AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF AUGUST 14, 2001
BETWEEN
THE PACIFIC LUMBER COMPANY
AND
BANK OF AMERICA, N.A.
TABLE OF CONTENTS
Section Page
ARTICLE I DEFINITIONS
1.01 Certain Defined Terms
1.02 Other Interpretive Provisions
1.03 Accounting Principles
ARTICLE II THE CREDITS
2.01 The Revolving Credit
(b) The Revolving Credit
(c) Reborrowing
(d) Obligations under the Prior Credit Agreement
2.02 Loan Accounts
2.03 Procedure for Borrowing
2.04 Conversion and Continuation Elections
2.05 Voluntary Termination or Reduction of Commitment
2.06 Optional Prepayments
2.07 Mandatory Prepayments of Loans
(a) Mandatory Prepayments, Cash Collateral
(c) Clean-up Period
(d) General
2.08 Scheduled Repayment
2.09 Interest
2.10 Fees
(a) Commitment Fee
(b) Arrangement Fee
2.11 Computation of Fees and Interest
2.12 Payments by the Company
2.13 Security
2.14 The Letter of Credit Subfacility
2.15 Issuance, Amendment and Renewal of Letters of Credit
2.16 Existing Letters of Credit; Drawings and Reimbursements
2.17 Role of the Bank
2.18 Obligations Absolute
2.19 Cash Collateral Pledge
2.20 Letter of Credit Fees
2.21 Uniform Customs and Practice
2.22 Extension of Commitments
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes
3.02 Illegality
3.03 Increased Costs and Reduction of Return
3.04 Funding Losses
3.05 Inability to Determine Rates
3.06 Reserves on Offshore Rate Loans
3.07 Survival
ARTICLE IV CONDITIONS PRECEDENT
4.01 Conditions of Initial Loans
(a) Credit Agreement
(b) Company Security Agreement
(c) Evidence of Filings
(d) Resolutions; Incumbency
(e) Legal Opinion
(f) Payment of Fees
(g) Certificate
4.02 Conditions to All Loans and Letters of Credit
(a) Notice of Borrowing or Conversion/Continuation;
Letter of Credit Application
(b) Continuation of Representations and Warranties
(c) No Existing Default
(d) No Future Advance Notice
(e) Other Documents
ARTICLE V REPRESENTATIONS AND WARRANTIES
5.01 Corporate Existence and Power
5.02 Corporate Authorization; No Contravention
5.03 Governmental Authorization
5.04 Binding Effect
5.05 Litigation
5.06 No Default
5.07 ERISA Compliance
5.08 Use of Proceeds; Margin Regulations
5.09 Title to Properties
5.10 Taxes
5.11 Financial Condition
5.12 Environmental Matters
5.13 Collateral Documents
5.14 Regulated Entities
5.15 No Burdensome Restrictions
5.16 Subsidiaries
5.17 Insurance
5.18 Solvency
5.19 Swap Obligations
5.20 Full Disclosure
5.21 Labor Relations
5.22 Compliance with Laws
5.23 Merchantable Inventory
5.24 Location of the Company
ARTICLE VI AFFIRMATIVE COVENANTS
6.01 Financial Statements
6.02 Certificates; Other Information
6.03 Notices
6.04 Preservation of Corporate Existence, Etc.
6.05 Maintenance of Property
6.06 Insurance
6.07 Payment of Obligations
6.08 Compliance with Laws
6.09 Compliance with ERISA
6.10 Inspection of Property and Books and Records
6.11 Environmental Laws
6.12 Use of Proceeds
6.13 Solvency
6.14 Protection of Collateral; Access
6.15 Further Assurances
ARTICLE VII NEGATIVE COVENANTS
7.01 Limitation on Liens
7.02 Disposition of Assets
7.03 Consolidations and Mergers
7.04 Loans and Investments
7.05 Limitation on Indebtedness
7.06 Transactions with Affiliates
7.07 Use of Proceeds
7.08 Contingent Obligations
7.09 Joint Ventures
7.10 ERISA
7.11 Lease Obligations
7.12 Restricted Payments
7.13 Change in Business
7.14 Accounting Changes
7.15 Other Contracts
7.16 Minimum Net Worth
ARTICLE VIII EVENTS OF DEFAULT
8.01 Event of Default
(a) Non-Payment
(b) Representation or Warranty
(c) Other Defaults
(d) Cross-Default
(e) Insolvency; Voluntary Proceedings
(f) Involuntary Proceedings
(g) ERISA
(h) Monetary Judgments
(i) Non-Monetary Judgments
(j) Change in Control
(k) Collateral
(m) Regulatory Action
8.02 Remedies
8.03 Specified Swap Contract Remedies
8.04 Rights Not Exclusive
8.05 Certain Financial Covenant Defaults
ARTICLE IX MISCELLANEOUS
9.01 Amendments and Waivers
9.02 Notices
9.03 No Waiver; Cumulative Remedies
9.04 Costs and Expenses
9.05 Company Indemnification
9.06 Marshalling; Payments Set Aside
9.07 Successors and Assigns
9.08 Assignments, Participations, etc.
9.09 Confidentiality
9.10 Set-off
9.11 Counterparts
9.12 Severability; Conflicting Provisions
(a) Severability
(b) Conflicting Provisions
9.13 No Third Parties Benefited
9.14 Governing Law and Jurisdiction
9.15 Verification of Receivables
9.16 Termination of Commitment to Lend under the Prior
Credit Agreement
SCHEDULES
Schedule 5.05 Litigation
Schedule 5.07 ERISA
Schedule 5.12 Environmental Matters
Schedule 5.16 Subsidiaries and Minority Interests
Schedule 7.01 Permitted Liens
Schedule 7.05 Permitted Indebtedness
Schedule 7.08 Contingent Obligations
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of August
14, 2001 between The Pacific Lumber Company (the "Company") and Bank of America,
N.A. (the "Bank").
WHEREAS, the Company and the Bank entered into an Amended and Restated
Credit Agreement dated as of November 10, 1995 (as amended by the First
Amendment thereto dated as of February 10, 1997 and the Second Amendment thereto
dated as of October 2, 1997, and as amended and restated by the Amended and
Restated Credit Agreement dated as of December 18, 1998, as amended by the First
Amendment thereto dated as of January 31, 2000) the "Prior Credit Agreement");
WHEREAS, the Bank and the Company wish to further amend the Credit
Agreement by providing, among other matters, for a $50,000,000 credit facility;
NOW, THEREFORE, the Company and the Bank agree that the Prior Credit
Agreement is hereby amended and restated in its entirety as set forth in this
Agreement and the Company and the Bank agree as follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the following
meanings:
"Acceptable Inventory" means inventory (as defined in the UCC) which:
(a) Is owned by the Company free and clear of all security
interests, liens, encumbrances, and rights of others, except the security
interest in favor of the Bank;
(b) Is located at permanent locations acceptable to the Bank and is
not covered by a negotiable document of title unless such document has been
delivered to the Bank;
(c) In the Bank's reasonable opinion, is not obsolete, unsalable,
damaged, or unfit for further processing;
(d) Is not placed by the Company on consignment;
(e) Consists of wood chips, lumber, or log inventory or, if the Bank
approves in writing in advance in its sole discretion, consists of gravel or
block inventory and, in any case, is of a type held for sale in the Company's
ordinary course of business; and
(f) Is otherwise acceptable to the Bank in the exercise of its
reasonable judgment.
The value of Acceptable Inventory shall be the lesser of the Company's cost
(determined under GAAP) or the Bank's independent determination of the resale
value of such inventory in such quantities and on such terms as the Bank may
reasonably deem appropriate. Until further written notice from the Bank to the
Company, the Bank agrees that the value (y) of the lumber component of
Acceptable Inventory shall be determined by the resale value of such inventory
in such quantities and on such terms as the Bank may reasonably deem appropriate
and (z) of the log component of such Acceptable Inventory shall be determined by
the Company's cost (determined under GAAP) of such inventory.
"Acceptable Receivable" means an Account:
(g) Arising from the sale of inventory or power produced by the
Company's cogeneration plant in Scotia, California, by the Company in its
ordinary course of business; and if arising from the sale of inventory, is in an
amount equal to or less than $2,000,000. The Bank may, from time to time, exempt
specific Accounts from this $2,000,000 limit;
(h) Upon which the Company's right to receive payment is absolute
and not contingent upon the fulfillment of any condition whatever;
(i) Against which is asserted no defense, counterclaim or setoff,
whether well-founded or otherwise;
(j) That is a true and correct statement of a bona fide indebtedness
incurred in the amount of the Account for merchandise sold and accepted by the
Receivable Debtor obligated upon such Account;
(k) With respect to which an invoice has been sent;
(l) That is owned by the Company and not subject to any right,
claim, or interest of another other than the security interest in favor of the
Bank;
(m) That does not arise from a sale to an employee, Affiliate,
parent, or Subsidiary of the Company, or an entity which has common officers or
directors with the Company; except that up to 20% of the total balance of
Acceptable Receivables may include Accounts on which the Receivable Debtor is
▇▇▇▇▇ Lumber Co., Inc.;
(n) That is not the obligation of a Receivable Debtor that is the
federal government or a political subdivision thereof unless the Bank has agreed
to the contrary in writing and the Company has complied with the Federal
Assignment of Claims Act of 1940 with respect to such obligation;
(o) That is not the obligation of a Receivable Debtor that is any
state of the United States or any city, town, municipality or division thereof;
except for Accounts up to an aggregate outstanding amount at any one time of
$100,000 which arise in one of the following ways:
(1) The sale of power produced by the Company's cogeneration
plant in Scotia, California; or
(2) The sale of lumber to cities and towns;
(p) That is not the obligation of a Receivable Debtor located in a
foreign country;
(q) That is not the obligation of a Receivable Debtor to whom the
Company is or may become liable for goods sold or services rendered by the
Receivable Debtor to the Company except to the extent that it exceeds the amount
of the Company's obligation to such Receivable Debtor;
(r) That does not arise with respect to goods which are delivered on
a cash-on-delivery basis or placed on consignment, guaranteed sale or other
terms by reason of which the payment by the Receivable Debtor may be
conditional;
(s) That is not in default. An Account shall be deemed in default
upon the occurrence of any of the following:
(1) The Account is not paid within the 60 day period starting on
its invoice date. This 60 day limitation shall not apply to an
Account which is not paid within such period because payment is
subject to the Company's "winter terms" previously approved by the
Bank;
(2) Any Receivable Debtor obligated upon such Account suspends
business, makes a general assignment for the benefit of creditors,
or fails to pay its debts generally as they come due; or
(3) Any petition is filed by or against any Receivable Debtor
obligated upon such Account under any bankruptcy law or any other
law or laws for the relief of debtors;
(t) That does not arise from the sale or lease of goods which remain
in the Company's possession or under the Company's control; and
(u) That is otherwise acceptable to Bank.
"Account" means any right to the payment of money owned by the Company and
arising out of the sale of goods or the rendering of services by the Company
which is not evidenced by an instrument or chattel paper.
"Acquisition" means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than a Person
that is a Restricted Subsidiary) provided that the Company or the Restricted
Subsidiary is the surviving entity.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract or otherwise. Except
with respect to the Bank or any Affiliate (defined without regard to this
sentence) of the Bank, any director, executive officer or beneficial owner of
10% or more of the equity of a Person shall for the purposes of this Agreement,
be deemed to control the other Person.
"Agreement" means this Credit Agreement.
"Applicable Margin" means 2.75% with respect to Offshore Rate Loans and 1.75%
with respect to Base Rate Loans.
"Assignee" has the meaning specified in subsection 9.08(a).
"Attorney Costs" means and includes all fees and disbursements of any law firm
or other external counsel, the allocated cost of internal legal services and all
disbursements of internal counsel.
"Bank" means Bank of America, N.A.. Unless the context otherwise clearly
requires, (a) "Bank" includes Bank of America, N.A. in its capacity as Swap
Provider, and (b) references to Bank of America, N.A. as a "Bank" shall also
include any of such institution's Affiliates that may at any time of
determination be Swap Providers.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Sections 101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.625% per annum above the
latest Federal Funds Rate; and (b) the rate of interest in effect for such day
as publicly announced from time to time by the Bank in San Francisco,
California, as its "reference rate." (The "reference rate" is a rate set by the
Bank based upon various factors including the Bank's costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate.) Any change in the reference rate announced by the Bank shall take effect
at the opening of business on the day specified in the public announcement of
such change.
"Base Rate Loan" means a Loan that bears interest based on the Base Rate.
"Borrowing Base" means:
(a) the sum of:
(1) 80% of the balance due on Acceptable Receivables; plus
(2) 60% of the value of Acceptable Inventory;
minus
(b) the aggregate of the Company's open payables for contracted
logging and hauling;
in each case as of the time of computation.
"Borrowing Base Certificate" means a certificate, in form and detail acceptable
to the Bank, from the Company and signed by a Responsible Officer of the
Company, setting forth the computations which form the basis for the Borrowing
Base contained in the certificate.
