,
the arbitrators and the parties shall take all action required to conclude any
arbitration proceedings within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulations, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provisions most
directly related to the Loan Documents or
59
the subject matter of the Dispute shall control. This arbitration provision
shall survive termination, amendment or expiration of any of the Loan Documents
or any relationship between the parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE TO FOLLOW]
60
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
BORROWER:
T-3 ENERGY SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Vice President
Address for Notices:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
AGENT AND LENDER:
▇▇▇▇▇ FARGO ENERGY CAPITAL, INC.
Commitment: By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Senior Vice President
$12,000,000 renewal, Address for Notices:
rearrangement and extension ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
$3,000,000 Additional Advance Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Signature page Amended and Restated Loan Agreement