"Borrowing Date" means any date on which a Loan is disbursed.
"▇▇▇▇▇ Lumber Agreement" means the agreement dated as of March 23, 1993, among
the Company and ▇▇▇▇▇ Lumber Co., Inc.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in San Francisco, California are authorized or
required by law to close and, if the applicable Business Day relates to any
Offshore Rate Loan, means such a day on which dealings are carried on in the
applicable offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or directive of any
central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital Lease" has the meaning specified in the definition of Capital Lease
Obligations.
"Capital Lease Obligations" means all monetary obligations of the Company or any
of its Subsidiaries under any leasing or similar arrangement which, in
accordance with GAAP, is classified as a capital lease ("Capital Lease").
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of equity
interests in (however designated) such Person, including any Preferred Stock of
such Person but excluding any Redeemable Stock of such Person.
"Cash Equivalents" means at any time (i) any evidence of any obligation issued
or directly and fully guaranteed or insured by the United States or any agency
or instrumentality thereof (provided, that the full faith and credit of the
United States is pledged in support thereof); (ii) demand or time deposits with,
and certificates of deposit or acceptances issued by, any bank or trust company
organized under the laws of the United States or any State thereof (including
the Bank) whose unsecured, unguaranteed long-term debt obligations are rated "A"
by Standard & Poor's Corporation ("S&P") and "A2" by ▇▇▇▇▇'▇ Investors
Service, Inc. ("Moody's") or higher, or whose unsecured, unguaranteed commercial
paper obligations are rated "A-2" by S&P and "P-2" by Moody's or higher;
(iii) repurchase agreements entered into with entities whose unsecured,
unguaranteed long-term debt obligations are rated "A" by S&P and "A2" by
Moody's or higher, or whose unsecured, unguaranteed commercial paper obligations
are rated "A-2" by S&P and "P-2" by Moody's or higher, pursuant to a written
agreement with respect to any obligation described in clauses (i), (ii) or (iv)
of this definition; (iv) commercial paper (including both noninterest-bearing
discount obligations and interest-bearing obligations payable on demand or on a
specified date not later than 180 days from the date of acquisition thereof) and
having a rating of "A-2" by S&P and "P-2" by Moody's or higher; (v) direct
obligations of any money market fund or other similar investment company all of
whose investments consist primarily of obligations described in the foregoing
clauses of this definition and that is rated "AAm" by S&P and "Aam" by
Moody's or higher; (vi) taxable auction rate securities commonly known as "money
market notes" that at the time of purchase have been rated and the ratings for
which (A) for direct issues, must not be less than "P2" if rated by Moody's and
not less than "A2" if rated by S&P, or (B) for collateralized issues which
follow the asset coverage tests set forth in the Investment Company Act of 1940,
as amended, must have long-term ratings of at least "AAA" if rated by S&P
and "Aaa" if rated by Moody's; or (vii) any investments hereafter developed
which are substantially comparable to those described above.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980.
"Change in Control" means the occurrence of any of the following events:
(a) MAXXAM Inc. not being the sole beneficial owner, directly or
indirectly, of at least 51% of the total common equity of the Company. For
purposes of this clause, a beneficial owner shall have the meaning ascribed in
Regulation 13d-3 of the Exchange Act as in effect on the date of this Agreement.
The provisions of this clause shall not apply if MAXXAM Inc. should not hold the
requisite beneficial ownership interest because of bankruptcy, reorganization,
insolvency, or similar proceedings; or
(b) MAXXAM Inc., through direct representation or through persons
nominated by it, not controlling a majority of the Board of Directors of the
Company necessary to effectuate any actions by the Board of Directors of the
Company; or
(c) Any person or group directly or indirectly owning more than
MAXXAM Inc. of the total voting power entitled to vote generally in the election
of directors of the Company. For purposes of this clause, person or group shall
have the meaning ascribed in Section 13(d)(3) of the Exchange Act as in effect
on the date of this Agreement; or
(d) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, members of his immediate family and trusts for
the benefit thereof (each such person, including ▇▇. ▇▇▇▇▇▇▇ and any trustee of
such trusts, a "Beneficiary") not having (other than by reason of resolution of
any litigation outstanding as of the date of this Agreement or any similar
litigation or the existence of a Lien but including by reason of the foreclosure
of or other realization upon a Lien) direct or indirect sole beneficial
ownership (as defined under Regulation 13d-3 of the Exchange Act as in effect on
the date of this Agreement) of at least the Minimum Percentage of the total
equity of MAXXAM Inc. other than as a result of new issuances of equity
securities by MAXXAM Inc. to third parties (other than to a third party who is
not a Beneficiary and who controls MAXXAM Inc.). For purposes of this
definition, "Minimum Percentage" means the product of (x) the percentage of the
total equity of MAXXAM Inc. directly or indirectly beneficially owned by the
Beneficiaries as of December 18, 1998 times (y) 80%.
"Closing Date" means the date on which all conditions precedent set forth in
Section 4.01 are satisfied or waived by the Bank (or, in the case of subsection
4.01(f), waived by the Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and regulations promulgated
thereunder.
"Collateral" means all property and interests in property and proceeds thereof
now owned or hereafter acquired by the Company in or upon which a Lien now or
hereafter exists in favor of the Bank securing all or part of the Obligations,
whether under this Agreement or under any other documents executed and delivered
to the Bank.
"Collateral Documents" means, collectively, (i) the Company Security Agreement,
and all other security agreements, mortgages, deeds of trust, patent and
trademark assignments, lease assignments, guarantees and other similar
agreements between the Company and the Bank now or hereafter delivered to the
Bank pursuant to or in connection with the transactions contemplated hereby,
granting Bank a Lien on the Collateral and all financing statements (or
comparable documents now or hereafter filed in accordance with the UCC or
comparable law) against the Company as debtor in favor of the Bank as secured
party, and (ii) any amendments, supplements, modifications, renewals,
replacements, consolidations, substitutions and extensions of any of the
foregoing.
"Commitment" means $50,000,000.
"Commitment Fee" has the meaning specified in Section 2.10(a).
"Commitment Fee Percentage" means, with respect to the Commitment, a
per annum rate of .625%.
"Company Security Agreement" means the Amended and Restated Security Agreement
(Receivables and Inventory) between the Bank and the Company of even date
herewith.
"Compliance Certificate" means a certificate substantially in form of Exhibit C.
"Contingent Obligation" means, as to any Person, (a) any Guaranty Obligation of
that Person; and (b) any direct or indirect obligation or liability, contingent
or otherwise, of that Person, (i) in respect of any letter of credit or similar
instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings, or (ii) in respect of any Swap
Contract that is not entered into in connection with a bona fide hedging
operation that provides offsetting benefits to such Person. The amount of any
Contingent Obligation shall (subject, in the case of Guaranty Obligations, to
the last sentence of the definition of "Guaranty Obligation") be deemed equal to
the maximum reasonably anticipated liability in respect thereof, and shall, with
respect to item (b)(ii) of this definition, be marked to market on a current
basis, excluding any obligations pursuant to contracts with Subsidiaries of the
Company or with ▇▇▇▇▇ Lumber Co., Inc.
"Contractual Obligation" means, as to any Person, any provision of any security
issued by such Person or of any agreement, undertaking, contract, indenture,
mortgage, deed of trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under Section 2.04, the
Company (a) converts Loans of one Type to another Type, or (b) continues as
Loans of the same Type, but with a new Interest Period, Loans having Interest
Periods expiring on such date.
"Debt" means, at any date of determination, the sum of the following, computed
on an Unconsolidated Basis: all outstanding Loans plus any other interest
bearing Indebtedness, the face amount of undrawn letters of credit, and any
Guaranty Obligation on account of interest bearing Indebtedness or undrawn
letters of credit.
"Default" means any event or circumstance which, with the giving of notice, the
lapse of time, or both, would (if not cured or otherwise remedied during such
time) constitute an Event of Default.
"Early Termination Date" with respect to a Specified Swap Contract shall have
the meaning specified in such contract.
"EBITDA" means, for any fiscal period, the following, computed on an
Unconsolidated Basis for such period, total revenues less cash operating
expenses, less corporate administration expenses as reported on the EBITDA line
of page ES-3, or its equivalent, of the "Forest Products Operations Consolidated
Financial Report," or its equivalent, provided monthly to the Bank pursuant to
Section 6.01(d) of this Agreement.
"Effective Amount" means (i) with respect to any Revolving Loans on any date,
the aggregate outstanding principal amount thereof after giving effect to any
Borrowings and prepayments or repayments of Revolving Loans occurring on such
date; and (ii) with respect to any outstanding L/C Obligations on any date, the
amount of such L/C Obligations on such date after giving effect to any Issuances
of Letters of Credit occurring on such date and any other changes in the
aggregate amount of the L/C Obligations as of such date, including as a result
of any reimbursements of outstanding unpaid drawings under any Letters of Credit
or any reductions in the maximum amount available for drawing under Letters of
Credit taking effect on such date.
"Environmental Claims" means all claims, however asserted, by any Governmental
Authority or by any other Person in good faith and upon a reasonable basis
alleging potential liability or responsibility for violation of any
Environmental Law or for release or injury to the environment or threat to
public health, personal injury (including sickness, disease or death), property
damage, natural resources damage, or otherwise alleging liability or
responsibility for damages (punitive or otherwise), cleanup, removal, remedial
or response costs, restitution, civil or criminal penalties, injunctive relief,
or other type of relief, resulting from or based upon (a) the presence,
placement, discharge, emission or release (including intentional and
unintentional, negligent and non-negligent, sudden or non-sudden, accidental or
non-accidental placement, spills, leaks, discharges, emissions or releases) of
any Hazardous Material at, in, or from property, whether or not owned by the
Company, or (b) any other circumstances forming the basis of any violation, or
violation alleged in good faith and upon a reasonable basis, of any
Environmental Law.
"Environmental Laws" means all federal, state or local laws, statutes, common
law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters; including
CERCLA, the Clean Air Act, the Federal Water Pollution Control Act of 1972, the
Solid Waste Disposal Act, the Endangered Species Act (16 U.S.C. Sections 1531 et
seq.), the Migratory Bird Treaty Act (16 U.S.C. 703 et seq.), the Forest and
Rangeland Renewable Resources Act of 1974, the National Forest Management Act of
1976, the Federal Resource Conservation and Recovery Act, the Toxic Substances
Control Act, the Emergency Planning and Community Right-to-Know Act, the
California Hazardous Waste Control Law, the California Solid Waste Management,
Resource, Recovery and Recycling Act, the California Water Code and the
California Health and Safety Code, the Z'▇▇▇▇-▇▇▇▇▇▇▇ Forest Practices Act of
1973 and the California Public Resources Code.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated) that
is, or at any time within six years of the time in question has been, under
common control with the Company 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).
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which
is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete
or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer
Plan or notification that a Multiemployer Plan is in reorganization; (d) the
treatment of a Pension Plan amendment as a termination under Section 4041 or
4041A of ERISA, or the filing of a notice of intent to terminate or the
commencement of proceedings by the PBGC to terminate a Pension Plan or
Multiemployer Plan; (e) an event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan;
or (f) the imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the Company or
any ERISA Affiliate.
"Event of Default" means any of the events or circumstances specified in Section
8.01.
"Excess Cash Flow" means, for any fiscal period, the following, computed for the
four fiscal quarters ending at the end of such period: (i) Free Cash Flow less
(ii) the sum, without duplication, of the following computed on an
Unconsolidated Basis: (A) interest expense, plus (B) other net reductions in
Indebtedness of the type described in clauses (a) through (f) of the definition
thereof, less (iii) any net increase in working capital, plus (iv) any net
decrease in working capital. Working capital for this purpose shall mean
accounts receivable, plus inventory, minus accounts payable.
"Exchange Act" means the Securities Exchange Act of 1934, and regulations
promulgated thereunder.
"Federal Funds Rate" means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
"H.15(519)") on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published on any
such preceding Business Day, the rate for such day will be the arithmetic mean
as determined by the Bank of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in New York City
selected by the Bank.
"FRB" means the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.
"Free Cash Flow" means, for any fiscal period, the following, computed for the
four fiscal quarters ending at the end of such period: EBITDA, plus SPC's
distributions to the Company on account of its membership interest in SPC, minus
capital expenditures computed on an Unconsolidated Basis, provided, however that
the foregoing shall be computed without giving effect to a direct or indirect
dividend or distribution to the stockholders of the Company or any of its
Subsidiaries of any Salmon Creek Proceeds.
"GAAP" means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession) and which are applicable to the circumstances.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation" means, as applied to any Person, any direct or indirect
liability of that Person with respect to any Indebtedness, lease, dividend,
letter of credit or other obligation (the "primary obligations") of another
Person (the "primary obligor"), including any obligation of that Person, whether
or not contingent, (a) to purchase, repurchase or otherwise acquire such primary
obligations or any property constituting direct or indirect security therefor,
or (b) to advance or provide funds (i) for the payment or discharge of any such
primary obligation, or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, or (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (d) otherwise
to assure or hold harmless the holder of any such primary obligation against
loss in respect thereof. The amount of any Guaranty Obligation shall be deemed
equal to the stated or determinable amount of the primary obligation in respect
of which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect thereof.
"Hazardous Materials" means all those substances that are regulated by, or which
may form the basis of liability under, any Environmental Law, including any
substance identified under any Environmental Law as a pollutant, contaminant,
hazardous waste, hazardous constituent, special waste, hazardous substance,
hazardous material, or toxic substance, or petroleum or petroleum derived
substance or waste.
"Honor Date" has the meaning specified in subsection 2.16(b).
"Incur" means, directly or indirectly, create, incur, issue, assume, guarantee
or become liable with respect to, contingently or otherwise (and the terms
"Incurred" and "Incurrence" have correlative meanings.
"Indebtedness" of any Person means, without duplication, (a) all indebtedness
for borrowed money; (b) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business on ordinary terms and other than
compensation, pension obligations, and other obligations arising from employee
benefits and employee arrangements); (c) all non-contingent reimbursement or
payment obligations with respect to all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments; (d) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced incurred
in connection with the acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
property acquired by the Person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property); (f) all obligations with respect to
Capital Leases; (g) all indebtedness referred to in clauses (a) through (f)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness;
and (h) all Guaranty Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (a) through (g) above.
"Indemnified Liabilities" has the meaning specified in Section 9.05(a).
"Indemnified Person" has the meaning specified in Section 9.05(a).
"Insolvency Proceeding" means (a) any case, action or proceeding before any
court or other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors; undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"Interest Payment Date" means, as to any Offshore Rate Loan, the last day of
each Interest Period applicable to such Loan and, as to any Base Rate Loan, the
last Business Day of each calendar quarter and each date such Loan is converted
into an Offshore Rate Loan, provided, however, that if any Interest Period
applicable to an Offshore Rate Loan exceeds three months, the date that falls
three months after the beginning of such Interest Period and after each Interest
Payment Date thereafter is also an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the period commencing on
the Borrowing Date of such Loan or on the Conversion/Continuation Date on which
the Loan is converted into or continued as an Offshore Rate Loan, and ending on
the date one, two, three or six months thereafter as selected by the Company in
its Notice of Borrowing or Notice of Conversion/Continuation; provided that:
(i) If any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following Business
Day unless, the result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period shall end on
the preceding Business Day;
(ii) Any Interest Period pertaining to an Offshore Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the calendar month at the
end of such Interest Period; and
(iii) No Interest Period for any Revolving Loan shall extend beyond the
Revolving Termination Date.
"Investments" has the meaning specified in Section 7.04.
"IRS" means the Internal Revenue Service, and any Governmental Authority
succeeding to any of its principal functions under the Code.
"Issuance Date" means the date of issuance of any Letter of Credit.
"Issue" means, with respect to any Letter of Credit to issue or to extend the
expiry of, or to renew or increase the amount of, such Letter of Credit; and the
terms "Issued," "Issuing" and "Issuance" have corresponding meanings.
"Joint Venture" means a single-purpose corporation, partnership, limited
liability company, joint venture or other similar legal arrangement (whether
created by contract or conducted through a separate legal entity) now or
hereafter formed by the Company or any of its Subsidiaries with another Person
in order to conduct a common venture or enterprise with such Person.
"L/C Amendment Application" means an application form for amendment of
outstanding letters of credit as shall at any time be in use at the Bank, as the
Bank shall request.
"L/C Application" means an application form for issuances of letters of credit
as shall at any time be in use at the Bank, as the Bank shall request.
"L/C Borrowing" means an extension of credit resulting from a drawing under any
Letter of Credit which shall not have been reimbursed on the date when made nor
converted into a Borrowing of Revolving Loans under subsection 2.16(b).
"L/C Obligations" means at any time the sum of (a) the aggregate undrawn amount
of all Letters of Credit then outstanding, plus (b) the amount of all
unreimbursed drawings under all Letters of Credit, including all outstanding L/C
Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C Applications, the
L/C Amendment Applications and any other document relating to any Letter of
Credit, including any of the Bank's standard form documents for letter of credit
Issuances.
"Lending Office" means, as to the Bank, the office or offices of the Bank
specified as its "Lending Office" or "Domestic Lending Office" or "Offshore
Lending Office", as the case may be, on the signature pages of this Agreement,
or such other office or offices as the Bank may from time to time notify the
Company.
"Letter of Credit Fee" has the meaning specified in subsection 2.20(a).
"Letter of Credit Fee Percentage" means with respect to the Letters of Credit, a
per annum rate equal to 2.75%.
"Letters of Credit" means letters of credit Issued under the Prior Credit
Agreement and letters of credit Issued pursuant to this Agreement.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising under
or evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a Capital Lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which such lien relates
as debtor, under the UCC or any comparable law) and any contingent or other
agreement to provide any of the foregoing, but not including the interest of a
lessor under an operating lease.
"Loan" means an extension of credit by the Bank to the Company under Article II,
and may be a Base Rate Loan or an Offshore Rate Loan (each, a "Type" of Loan),
and includes any Revolving Loan.
"Loan Documents" means this Agreement, the Collateral Documents, the L/C
Applications, any documents evidencing or relating to Specified Swap Contracts
with the Bank, and all other documents delivered to the Bank in connection with
the transactions contemplated by this Agreement.
"Margin Stock" means "margin stock" as such term is defined in Regulation T, U
or X of the FRB.
"Material Adverse Effect" means a material adverse change in, or a material
adverse effect upon, any of (a) the operations, business, properties, condition
(financial or otherwise) or financial prospects of the Company or the Company
and its Subsidiaries taken as a whole or as to SPC; (b) the ability of the
Company to perform under any Loan Document and avoid any Event of Default; (c)
the legality, validity, binding effect or enforceability of any Loan Document;
or (d) the perfection or priority of any Lien granted to the Bank under any of
the Collateral Documents.
"MGHI" means MAXXAM Group Holdings Inc.
"Multiemployer Plan" means a "multiemployer plan", within the meaning of Section
4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes, is
making, or is obligated to make contributions or, during the preceding three
calendar years, has made, or been obligated to make, contributions.
"Net Worth" means for any fiscal period, the following, computed on an
Unconsolidated Basis for such period, total stockholders' equity as reported by
the Company on page PL-15, or its equivalent, of the "Forest Products Operations
Consolidated Financial Report," or its equivalent, provided monthly to the Bank
pursuant to Section 6.01(d) of this Agreement.
"Notice of Borrowing" means a notice in substantially the form of Exhibit A.
"Notice of Conversion/Continuation" means a notice in substantially the form of
Exhibit B.
"Notice of Lien" has the meaning specified in Section 7.01(c).
"Obligations" means all advances, debts, liabilities, obligations, covenants and
duties arising under any Loan Document owing by the Company to the Bank or any
Indemnified Person, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising.
"Offshore Rate" means, for any Interest Period, with respect to any Offshore
Rate Loan, the rate of interest per annum at which dollar deposits in the
approximate amount of the Bank's Offshore Rate Loan for such Interest Period
would be offered by the Bank's Grand Cayman Branch, Grand Cayman, B.W.I. (or
such other office as may be designated for such purpose by the Bank) to major
banks in the offshore dollar interbank market upon request of such banks at
approximately 11:00 a.m. (New York City time) two Business Days prior to the
commencement of such Interest Period.
"Offshore Rate Loan" means a Loan that bears interest based on the Offshore
Rate.
"Organization Documents" means, for any corporation, the certificate or articles
of incorporation, the bylaws, any certificate of determination or instrument
relating to the rights of preferred shareholders of such corporation, any
shareholder rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation.
"Outstanding Letter of Credit" means at any time an Issued and as yet unexpired
Letter of Credit in an amount equal to the undrawn amount of such Letter of
Credit.
"Participant" has the meaning specified in subsection 9.08(b).
"PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental
Authority succeeding to any of its principal functions under ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA (excluding any Multiemployer Plan) which the
Company sponsors, maintains, or to which it makes, is making, or is obligated to
make contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA) has made contributions at any time during the
immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 7.01.
"Permitted Salmon Creek Transaction" means any or all of the following: the
contribution, transfer, or sale (whether or not for fair market value) by the
Company or any of its Restricted Subsidiaries to Salmon Creek LLC, any of its
Subsidiaries, or any Special Purpose Subsidiary of any standing timber, timber
rights, or timberlands or of any equity interest in any Special Purpose
Subsidiary, or Investments by the Company or any of its Restricted Subsidiaries
to or in Salmon Creek LLC, any of its Subsidiaries, or any Special Purpose
Subsidiary of up to an additional $5,000,000 in cash or other assets in
aggregate cumulative amount after the date hereof.
"Permitted Swap Obligations" means all obligations (contingent or otherwise) of
the Company existing or arising under Swap Contracts, provided that each of the
following criteria is satisfied: (a) such obligations are (or were) entered into
by such Person in the ordinary course of business for the purpose of directly or
indirectly mitigating risks associated with liabilities, commitments or assets
held by such Person, or changes in the value of securities issued by such Person
in conjunction with a securities repurchase program not otherwise prohibited
hereunder, and not for purposes of speculation or taking a "market view;" (b)
such Swap Contracts do not contain (i) any provision ("walk-away" provision)
exonerating the non-defaulting party from its obligation to make payments on
outstanding transactions to the defaulting party, or (ii) with respect to any
Swap Contract that is not a Specified Swap Contract, any provision creating or
permitting the declaration of an event of default, termination event or similar
event upon the occurrence of an Event of Default hereunder (other than an Event
of Default under Section 8.01(a).
"Person" means an individual, a sole proprietorship, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
which the Company sponsors or maintains or to which the Company makes, is
making, or is obligated to make contributions and includes any Multiemployer
Plan or Pension Plan.
"Preferred Stock" as applied to the Capital Stock or Redeemable Stock of any
corporation, means Capital Stock or Redeemable Stock of any class or classes
(however designated) which is preferred as to the payment of dividends, or as to
the distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such corporation, over shares of Capital Stock or Redeemable
Stock, as the case may be, of any other class of such corporation.
"Prior Credit Agreement" has the meaning specified in the first "WHEREAS" clause
of this Agreement.
"Receivable Debtor" means the person or entity obligated upon a Receivable.
"Receivables" shall have the meaning given in the Company Security Agreement.
"Redeemable Stock" of any Person means any equity security of such Person that
by its terms is required to be redeemed prior to the date four years after the
Revolving Termination Date, or is redeemable at the option of the holder thereof
at any time prior to such date.
"Reportable Event" means, any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder, other than any such event for which the
30-day notice requirement under ERISA has been waived in regulations issued by
the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or common),
treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" of a Person means the chief executive officer or the
president, the chief financial officer, the Vice President - Finance and
Administration, the treasurer, assistant treasurer, or any other officer of such
Person having substantially the same authority and responsibility or designated
by the chief executive officer or the chief financial officer of such Person as
having the appropriate authority and responsibility.
"Restricted Payment" has the meaning specified in Section 7.12.
"Restricted Subsidiary" means, as of any determination date, each of the
Subsidiaries of the Company which is not as of such determination date an
Unrestricted Subsidiary of the Company.
"Revolving Credit" means the credit described in subsection 2.01(a).
"Revolving Loan" has the meaning specified in subsection 2.01(a).
"Revolving Termination Date" means the earlier to occur of:
(a) August 14, 2003, or such later date as extended from time to
time pursuant to Section 2.22 of this Agreement; and
(b) the date on which the Bank's commitment to make Loans
terminates in accordance with the provisions of this Agreement.
"Salmon Creek LLC" means Salmon Creek LLC, a Delaware limited liability company,
or any successor entity, by way of merger, consolidation, purchase of all or
substantially all of its assets, or otherwise.
"Salmon Creek Proceeds" means any consideration received by the Company or any
of its Subsidiaries from any Person (A) in respect of all or any part of the
equity of Salmon Creek LLC, any of its Subsidiaries, or any Special Purpose
Subsidiary, or (B) in respect of all or any part of the real property
constituting Salmon Creek Property, or (C) otherwise in connection with Salmon
Creek LLC, any of its Subsidiaries, or any Special Purpose Subsidiary, or Salmon
Creek Property (including, without limitation, amounts distributed by SPC to the
Company to the extent that such distributions are funded with funds released
from the Scheduled Amortization Reserve Account, as such term is defined in the
Scotia Pacific Indenture), except in each case proceeds of the harvesting of
timber constituting Salmon Creek Property.
"Salmon Creek Property" means any standing timber, timber rights, or timberlands
(including structures and improvements thereon and related interests in real
property) owned on the date hereof by the Company, SPC, or Salmon Creek LLC or
any of its Subsidiaries, any asset held by Salmon Creek LLC or any of its
Subsidiaries on the date hereof, and any other assets obtained in exchange for
or out of the proceeds of the sale or disposition of any of the foregoing.
"Scotia Pacific Indenture" means the Indenture, dated as of July 20, 1998, as
amended and in effect on the date hereof, between Scotia Pacific Company LLC and
State Street Bank and Trust Company.
"SEC" means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.
"Solvent" means, as to any Person at any time, that (a) the fair value of the
property of such Person is greater than the amount of such Person's liabilities
(including disputed, contingent and unliquidated liabilities) as such value is
established and liabilities evaluated for purposes of Section 101(31) of the
Bankruptcy Code and, in the alternative, for purposes of the California Uniform
Fraudulent Transfer Act; (b) the present fair saleable value of the property of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured; (c) such Person is able to realize upon its property and pay its debts
and other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business; (d) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature; and (e) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"Specified Swap Contract" means any Swap Contract made or entered into at any
time, or in effect at any time (whether heretofore or hereafter), whether
directly or indirectly, and whether as a result of assignment or transfer or
otherwise, between the Company and any Swap Provider which Swap Contract is or
was intended by the Company to have been entered into, in part or entirely, for
purposes of mitigating interest rate risk relating to any Loan (which intent
shall conclusively be deemed to exist if the Company so represents to the Swap
Provider in writing), and as to which the final scheduled payment by the Company
is not later than the sixth anniversary of this Agreement.
"SPC" means Scotia Pacific Company LLC, a Wholly-Owned Subsidiary of the
Company.
"Special Purpose Subsidiary" means a Subsidiary of the Company created after
December 18, 1998, capitalized with no material assets other than standing
timber, timber rights, or timberlands owned by the Company or any of its
Subsidiaries on December 18, 1998, and designated by the Company as an
Unrestricted Subsidiary in connection with such capitalization.
"Subsidiary" means, with respect to any Person, (i) any corporation of which
more than 50% of the outstanding Capital Stock and Redeemable Stock having
ordinary voting power to elect a majority of the board of directors of the
corporation (irrespective of whether at the time Capital Stock or Redeemable
Stock of any other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency) is at the time owned,
directly or indirectly, by such Person, or by one or more other Subsidiaries of
such Person, or by such Person and one or more other Subsidiaries of such
Person, or (ii) any other entity of which more than 50% of the outstanding
equity ownership interests are at the time owned, directly or indirectly, by
such Person, or by one or more other Subsidiaries of such Person, or by such
Person and one or more other Subsidiaries of such Person.
"Swap Contract" means any agreement, whether or not in writing, relating to any
transaction that is a rate swap, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap or option, bond, note or
▇▇▇▇ option, interest rate option, forward foreign exchange transaction, cap,
collar or floor transaction, currency swap, cross-currency rate swap, swaption,
currency option or any other, similar transaction (including any option to enter
into any of the foregoing) or any combination of the foregoing, and, unless the
context otherwise clearly requires, any master agreement relating to or
governing any or all of the foregoing.
"Swap Provider" means the Bank, or any Affiliate of the Bank, that is at the
time of determination party to a Swap Contract with the Company.
"Swap Termination Value" means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a) the amount(s) determined as the ▇▇▇▇-to-market
value(s) for such Swap Contracts, as determined by the Company based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include the Bank.)
"Tax Sharing Agreement" means the Tax Allocation Agreement, dated May 21, 1988,
by and among MAXXAM Inc., the Company, and certain other subsidiaries of MAXXAM
Inc., as amended by the Tax Allocation Agreement, dated as of March 23, 1993, by
and among MAXXAM Inc., the Company, Scotia Pacific Holding Company, and Salmon
Creek Corporation.
"Timber Notes" means the 6.55% Series B Class A-1, 7.11% Series B Class A-2 and
7.71% Series B Class A-3 Timber Collateralized Notes due 2028, issued by SPC
pursuant to the Indenture dated as of July 20, 1998, as amended by the First
Supplemental Indenture dated as July 16, 1999 and the Second Supplemental
Indenture dated as of November 18, 1999, between SPC and State Street Bank and
Trust Company, as trustee.
"Type" has the meaning specified in the definition of "Loan."
"UCC" means the Uniform Commercial Code as in effect in the State of California.
"Unconsolidated Basis" means the Company and its Restricted Subsidiaries other
than SPC on a consolidated basis.
"Unfunded Pension Liability" means the excess of a Pension Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.
"Unrestricted Subsidiary" means (a) each of the Subsidiaries of the Company so
designated after the date hereof by a resolution adopted by the Company's Board
of Directors and as to which designation the Bank has given its prior written
approval, (b) any Subsidiary of an Unrestricted Subsidiary, (c) Salmon Creek
LLC, and (d) any Special Purpose Subsidiary. The Board of Directors may
designate an Unrestricted Subsidiary to be a Restricted Subsidiary if no Default
or Event of Default would arise by virtue of such designation.
"Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary that is a
Wholly-Owned Subsidiary.
"Wholly-Owned Subsidiary" means (i) a corporation of which all of the
outstanding shares of Capital Stock and Redeemable Stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time Capital Stock or Redeemable Stock of any
other class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency) are owned at the time, directly or indirectly
(through one or more Wholly-Owned Restricted Subsidiaries), by the Company
(except for director's qualifying shares), or (ii) any other entity of which all
of the outstanding equity ownership interests are owned at the time, directly or
indirectly (through one or more Wholly-Owned Restricted Subsidiaries), by the
Company.
1.02 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) Terms:
(1) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(2) The term "including" is not limiting and means "including
without limitation."
(3) In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including"; the words
"to" and "until" each mean "to but excluding", and the word "through" means "to
and including."
(4) The term "property" includes any kind of property or asset,
real, personal or mixed, tangible or intangible.
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Bank, the Company
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Bank merely because of the Bank's involvement
in their preparation.
1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.01 The Revolving Credit.
(a) The Revolving Credit. The Bank agrees, on the terms and
conditions hereinafter set forth, to make loans to the Company (each such loan a
"Revolving Loan") and to Issue Letters of Credit for the account of the Company
from time to time on any Business Day during the period from the Closing Date to
the Revolving Termination Date, in an aggregate amount not to exceed at any time
outstanding the lesser of the Commitment or the Borrowing Base; provided,
however, that:
(1) After giving effect to any Loan and/or the Issuance of a
Letter of Credit, the Effective Amount of all Loans and L/C Obligations shall
not exceed the lesser of the Commitment or the Borrowing Base; and
(2) After the Issuance of a Letter of Credit, the Effective
Amount of all L/C Obligations shall not exceed $20,000,000.
(b) Reborrowing. Within the limits of the Commitment and the
Borrowing Base and subject to the other terms and conditions hereof, the Company
may, pursuant to the terms of this Agreement (x) borrow, prepay, and reborrow
under this Section 2.01; and (y) obtain Letters of Credit and obtain new Letters
of Credit in place of Letters of Credit that have been discharged by performance
and reimbursement to the Bank or which have expired.
(c) Obligations under the Prior Credit Agreement. From and after the
Closing Date, all "Letters of Credit", "Loans", and "Letter of Credit
Obligations" of the Company to the Bank under the Prior Credit Agreement shall
be deemed to be Letters of Credit, Revolving Credit Loans, and L/C Obligations,
respectively, under this Agreement, included in the computations required
hereunder and subject to the provisions hereof.
2.02 Loan Accounts. The Loans made by the Bank shall be evidenced by one
or more loan accounts or records maintained by the Bank in the ordinary course
of business. The loan accounts or records maintained by the Bank shall be
evidence of the amount of the Loans made by the Bank to the Company and the
interest and payments thereon. Any failure so to record or any error in doing so
shall not, however, limit or otherwise affect the obligation of the Company
hereunder to pay any amount owing with respect to the Loans.
2.03 Procedure for Borrowing.
(a) Each Loan shall be made upon the Company's irrevocable written
notice (including notice via facsimile transmission confirmed immediately by a
telephone call) delivered to the Bank in the form of a Notice of Borrowing
(which notice must be received by the Bank prior to (i) 9:00 a.m. (San
Francisco, California time) three Business Days prior to the requested Borrowing
Date, in the case of Offshore Rate Loans; and (ii) 11:00 a.m. San Francisco,
California time on the requested Borrowing Date, in the case of Base Rate Loans,
specifying:
(1) The amount of the Loan, which shall be in minimum amounts of
$500,000 for Offshore Rate Loans and $100,000 for Base Rate Loans;
(2) The requested Borrowing Date, which shall be a Business Day;
(3) Whether each Loan is to be an Offshore Rate Loan or a Base
Rate Loan; and
(4) The duration of the Interest Period applicable to the
Offshore Rate Loans included in such notice. If the Notice of Borrowing fails to
specify the duration of the Interest Period for any Offshore Rate Loans, such
Interest Period shall be three months.
(b) The proceeds of the Loans will be made available to the Company
by the Bank by crediting the account of the Company on the books of the Bank
with such proceeds or by wire transfer in accordance with written instructions
provided to the Bank by the Company.
(c) After disbursement of any Loan, unless the Bank shall otherwise
consent, there may not be more than ten different Interest Periods in effect.
2.04 Conversion and Continuation Elections.
(a) The Company may, upon irrevocable written notice to the Bank in
accordance with subsection 2.04(b):
(1) Elect to convert on any Business Day, any Base Rate Loans
(or any part thereof in a minimum amount of $500,000) into Offshore Rate Loans
or;
(2) Elect to convert on any Interest Payment Date any Offshore
Rate Loans maturing on such Interest Payment Date (or any part thereof in a
minimum amount of $100,000) into Base Rate Loans; or
(3) Elect to renew on any Interest Payment Date any Offshore
Rate Loans maturing on such Interest Payment Date (or any part thereof in a
minimum amount of $500,000);
provided, that if at any time an Offshore Rate Loan is reduced, by payment,
prepayment, or conversion of part thereof to be less than $500,000, such
Offshore Rate Loan shall automatically convert into a Base Rate Loan, and on and
after such date the right of the Company to continue such Loan as, and convert
such Loan into, an Offshore Rate Loan shall terminate.
(b) The Company shall deliver by telex, cable or facsimile,
confirmed immediately in writing, a Notice of Conversion/Continuation to be
received by the Bank not later than (i) 9:00 a.m. San Francisco, California time
at least three Business Days in advance of the Conversion/Continuation Date, if
the Loans are to be converted into or continued as Offshore Rate Loans; and (ii)
noon San Francisco, California time one Business Day in advance of the
Conversion Date or continuation date, if the Loans are to be converted into or
renewed as Base Rate Loans, specifying:
(1) The proposed Conversion/Continuation Date;
(2) The aggregate amount of Loans to be converted or renewed;
(3) The nature of the proposed conversion or continuation; and
(4) The duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, the Company has failed to select a new Interest Period to
be applicable to such Offshore Rate Loans, or if any Default or Event of Default
shall then exist, the Company shall be deemed to have elected to convert such
Offshore Rate Loans into Base Rate Loans effective as of the expiration date of
such current Interest Period.
(d) Unless the Bank otherwise consents, during the existence of a
Default or Event of Default, the Company may not elect to have a Loan converted
into or continued as an Offshore Rate Loan.
(e) After giving effect to any conversion or continuation of Loans,
unless the Bank shall otherwise consent, there may not be more than ten
different Interest Periods in effect.
2.05 Voluntary Termination or Reduction of Commitment. The Company may,
upon not less than five Business Days' prior notice to the Bank, at any time
before the Revolving Termination Date, terminate the Bank's commitment to make
Loans or permanently reduce the amount of the Commitment by a minimum amount of
$1,000,000 or any whole multiple of $1,000,000 in excess thereof; unless, after
giving effect thereto and to any prepayments of Loans made on the effective date
thereof, the Effective Amount of all Loans and L/C Obligations would exceed the
amount of the Commitment then in effect and, provided, further, that once
reduced in accordance with this Section, the Commitment may not be increased. If
the Commitment is terminated in its entirety, all accrued Commitment Fees to the
effective date of such termination shall be payable on the effective date of
such termination without any premium or penalty.
2.06 Optional Prepayments. Subject to Section 3.04, the Company may, at
any time or from time to time, upon not less than three Business Days' (with
respect to Offshore Rate Loans) and same Business Day (with respect to Base Rate
Loans) irrevocable notice to the Bank, prepay Loans in whole or in part, in
minimum prepayments of $500,000 for Offshore Rate Loans and $100,000 for Base
Rate Loans (or, in each case, such lesser amount as represents the entire
outstanding amount of such Offshore Rate Loan or Base Rate Loan). Such notice of
prepayment shall specify the date and amount of such prepayment and the Type(s)
of Loans to be prepaid, and in the case of Offshore Rate Loans, which Offshore
Rate Loans are to be prepaid. If such notice is given by the Company, the
Company shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein, together with
accrued interest to each such date on the amount prepaid and any amounts
required pursuant to Section 3.04.
2.07 Mandatory Prepayments of Loans.
(a) Mandatory Prepayments, Cash Collateral. If at any time and for
any reason the Effective Amount of the Loans and the L/C Obligations exceeds the
lesser of the Commitment or the Borrowing Base, the Company shall pay to Bank,
upon Bank's election and demand, the amount of the excess. Payments under this
Section may be applied to the obligations of the Company relating to the Loans
and L/C Obligations in the order and manner as the Company in its discretion may
determine. Payments to be applied to Outstanding Letters of Credit may, at
Bank's option, be used to prepay, or held as cash collateral to secure, the
Company's obligations to Bank with respect thereto and L/C Obligations.
(b) Clean-up Period. The Company agrees to borrow, repay, and
reborrow under the Revolving Credit such that in each calendar year there shall
be at least one period of 30 consecutive days in which there are no outstanding
Revolving Loans under this Agreement.
(c) General. Any prepayments relating to the Loans made pursuant to
this Section shall be applied as instructed by the Company; provided, however,
that the Company may, at its option, place any amounts which it would otherwise
be required to use to prepay Offshore Rate Loans on a day other than the last
day of the Interest Period therefor in an interest-bearing account pledged to
the Bank until the end of such Interest Period at which time such pledged
amounts will be credited to the prepayment of such Offshore Rate Loans. The
Company shall pay, together with each prepayment under this Section, accrued
interest on the amount prepaid and any amounts required under Section 3.04.
2.08 Scheduled Repayment. The Company shall repay to the Bank in full on
the Revolving Termination Date the aggregate principal amount of Revolving Loans
outstanding on such date.
2.09 Interest.
(a) Each Loan shall bear interest on the outstanding principal
amount thereof from its Borrowing Date at a rate per annum equal to the Offshore
Rate or the Base Rate, as the case may be (and subject to the Company's right to
convert to other Types of Loans under Section 2.04), plus the Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of
Offshore Rate Loans under Sections 2.06 or 2.07 for the portion of the Offshore
Rate Loans so prepaid and upon payment (including prepayment) in full thereof
and, during the existence of any Event of Default, interest shall be paid on
demand of the Bank.
(c) Notwithstanding subsection (a) of this Section, while any Event
of Default exists or after acceleration, the Company shall pay interest (after
as well as before entry of judgment thereon to the extent permitted by law) on
the principal amount of all Obligations due and unpaid, at a rate per annum
which is determined by adding 2% per annum to the Applicable Margin then in
effect for such Loans and, in the case of Obligations not subject to an
Applicable Margin, at a rate per annum equal to the Base Rate plus the
Applicable Margin then in effect for Base Rate Loans plus 2%; provided, however,
that, on and after the expiration of any Interest Period applicable to any
Offshore Rate Loan outstanding on the date of occurrence of such Event of
Default or acceleration, the principal amount of such Loan shall, during the
continuation of such Event of Default or after acceleration, bear interest at a
rate per annum equal to the Base Rate plus the Applicable Margin then in effect
for Base Rate Loans plus 2%.
(d) Anything herein to the contrary notwithstanding, the obligations
of the Company to the Bank hereunder shall be subject to the limitation that
payments of interest shall not be required, for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by the Bank would be contrary to the provisions of any
law applicable to the Bank limiting the highest rate of interest that may be
lawfully contracted for, charged or received by the Bank, and in such event the
Company shall pay the Bank interest at the highest rate permitted by applicable
law.
2.10 Fees.
(a) Commitment Fee.
(1) The Company shall pay to the Bank a commitment fee
("Commitment Fee") for each day from the Closing Date through the Revolving
Termination Date in an amount equal to the product of (i) the unused portion
(which excludes the Effective Amount of L/C Obligations) of the Commitment in
effect on such date multiplied by (ii) 1/360th of the Commitment Fee Percentage
in effect on such day. Such Commitment Fee shall be due and payable quarterly in
arrears on September 28, 2001 and thereafter on the last Business Day of each
calendar quarter commencing on the first such date occurring after the date of
this Agreement through the Revolving Termination Date, with the final payment to
be made on the Revolving Termination Date.
(2) The Commitment Fee provided in this subsection shall accrue
at all times after the above-mentioned commencement date, including at any time
during which one or more conditions in Article IV are not met.
(b) Arrangement Fee. The Company shall pay to the Bank, as an
Arrangement Fee, (1) $125,000 on the Closing Date and (2) $125,000 on each
anniversary date of this Agreement on which the Commitment remains in effect or
Loans remain outstanding.
2.11 Computation of Fees and Interest.
(a) All computations of interest for Base Rate Loans when the Base
Rate is determined by the Bank's "reference rate" shall be made on the basis of
a year of 365 or 366 days, as the case may be, and actual days elapsed. All
other computations of fees and interest shall be made on the basis of a 360-day
year and actual days elapsed (which results in more interest and fees being paid
than if computed on the basis of a 365-day year). Interest and fees shall accrue
during each period during which interest or such fees are computed from the
first day thereof to the last day thereof.
(b) Any change in the interest rate on a Loan resulting from a
change in the Applicable Margin shall become effective as of the opening of
business on the day on which such change in the Applicable Margin becomes
effective.
(c) Each determination of an interest rate by the Bank shall be
conclusive and binding on the Company in the absence of manifest error.
2.12 Payments by the Company.
(a) All payments to be made by the Company shall be made without
set-off, recoupment or counterclaim. Except as otherwise expressly provided
herein, all payments by the Company shall be made to the Bank at the place
indicated as the place of payment in the signature pages to this Agreement or
such other place of payment as the Bank may specify to the Company in writing
from time to time, and shall be made in dollars and in immediately available
funds, no later than 10:00 a.m. (San Francisco, California time) for Offshore
Rate Loans and no later than 1:00 p.m. (San Francisco, California time) for Base
Rate Loans, in each case on the date specified herein. Any payment received by
the Bank later than such specified times shall be deemed to have been received
on the following Business Day and any applicable interest or fee shall continue
to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
2.13 Security.
(a) All obligations of the Company under this Agreement, and all
other Loan Documents shall be secured in accordance with the Collateral
Documents. The Company hereby ratifies and reaffirms all of the Liens previously
granted in favor of the Bank pursuant to the Company Security Agreement, which
Liens are and continue to be perfected and of first priority.
(b) The Bank agrees to release its security interest under the
Collateral Documents upon (i) the termination of the Bank's commitment to make
Loans and (ii) the Effective Amount of L/C Obligations and Revolving Loans being
reduced to $0.
2.14 The Letter of Credit Subfacility. The Bank is under no obligation
to Issue any Letter of Credit if:
(a) any order, judgment or decree of any Governmental Authority or
arbitrator shall by its terms purport to enjoin or restrain the Bank from
Issuing such Letter of Credit, or any Requirement of Law applicable to the Bank
or any request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Bank shall prohibit, or
request that the Bank refrain from, the Issuance of letters of credit generally
or such Letter of Credit in particular or shall impose upon the Bank with
respect to such Letter of Credit any restriction, reserve or capital requirement
(for which the Bank is not otherwise compensated hereunder) not in effect on the
Closing Date, or shall impose upon the Bank any unreimbursed loss, cost or
expense which was not applicable on the Closing Date and which the Bank in good
▇▇▇▇▇ ▇▇▇▇▇ material to it;
(b) the expiry date of any requested Letter of Credit is (A) more
than 365 days after the date of Issuance, unless the Bank has approved such
expiry date in writing, or (B) after the Revolving Termination Date, unless the
Bank has approved such expiry date in writing;
(c) the expiry date of any requested Letter of Credit is prior to
the maturity date of any financial obligation to be supported by the requested
Letter of Credit;
(d) any requested Letter of Credit does not provide for drafts, or
is not otherwise in form and substance acceptable to the Bank, or the Issuance
of a Letter of Credit shall violate any applicable policies of the Bank;
(e) any Letter of Credit is for the purpose of supporting the
issuance of any letter of credit by any other Person; or
(f) such Letter of Credit is to be denominated in a currency other
than Dollars.
2.15 Issuance, Amendment and Renewal of Letters of Credit.
(a) Each Letter of Credit shall be issued upon the written request
of the Company received by the Bank at least three Business Days (or such
shorter time as the Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of issuance. Each such request for
issuance of a Letter of Credit shall be by facsimile, confirmed immediately in
an original writing, in the form of an L/C Application, and shall specify in
form and detail satisfactory to the Bank: (i) the proposed date of issuance of
the Letter of Credit (which shall be a Business Day); (ii) the face amount of
the Letter of Credit; (iii) the expiry date of the Letter of Credit; (iv) the
name and address of the beneficiary thereof; (v) the documents to be presented
by the beneficiary of the Letter of Credit in case of any drawing thereunder;
(vi) the full text of any certificate to be presented by the beneficiary in case
of any drawing thereunder; and (vii) such other matters as the Bank may require.
Such request may be withdrawn by the Company, but the fees owing on account of
any requested Letter of Credit pursuant to Section 2.20(b) shall be fully earned
upon the submission of such request notwithstanding its later withdrawal.
(b) From time to time while a Letter of Credit is outstanding and
prior to the Revolving Termination Date, the Bank will, upon the written request
of the Company received by the Bank at least three Business Days (or such
shorter time as the Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of amendment, amend any Letter of Credit
issued by it. Each such request for amendment of a Letter of Credit shall be
made by facsimile, confirmed immediately in an original writing, made in the
form of an L/C Amendment Application and shall specify in form and detail
satisfactory to the Bank: (i) the Letter of Credit to be amended; (ii) the
proposed date of amendment of the Letter of Credit (which shall be a Business
Day); (iii) the nature of the proposed amendment; and (iv) such other matters as
the Bank may require. The Bank shall be under no obligation to amend any Letter
of Credit if: (A) the Bank would have no obligation at such time to issue such
Letter of Credit in its amended form under the terms of this Agreement; or (B)
the beneficiary of any such Letter of Credit does not accept the proposed
amendment to the Letter of Credit.
(c) The Bank agrees that, while a Letter of Credit is outstanding
and prior to the Revolving Termination Date, at the option of the Company and
upon the written request of the Company received by the Bank at least three
Business Days (or such shorter time as the Bank may agree in a particular
instance in its sole discretion) prior to the proposed date of notification of
renewal, the Bank shall renew any Letter of Credit issued by it. Each such
request for renewal of a Letter of Credit shall be made by facsimile, confirmed
immediately in an original writing, in the form of an L/C Amendment Application,
and shall specify in form and detail satisfactory to the Bank: (i) the Letter of
Credit to be renewed; (ii) the proposed date of notification of renewal of the
Letter of Credit (which shall be a Business Day); (iii) the revised expiry date
of the Letter of Credit; and (iv) such other matters as the Bank may require.
The Bank shall be under no obligation so to renew any Letter of Credit if: (A)
the Bank would have no obligation at such time to issue or amend such Letter of
Credit in its renewed form under the terms of this Agreement; or (B) the
beneficiary of any such Letter of Credit does not accept the proposed renewal of
the Letter of Credit. If any outstanding Letter of Credit shall provide that it
shall be automatically renewed unless the beneficiary thereof receives notice
from the Bank that such Letter of Credit shall not be renewed, and if at the
time of renewal the Bank would be obligated to authorize the automatic renewal
of such Letter of Credit in accordance with this subsection 2.15(c) upon the
request of the Company but the Bank shall not have received any L/C Amendment
Application from the Company with respect to such renewal or other written
direction by the Company with respect thereto, the Bank shall nonetheless be
permitted to allow such Letter of Credit to renew, and the Company hereby
authorizes such renewal, and, accordingly, the Bank shall be deemed to have
received an L/C Amendment Application from the Company requesting such renewal.
(d) The Bank may, at its election, deliver any notices of
termination or other communications to any Letter of Credit beneficiary or
transferee, and take any other action as necessary or appropriate, at any time
and from time to time, in order to cause the expiry date of such Letter of
Credit to be a date not later than the Revolving Termination Date.
(e) This Agreement shall control in the event of any conflict with
any L/C-Related Document (other than any Letter of Credit).
2.16 Existing Letters of Credit; Drawings and Reimbursements.
(a) On and after the Closing Date, the Letters of Credit as defined
in the Prior Credit Agreement shall be deemed for all purposes, including for
purposes of the fees to be collected pursuant to subsections 2.20(a) and
2.20(b), and reimbursement of costs and expenses to the extent provided herein,
Letters of Credit outstanding under this Agreement and entitled to the benefits
of this Agreement and the other Loan Documents, and shall be governed by the
applications and agreements pertaining thereto and by this Agreement.
(b) In the event of any request for a drawing under a Letter of
Credit by the beneficiary or transferee thereof, the Bank will promptly notify
the Company. The Company shall reimburse the Bank prior to 10:00 a.m. San
Francisco time, on each date that any amount is paid by the Bank under any
Letter of Credit (each such date, an "Honor Date"), in an amount equal to the
amount so paid by the Bank. In the event the Company fails to reimburse the Bank
for the full amount of any drawing under any Letter of Credit by 10:00 a.m. San
Francisco time on the Honor Date, the Company shall be deemed to have requested
that a Revolving Loan constituting a Base Rate Loan be made by the Bank to be
disbursed on the Honor Date under such Letter of Credit, subject to the amount
of the unutilized portion of the Commitment and subject to the conditions set
forth in Section 4.02. Any notice given by the Bank pursuant to this subsection
2.16(b) may be oral if immediately confirmed in writing (including by
facsimile); provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.
(c) With respect to any unreimbursed drawing that is not converted
into Revolving Loans consisting of Base Rate Loans to the Company in whole or in
part, because of the Company's failure to satisfy the conditions set forth in
Section 4.02 or for any other reason, the Company shall be deemed to have
incurred from the Bank an L/C Borrowing in the amount of such drawing, which L/C
Borrowing shall be due and payable on demand (together with interest) and shall
bear interest at a rate per annum equal to the Base Rate plus the Applicable
Margin then applicable to the Base Rate Loans plus 2% per annum.
2.17 Role of the Bank.
(a) The Company agrees that, in paying any drawing under a Letter of
Credit, the Bank shall not have any responsibility to obtain any document (other
than any sight draft and certificates expressly required by the Letter of
Credit) or to ascertain or inquire as to the validity or accuracy of any such
document or the authority of the Person executing or delivering any such
document.
(b) The Company hereby assumes all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Company's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. The Bank
shall not be liable or responsible for any of the matters described in clauses
(a) through (g) of Section 2.18; provided, however, nothing in such clauses or
this Section shall limit any claim the Company may have against the Bank, or the
Bank's liability to the Company, for any direct, as opposed to consequential or
exemplary, damages suffered by the Company that the Company proves were caused
by the Bank's willful misconduct, bad faith, or gross negligence or the Bank's
willful failure to pay under any Letter of Credit after the presentation to it
by the beneficiary of a sight draft and certificate(s) strictly complying with
the terms and conditions of a Letter of Credit. In furtherance and not in
limitation of the foregoing: (i) the Bank may accept documents that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary; and (ii) the Bank shall
not be responsible for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason.
2.18 Obligations Absolute. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Bank for a drawing under
a Letter of Credit, and to repay any L/C Borrowing and any drawing under a
Letter of Credit converted into Revolving Loans, shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-Related Document under all circumstances,
including the following:
(a) any lack of validity or enforceability of this Agreement or any
L/C-Related Document;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of the Company in respect of any
Letter of Credit or any other amendment or waiver of or any consent to departure
from all or any of the L/C-Related Documents;
(c) the existence of any claim, set-off, defense or other right that
the Company may have at any time against any beneficiary or any transferee of
any Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Bank or any other Person, whether in connection
with this Agreement, the transactions contemplated hereby or by the L/C-Related
Documents or any unrelated transaction;
(d) any draft, demand, certificate or other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect; or any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit;
(e) any payment by the Bank under any Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of any Letter of Credit; or any payment made by the Bank under any Letter
of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in connection with any
Insolvency Proceeding;
(f) any exchange, release or non-perfection of any collateral, or
any release or amendment or waiver of or consent to departure from any other
guarantee, for all or any of the obligations of the Company in respect of any
Letter of Credit; or
(g) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Company or a
guarantor.
2.19 Cash Collateral Pledge. Upon the request of the Bank, if, as of the
Revolving Termination Date, any Letters of Credit may for any reason remain
outstanding and partially or wholly undrawn, then the Company shall immediately
Cash Collateralize the L/C Obligations in an amount equal to the aggregate
undrawn face amount of all Outstanding Letters of Credit.
2.20 Letter of Credit Fees.
(a) The Company shall pay the Bank a per annum fee ("Letter of
Credit Fee") on each Letter of Credit equal to the Letter of Credit Fee
Percentage in effect on the date of each quarterly calculation, computed on the
outstanding undrawn amount of such Letter of Credit as of the date the fee is
calculated, payable quarterly in advance on the Issuance Date and the first day
of each calendar quarter thereafter, and calculated on the basis of a 360 day
year. Such fee shall be prorated if the term of a Letter of Credit is less than
one year. If an Event of Default occurs under this Agreement, at the option of
the Bank, the amount of the fee shall be increased by an additional 2.00% per
annum during the continuance of such Event of Default, commencing on the day the
Bank provides notice of the increase to the Company.
(b) The Company shall pay to the Bank from time to time on demand
the normal issuance, presentation, amendment and other processing fees, and
other standard costs and charges, of the Bank relating to letters of credit as
from time to time in effect.
2.21 Uniform Customs and Practice. The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce most
recently at the time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to the Letters of Credit.
2.22 Extension of Commitments. Not less than 60 days nor more than 120
days before each anniversary date of this Agreement, the Company may, by written
request delivered to the Bank, request that the Revolving Termination Date be
extended for a period of 364 days from the then-current Revolving Termination
Date. The Bank shall respond to the Company's request not less than 30 days
prior to each anniversary date. If the Bank approves the extension request, the
Bank will notify the Company thereof, and the Revolving Termination Date shall
thereupon be extended for 364 days. Each request for an extension of the
Revolving Termination Date under this Section shall contain a certification by a
Responsible Officer that, as of the date of such request, (i) the
representations and warranties in Article V are true and correct on and as of
such date with the same effect as if made on and as of such date (except to the
extent such representations and warranties expressly refer to an earlier date,
in which case they shall be true and correct as of such earlier date), and (ii)
no Default or Event of Default exists or would result from such extension.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes.
(a) (i) If, as a result of the Company's actions, any taxes, (other
than income taxes imposed by the country or any state or subdivision of the
country in which the Bank's principal office or actual lending office is
located) are imposed on any payments under or in respect of this Agreement or
any instrument or agreement required hereunder including, but not limited to,
payments made pursuant to this Section, the Company shall pay all such taxes and
shall also pay to the Bank promptly all additional amounts which are reasonably
necessary to preserve the after-tax yield the Bank would have received if such
taxes had not been imposed.
(ii) The additional amounts necessary to preserve the after-tax
yield the Bank would have received if such taxes had not been imposed shall be
calculated pursuant to the formula:
(w)(t)(i)
y = ----------------
1-w-t
where the terms are defined as follows:
y = additional payment to be made to Bank
w = withholding tax rate levied by foreign government
t = the Bank's combined Federal and state tax rate
i = stated interest amount to be paid on credit (calculated using
the applicable contract rate plus quoted spread)
1 = one
(b) All payments made to the Bank under this Agreement shall be net
of all applicable U.S. withholding taxes.
(c) The Company will provide the Bank with original tax receipts,
notarized copies of tax receipts, or such other documentation as will prove
payment of tax in a court of law applying the United States Federal Rules of
Evidence, for all taxes paid by the Company pursuant to subsection 3.01(a)
above. The Company will deliver receipts to the Bank within 30 days after the
due date for the related tax.
(d) Nothing contained in this Section shall override any term or
provision of any Specified Swap Contract regarding withholding taxes relating to
Swap Contracts.
3.02 Illegality.
(a) If, after the date of this Agreement, the Bank shall reasonably
determine that the introduction of any Requirement of Law, or any change in any
Requirement of Law or in the interpretation or administration thereof, has made
it unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for the Bank or its Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Bank to the Company, the
obligation of the Bank to make Offshore Rate Loans shall be suspended until the
Bank shall have notified the Company that the circumstances giving rise to such
determination no longer exists.
(b) If, after the date of this Agreement, the Bank shall reasonably
determine that it is unlawful to maintain any Offshore Rate Loan, the Company
shall prepay in full all Offshore Rate Loans of the Bank then outstanding,
together with interest accrued thereon, either on the last day of the Interest
Period thereof if the Bank may lawfully continue to maintain such Offshore Rate
Loans to such day, or immediately, if the Bank may not lawfully continue to
maintain such Offshore Rate Loans, together with any amounts required to be paid
in connection therewith pursuant to Section 3.04.
(c) If the Company is required to prepay any Offshore Rate Loan
immediately as provided in subsection 3.02(b), then concurrently with such
prepayment, the Company may borrow from the Bank, in the amount of such
repayment, a Base Rate Loan.
(d) If the obligation of the Bank to make or maintain Offshore Rate
Loans has been so terminated or suspended, the Company may elect, by giving
notice to the Bank, that all Loans which would otherwise be made by the Bank as
Offshore Rate Loans shall be instead Base Rate Loans.
3.03 Increased Costs and Reduction of Return.
(a) If the Bank shall determine that, due to either (i) the
introduction, after the date of this Agreement, of or any change in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request, made after the date of this Agreement, from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to the Bank of agreeing to make or
making, funding or maintaining any Offshore Rate Loans, then the Company shall
be liable for, and shall from time to time, upon demand therefor by the Bank pay
to the Bank additional amounts as are sufficient to compensate the Bank for such
increased costs; provided that the Bank shall have given the Company prompt
notice of such introduction, guideline, or request, as applicable.
(b) If the Bank shall have determined that (i) the introduction,
after the date of this Agreement, of any Capital Adequacy Regulation, (ii) any
change, after the date of this Agreement, in any Capital Adequacy Regulation,
(iii) any change, after the date of this Agreement, in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or (iv) compliance by the Bank (or its Lending Office) or any
corporation controlling the Bank, with any Capital Adequacy Regulation enacted
or adopted after the date of this Agreement; affects or would affect the amount
of capital required or expected to be maintained by the Bank or any corporation
controlling the Bank and (taking into consideration the Bank's or such
corporation's policies with respect to capital adequacy and the Bank's desired
return on capital) the Bank determines in good faith that the amount of such
capital is increased as a consequence of its loans, credits or obligations under
this Agreement, then, upon demand of the Bank the Company shall immediately pay
to the Bank, from time to time as specified by the Bank, additional amounts
sufficient to compensate the Bank for such increase. The Bank agrees to give the
Company prompt notice of any such Capital Adequacy Regulation, change in Capital
Adequacy Regulation, change in the interpretation or administration of Capital
Adequacy Regulation.
3.04 Funding Losses. The Company agrees to reimburse the Bank and hold
the Bank harmless from any loss or expense which the Bank may sustain or incur
as a consequence of:
(a) The failure of the Company to make on a timely basis any payment
or prepayment of principal of any Offshore Rate Loan (including payments made
after any acceleration thereof);
(b) The failure of the Company to borrow, continue or convert a Loan
after the Company has given (or is deemed to have given) a Notice of Borrowing
or a Notice of Conversion/ Continuation;
(c) The failure of the Company to make any prepayment after the
Company has given a notice in accordance with Section 2.06;
(d) The prepayment (including pursuant to Section 2.07) or other
payment (including after acceleration thereof) of an Offshore Rate Loan on a day
that is not the last day of the relevant Interest Period; or
(e) The automatic conversion under Section 2.04 of any Offshore Rate
Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained. For purposes of
calculating amounts payable by the Company to the Bank under this Section and
under subsection 3.03(a), each Offshore Rate Loan made by the Bank (and each
related reserve, special deposit or similar requirement) shall be conclusively
deemed to have been funded at the Offshore Rate for such Offshore Rate Loan by a
matching deposit or other borrowing in the interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such Offshore Rate
Loan is in fact so funded.
3.05 Inability to Determine Rates. If the Bank determines that for any
reason adequate and reasonable means do not exist for determining the Offshore
Rate for any requested Interest Period with respect to a proposed Offshore Rate
Loan, or that the Offshore Rate applicable pursuant to subsection 2.09(a) for
any requested Interest Period with respect to a proposed Offshore Rate Loan does
not adequately and fairly reflect the cost to the Bank of funding such Loan, the
Bank will promptly so notify the Company. Thereafter, the obligation of the Bank
to make or maintain Offshore Rate Loans hereunder shall be suspended until the
Bank revokes such notice in writing. Upon receipt of such notice, the Company
may revoke any Notice of Borrowing or Notice of Conversion/Continuation then
submitted by it. If the Company does not revoke such Notice, the Bank shall
make, convert or continue the Loans, as proposed by the Company, in the amount
specified in the applicable notice submitted by the Company, but such Loans
shall be made, converted or continued as Base Rate Loans instead of Offshore
Rate Loans.
3.06 Reserves on Offshore Rate Loans. The Company shall pay to the Bank,
as long as the Bank shall be required under regulations of the FRB to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"),
additional costs on the unpaid principal amount of each Offshore Rate Loan equal
to the actual costs of such reserves allocated to such Loan by the Bank (as
determined by the Bank in good faith, which determination shall be conclusive),
payable on each date on which interest is payable on such Loan, provided the
Company shall have received at least 15 days' prior written notice of such
additional costs from the Bank. If the Bank fails to give notice 15 days prior
to the relevant Interest Payment Date, such additional costs shall be payable 15
days from receipt of such notice.
3.07 Survival. The agreements and obligations of the Company in this
Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions of Initial Loans. The obligation of the Bank (x) to Issue
the first Letter of Credit after the date of this Agreement, and (y) to make its
initial Loan hereunder is subject to the condition that the Bank has received on
or before the Closing Date all of the following, in form and substance
satisfactory to the Bank:
(a) Credit Agreement. This Agreement executed by each party thereto;
(b) Company Security Agreement. The Company Security Agreement
executed by each party thereto;
(c) Evidence of Filings. Evidence of all filings and lien searches
to perfect and establish the first priority liens created by the Company
Security Agreement;
(d) Resolutions; Incumbency.
(1) Copies of the resolutions of the board of directors of the
Company authorizing the transactions contemplated hereby, certified as of the
Closing Date by the Secretary or an Assistant Secretary of the Company;
(2) A certificate of the Secretary or Assistant Secretary of the
Company, certifying the names and true signatures of the officers of the Company
authorized to execute, deliver and perform, as applicable, this Agreement, and
all other Loan Documents to be delivered by it hereunder;
(e) Legal Opinion. An opinion of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Assistant
General Counsel of the Company and addressed to the Bank, in form and substance
reasonably acceptable to the Bank;
(f) Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date, and all fees accrued through the Closing Date under the
Prior Credit Agreement, together with Attorney Costs of the Bank to the extent
invoiced prior to or on the Closing Date, plus such additional amounts of
Attorney Costs as shall constitute the Bank's reasonable estimate of Attorney
Costs incurred or to be incurred by it through the closing proceedings (provided
that such estimate shall not thereafter preclude final settling of accounts
between the Company and the Bank) including any such costs, fees and expenses
arising under or referenced in Sections 2.10 and 9.04;
(g) Certificate. A certificate signed by a Responsible Officer of
the Company, dated as of the Closing Date, stating that:
(1) the representations and warranties contained in Article V
are true and correct on and as of such date, as though made on and as of such
date;
(2) no Default or Event of Default exists or would result from
the making of the first Loan; and
(3) there has occurred since March 31, 2001, no event or
circumstance that has resulted or could reasonably be expected to result in a
Material Adverse Effect.
4.02 Conditions to All Loans and Letters of Credit. The obligation of the
Bank to make any Loan to be made by it (including its initial Loan), to continue
any Offshore Rate Loan or convert any Loan into an Offshore Rate Loan, and to
Issue any Letter of Credit (including the initial Issuance) from and after the
date of this Agreement is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date or Conversion/Continuation
Date:
(a) Notice of Borrowing or Conversion/Continuation; L/C Application.
The Bank shall have received a Notice of Borrowing, Notice of
Conversion/Continuation, or a properly completed L/C Application for the
Issuance of a Letter of Credit, as applicable;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article V shall be true and correct on and as
of such Borrowing Date, Conversion/Continuation Date, or Issuance Date with the
same effect as if made on and as of such Borrowing Date, Conversion/Continuation
Date, or Issuance Date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and correct
as of such earlier date);
(c) No Existing Default. No Default or Event of Default shall exist
or shall result from the making of such Loan or its continuation or conversion;
or from the Issuance of such Letter of Credit;
(d) No Future Advance Notice. The Bank shall not have received from
the Company any notice that any Collateral Document will no longer secure on a
first priority basis future advances or future Loans to be made or extended, and
Letters of Credit to be Issued under this Agreement; and
(e) Other Documents. Such other approvals, opinions, documents or
materials as the Bank may reasonably request (each in form and substance
satisfactory to the Bank).
Each Notice of Borrowing, Notice of Conversion/Continuation with respect to the
continuation of or conversion into an Offshore Rate Loan, or L/C Application
submitted by the Company hereunder shall constitute a representation and
warranty by the Company hereunder, as of the date of each such notice, as of
each Borrowing Date, Conversion/Continuation Date, or Issuance Date, as
applicable, that the conditions in Section 4.02 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Bank that, except as
disclosed in MGHI's Form 10-K for the year ended December 31, 2000 or the Form
10-Q for the quarter ended March 31, 2001 or the Schedules attached hereto:
5.01 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) Is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization;
(b) Has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business
and to execute, deliver, and perform its obligations under the Loan Documents;
(c) Is duly qualified as a foreign corporation or other entity and
is licensed and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification or license; and
(d) Is in compliance with all Requirements of Law;
except, in each case referred to in clause (c) or clause (d), to the extent that
the failure to do so could not reasonably be expected to have a Material Adverse
Effect.
5.02 Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company of this Agreement and each other Loan Document to
which the Company is party, have been duly authorized by all necessary corporate
action, and do not and will not:
(a) Contravene the terms of any of the Company's Organization
Documents;
(b) Conflict with or result in any breach or contravention of, or
the creation of any Lien under, any document evidencing any material Contractual
Obligation to which the Company or any of its Subsidiaries is a party or any
order, injunction, writ or decree of any Governmental Authority to which Company
or any of its Subsidiaries or its property is subject; or
(c) Violate, to the Company's knowledge, any Requirement of Law.
5.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority (except for recordings or filings in connection with the
Liens granted to the Bank under the Collateral Documents) is necessary or
required to be obtained, given, or filed by the Company in connection with the
execution, delivery or performance by, or enforcement against, the Company of
this Agreement or any other Loan Document.
5.04 Binding Effect. This Agreement and each other Loan Document to which
the Company is a party constitute the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability.
5.05 Litigation. Except as specifically disclosed in Schedule 5.05, there
are no actions, suits, proceedings, claims or disputes pending, or to the best
knowledge of the Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Company, or its
Subsidiaries or any of their respective properties which:
(a) Purport to affect or pertain to this Agreement or any other Loan
Document, or any of the transactions contemplated hereby or thereby; or
(b) Has a reasonable probability of being determined adversely to
the Company or its Subsidiaries and, if so determined, would reasonably be
expected to have a Material Adverse Effect. No injunction, writ, temporary
restraining order or any order of any nature has been issued by any court or
other Governmental Authority purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any other Loan Document, or
directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
5.06 No Default. No Default or Event of Default exists or would result
from the incurring of any Obligations by the Company or from the grant or
perfection of the Liens of the Bank on the Collateral. As of the Closing Date,
neither the Company nor any Subsidiary of the Company is in default under or
with respect to any Contractual Obligation in any respect which, individually or
together with all such defaults, could reasonably be expected to have a Material
Adverse Effect, or that would, if such default had occurred after the Closing
Date, create an Event of Default under subsection 8.01(d).
5.07 ERISA Compliance. Except as specifically disclosed in Schedule
5.07:
(a) To the Company's knowledge, each Plan is in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law. Each Plan which is intended to qualify under Section
401(a) of the Code has received a favorable determination letter from the IRS at
the time of Plan adoption and to the best knowledge of the Company, nothing has
occurred which would cause the loss of such qualification. The Company and each
ERISA Affiliate has made all required contributions to any Plan subject to
Section 412 of the Code, and no application for a funding waiver or an extension
of any amortization period pursuant to Section 412 of the Code has been made
with respect to any Plan within the five plan years preceding the Closing Date.
In connection with the foregoing, the PALCO Retirement Plan has been amended and
restated as of December 1, 1989, has been subsequently amended three times to
date, and received a favorable determination letter from the IRS dated January
10, 1996.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) Within the five years preceding the Closing Date, (i) no ERISA
Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has
any Unfunded Pension Liability that would reasonably be expected to have a
Material Adverse Effect; (iii) neither the Company nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability under Title IV of ERISA
with respect to any Pension Plan (other than premiums due and not delinquent
under Section 4007 of ERISA); (iv) neither the Company nor any ERISA Affiliate
has incurred, or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (v) neither the Company nor any ERISA Affiliate has
engaged in a transaction that could be reasonably be expected to be subject to
Section 4069 or 4212(c) of ERISA.
5.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to
be used solely for the purposes set forth in and permitted by Section 6.12 and
Section 7.07. Neither the Company nor any Subsidiary of the Company is generally
engaged in the business of purchasing or selling Margin Stock or extending
credit for the purpose of purchasing or carrying Margin Stock.
5.09 Title to Properties. The Company and each of its Subsidiaries have
good record and marketable title in fee simple to, or valid leasehold interests
in, all real property necessary or used in the ordinary conduct of their
respective businesses, except for such defects in title as could not,
individually or in the aggregate, have a Material Adverse Effect. As of the
Closing Date, the property of the Company and its Subsidiaries is subject to no
Liens, other than Permitted Liens.
5.10 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company or
any of its Subsidiaries that would, if made, have a Material Adverse Effect.
5.11 Financial Condition.
(a) The reviewed consolidated financial statements of the Company
and its Subsidiaries dated December 31, 2000 and the related consolidated
statements of income or operations, shareholders' equity or members' capital and
cash flows for the fiscal year ended on that date and the unaudited quarterly
financial statements of the Company and its Subsidiaries dated March 31, 2001,
and the related consolidated statements of income or operations, shareholders'
equity or members' capital and cash flows for the fiscal quarter ended on that
date;
(1) Were (except for the exclusion of notes in connection with
the unaudited quarterly financial statements) prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein, subject, in the case of the quarterly financial
statements, to ordinary, good faith year-end audit adjustments;
(2) Are, in all material respects, complete and accurate, and
fairly present the financial condition of the Company and its Subsidiaries as of
the date thereof and results of operations for the period covered thereby; and
(3) Show all material indebtedness and other liabilities, direct
or contingent, of the Company and its consolidated Subsidiaries as of the date
thereof, including liabilities for taxes, material commitments and Contingent
Obligations.
(b) Since March 31, 2001, there has been no Material Adverse Effect.
5.12 Environmental Matters.
(a) Except as specifically disclosed in Schedule 5.12, the on-going
operations of the Company and each of its Subsidiaries comply in all respects
with all Environmental Laws, except such non-compliance which would not (if
enforced in accordance with applicable law) reasonably be expected to result in
liability which would cause a Material Adverse Effect;
(b) Except as specifically disclosed in Schedule 5.12, the Company
and each of its Subsidiaries have obtained all material licenses, permits,
authorizations and registrations required under any Environmental Law
("Environmental Permits") and necessary for their respective ordinary course
operations, all such material Environmental Permits are in good standing, and
the Company and each of its Subsidiaries are in compliance with all material
terms and conditions of such Environmental Permits.
(c) Except as specifically disclosed in Schedule 5.12, none of the
Company, any of its Subsidiaries or any of their respective present property or
operations, is subject to any outstanding written order from or agreement with
any Governmental Authority, nor subject to any judicial or docketed
administrative proceeding, respecting any Environmental Law, Environmental Claim
or Hazardous Material, the non-compliance with which could be reasonably be
expected to have a Material Adverse Effect.
(d) Except as specifically disclosed in Schedule 5.12, there are no
Hazardous Materials or other conditions or circumstances existing with respect
to any property of the Company or any of its Subsidiaries, or arising from
operations prior to the Closing Date, of the Company or any of its Subsidiaries
that would reasonably be expected to give rise to Environmental Claims for any
such condition, circumstance or property that could reasonably be expected to
have a Material Adverse Effect. In addition, to the best of the Company's
knowledge, (i) neither the Company nor any of its Subsidiaries has any
underground storage tanks (x) that are not properly registered or permitted in
all material respects under applicable Environmental Laws, or (y) that are
leaking or disposing of Hazardous Materials off-site in a manner that could
reasonably be expected to cause a Material Adverse Effect, and (ii) the Company
and its Subsidiaries have notified all of their employees of the existence, if
any, of any health hazard arising from the conditions of their employment and
have met all notification requirements under Title III of CERCLA and all other
Environmental Laws.
5.13 Collateral Documents.
(a) The provisions of each of the Collateral Documents are effective
to create in favor of the Bank, a legal, valid and enforceable first priority
security interest in all right, title and interest of the Company in the
collateral described therein.
(b) All representations and warranties of the Company contained in
the Collateral Documents are true and correct.
5.14 Regulated Entities. None of the Company, any Person controlling the
Company, or any Subsidiary of the Company, is (a) an "Investment Company" within
the meaning of the Investment Company Act of 1940; or (b) subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur Indebtedness.
5.15 No Burdensome Restrictions. Neither the Company nor any of its
Subsidiaries is a party to or bound by any Contractual Obligation, or subject to
any restriction in any Organization Document, or any Requirement of Law, which
could reasonably be expected to have a Material Adverse Effect.
5.16 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
5.16 hereto and has no material equity investments in any other corporation or
entity other than those specifically disclosed in part (b) of Schedule 5.16.
5.17 Insurance. The properties of the Company and its Subsidiaries are
insured with financially sound and reputable insurance companies, and to the
knowledge of the Company, in such amounts, with such deductibles and covering
such risks as are customarily carried by companies engaged in similar businesses
and owning similar properties in localities where the Company or such Subsidiary
operates.
5.18 Solvency. The Company and SPC are each Solvent.
5.19 Swap Obligations.
(a) As of the Closing Date, neither the Company nor any of its
Subsidiaries has incurred any outstanding obligations under any Swap Contracts.
With respect to any Swap Contracts that may be entered into by the Company after
the Closing Date, the Company represents and warrants that it has undertaken its
own independent assessment of its consolidated assets, liabilities and
commitments and has considered appropriate means of mitigating and managing
risks associated with such matters and has not relied on any Swap Provider or
any Affiliate of any Swap Provider, swap counterparty or any Affiliate of any
swap counterparty, in determining whether to enter into any Swap Contract.
(b) The Company has not entered into any master agreement relating
to Swap Contracts and under which termination values resulting from Swap
Contracts that are Specified Swap Contracts are nettable against termination
values resulting from Swap Contracts that are not Specified Swap Contracts
unless only Specified Swap Contracts are outstanding under such master
agreement.
(c) None of the Subsidiaries of the Company has entered into any
Swap Contracts other than as disclosed in the SEC filings of SPC.
5.20 Full Disclosure. None of the representations or warranties made by
the Company in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of the
Company in connection with the Loan Documents, contains any untrue statement of
a material fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.
5.21 Labor Relations. There are no material strikes, lockouts or other
labor disputes against the Company or any of its Subsidiaries, or, to the best
of the Company's knowledge, threatened against or affecting the Company or any
of its Subsidiaries, and no significant unfair labor practice complaint is
pending against the Company or any of its Subsidiaries or, to the best knowledge
of the Company, threatened against any of them before any Governmental
Authority.
5.22 Compliance with Laws. The Company has complied in all material
respects with all federal, state, and local laws, rules, and regulations
applicable to the business of the Company including, but not limited to, laws
regulating the Company's sales or the furnishing of services to Receivable
Debtors and disclosures in connection therewith.
5.23 Merchantable Inventory. All inventory which is included in the
Borrowing Base is of good and merchantable quality in all material respects.
5.24 Location of the Company. On the Closing Date, the Company's place of
business (or, if the Company has more than one place of business, its chief
executive office) is located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, so long as the Bank shall have
any commitment to extend credit hereunder, or any Loan, L/C Obligation, or other
outstanding monetary Obligation shall remain unpaid or unsatisfied, unless the
Bank waives compliance in writing:
6.01 Financial Statements. The Company shall deliver to the Bank, in
form and detail satisfactory to the Bank:
(a) As soon as available, but not later than 105 days after the end
of each fiscal year, a copy of the audited consolidated balance sheets of MGHI
and SPC as at the end of such year and the related consolidated statements of
income, shareholders' equity or members' capital and cash flows for such fiscal
year, setting forth in each case in comparative form the figures for the
previous year, and accompanied by the opinion of a nationally-recognized
independent public accounting firm which report shall state that such
consolidated financial statements present fairly the financial position for the
periods indicated in conformity with GAAP;
(b) As soon as available, but not later than 105 days after the end
of each fiscal year, a copy of the consolidated balance sheet of the Company as
at the end of such year and the related consolidated statements of income,
shareholders' equity and cash flows for such fiscal year, setting forth in each
case in comparative form the figures for the previous year, together with
written confirmation that such financial statements have been reviewed by the
independent public accounting firm that prepared the audited financial
statements being simultaneously delivered pursuant to subsection 6.01(a);
(c) (i) As soon as available, but not later than 60 days after the
end of each of the first three fiscal quarters of each year, the Forms 10-Q for
the relevant fiscal quarters for each of MGHI and SPC; and (ii) as soon as
available, but not later than 60 days after the end of each fiscal quarter, on
an Unconsolidated Basis, the unaudited balance sheet of the Company at the end
of such quarter and the related statements of income, shareholders' equity and
cash flows for the Company on an Unconsolidated Basis for the year to date
ending such fiscal quarter, each certified by a Responsible Officer of the
Company as having been used or as shall be used in connection with the
preparation of the financial statements referred to in subsection 6.01(b) and
(c)(i);
(d) Within 45 days after the end of each monthly accounting period,
and as of the last day of such period, Company-prepared financial statements for
the Company for such month in form consistent with prior practice;
(e) Promptly upon each request of Bank, such other statements, lists
of property and accounts, budgets, forecasts or reports as to the Company as
Bank may reasonably request;
6.02 Certificates; Other Information. The Company shall furnish to the Bank:
(a) Concurrently with the delivery of the financial statements
referred to in subsections 6.01(a) and (b) above, a Compliance Certificate
executed by a Responsible Officer of the Company;
(b) Within 45 days after the end of each monthly accounting period,
and as of the last day of such period:
(1) A Borrowing Base Certificate;
(2) A description of lumber and log inventories with book and
market value;
(3) Statements showing an aging and reconciliation of
Receivables;
(c) Promptly after the same are sent, copies of all financial
statements and reports which the Company sends to its public shareholders, if
any; and promptly after the same are filed, copies of all financial statements
and regular, periodical or special reports which the Company may make to, or
file with, the SEC or any similar Governmental Authority; and
(d) On or before each March 31, the following prepared on a
consolidated basis (which information shall be considered as confidential
information pursuant to Section 9.09, whether or not identified as
"confidential" or "secret"):
(1) The Company's annual business plan, and if requested by
Bank, the Company's key operating assumptions, such as timber harvest volumes,
log consumption and lumber production, wood product shipments, projected prices
of logs, lumber and other products sold by the Company, capital expenditures,
and expected debt repayments and/or borrowings. The Company agrees to meet with
the Bank, at least once a year, to discuss the foregoing matters;
(2) The Company's "Category of species and inventory of timber",
the annual harvest plan indicating timber harvest volumes by major categories,
and a listing of approved timber harvest plans;
(e) Within the 60 day period commencing on the first day of each
calendar quarter, an updated status report of the Company's approved timber
harvest plans (which information shall be considered as confidential information
pursuant to Section 9.09, whether or not identified as "confidential" or
"secret");
(f) Promptly, such additional business, financial, corporate affairs
and other information as the Bank may from time to time reasonably request
(which information shall be considered as confidential information pursuant to
Section 9.09, whether or not identified as "confidential" or "secret").
6.03 Notices. The Company shall promptly notify the Bank:
(a) Of the occurrence of any Default or Event of Default, and of the
occurrence or existence of any event or circumstance that foreseeably will
become a Default or Event of Default;
(b) Of (i) any breach or non-performance of, or any default under,
any Contractual Obligation of the Company or any of its Subsidiaries which could
reasonably be expected to result in a Material Adverse Effect; and (ii) any
dispute, litigation, investigation, proceeding or suspension which may exist at
any time between the Company or any of its Subsidiaries and any Governmental
Authority which could reasonably be expected to result in a Material Adverse
Effect;
(c) Of the commencement of, or any material adverse development in,
any litigation or proceeding affecting the Company or any Subsidiary of the
Company which, if adversely determined, would reasonably be expected to have a
Material Adverse Effect, or in which the relief sought is an injunction or other
stay of the performance of this Agreement or any Loan Document (such obligation
to give notice shall be deemed satisfied by the Company giving the Bank,
pursuant to Section 6.02(c), the reports containing the required information
furnished by the Company, MGHI, or SPC to the SEC);
(d) Promptly upon becoming aware of any of the following that could
reasonably be expected to have a Material Adverse Effect: (i) any and all
enforcement, cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened against the Company or any of its
Subsidiaries or any of their respective properties pursuant to any applicable
Environmental Laws, (ii) all other Environmental Claims, and (iii) any
environmental or similar condition on any real property adjoining or in the
vicinity of the property of the Company or any of its Subsidiaries that could
reasonably be anticipated to cause such property or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or use
of such property under any Environmental Laws;
(e) Of any other litigation or proceeding affecting the Company or
any of its Subsidiaries which the Company, MGHI, or SPC would be required to
report to the SEC pursuant to the Exchange Act, promptly after reporting the
same to the SEC;
(f) Of any of the following events affecting the Company, together
with a copy of any notice with respect to such event that may be required to be
filed with a Governmental Authority and any notice delivered by a Governmental
Authority to the Company with respect to such event:
(1) An ERISA Event;
(2) If any of the representations and warranties in Section 5.07
ceases to be true and correct in any material respect;
(3) The adoption of any new Pension Plan or other Plan subject
to Section 412 of the Code;
(4) The adoption of any amendment to a Pension Plan or other
Plan subject to Section 412 of the Code, if such amendment results in a material
increase in contributions or Unfunded Pension Liability; or
(5) The commencement of contributions to any Pension Plan or
other Plan subject to Section 412 of the Code;
(g) Any Material Adverse Effect subsequent to the date of the most
recent audited financial statements delivered to the Banks pursuant to
subsection 6.01(a);
(h) Of any material change in accounting policies or financial
reporting practices by the Company or any of its Subsidiaries;
(i) Of any labor controversy resulting in or which could reasonably
be expected to result in any strike, work stoppage, boycott, shutdown or other
labor disruption against or involving the Company or any of its Subsidiaries;
(j) Of any change in the Company's name, business or legal
structure, place of business, or chief executive office if the Company has more
than one place of business; each such notice to be given in writing and not less
than 45 days prior to such change;
(k) Of the entry by the Company into any Specified Swap Contract,
together with the details thereof;
(l) Of the occurrence of any default, event of default, termination
event or other event under any Specified Swap Contract that after the giving of
notice, passage of time or both, would permit either counterparty to such
Specified Swap Contract to terminate early any or all trades relating to such
contract.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer of the Company setting forth details of the
occurrence referred to therein, and stating what action the Company or any
affected Subsidiary of the Company proposes to take with respect thereto and at
what time. Each notice under subsection 6.03(a) shall describe with
particularity any and all clauses or provisions of this Agreement or other Loan
Document that have been (or foreseeably will be) breached or violated.
6.04 Preservation of Corporate Existence, Etc. The Company shall, and
shall cause each of its Restricted Subsidiaries to:
(a) Preserve and maintain in full force and effect its legal
existence and good standing under the laws of its state or jurisdiction of
organization (other than as to Restricted Subsidiaries other than SPC whose
dissolution could not reasonably be expected to cause a Material Adverse
Effect);
(b) Preserve and maintain in full force and effect all material
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the ordinary course of business except in connection with
transactions permitted by Section 7.03 and dispositions of assets permitted by
Section 7.02;
(c) Use reasonable efforts, in the ordinary course of business, to
preserve its business organization and preserve the goodwill and business of the
customers, suppliers, and others having material business relations with it.
6.05 Maintenance of Property. The Company shall maintain, and shall cause
each of its Subsidiaries to maintain, and preserve all its property which is
used or useful in its business in good working order and condition, ordinary
wear and tear excepted and make all necessary repairs thereto and renewals and
replacements thereof except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect, except as permitted by Section 7.02.
The Company and each Subsidiary of the Company shall use the standard of care
typical in the industry in the operation and maintenance of its facilities and
in the care and preservation of its timberlands.
6.06 Insurance.
(a) In addition to insurance requirements set forth in the
Collateral Documents, the Company shall maintain and shall cause each of its
Subsidiaries to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons; including workers'
compensation insurance, comprehensive general liability and property insurance.
The Company may self-insure any or all Workers' Compensation liabilities.
(b) To the extent that any of the insurance required by this clause
ceases to be available at commercially reasonable rates, the Company may effect
substitute insurance coverage therefor in accordance with the prudent standards
then being followed by other companies engaged in the same or similar business
or having comparable properties. In the event that the Company wishes to effect
substitute coverage pursuant to the foregoing proviso, it will notify the Bank
of such intent as soon as reasonably practicable, and not less than five
Business Days prior to the termination of the coverage for which substitution is
to be made, furnish the Bank with a report describing in reasonable detail the
nature of such substitute coverage and the reasons why the Company believes that
such substitute coverage is appropriate.
(c) Upon request of the Bank, the Company shall furnish the Bank at
reasonable intervals (but not more than once per calendar year) a certificate of
a Responsible Officer of the Company or any insurance broker of the Company
setting forth the nature and extent of all insurance maintained by the Company
and its Subsidiaries in accordance with this Section or any Collateral Documents
(and which, in the case of a certificate of a broker, were placed through such
broker).
6.07 Payment of Obligations. With only such exceptions as could not
reasonably be expected to have a Material Adverse Effect, the Company shall, and
shall cause its Subsidiaries to, pay and discharge as the same shall become due
and payable, all their respective obligations and known liabilities, including:
(a) All tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by the Company or such Subsidiary;
(b) All lawful claims which, if unpaid, would by law become a Lien
upon its property unless such claims are contested in good faith by appropriate
proceedings and adequate reserves in accordance with GAAP are being maintained
by the Company and such Subsidiaries;
(c) All Indebtedness, as and when due and payable, but subject to
any subordination provisions contained in any instrument or agreement evidencing
such Indebtedness; and
(d) All Obligations.
6.08 Compliance with Laws. The Company shall comply, and shall cause each
of its Subsidiaries to comply, in all material respects with all Requirements of
Law of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
6.09 Compliance with ERISA. The Company shall, and to the fullest extent
permitted by applicable law shall cause each of its ERISA Affiliates to: (a)
maintain each Plan in compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state law; (b) cause each
Plan which is qualified under Section 401(a) of the Code to maintain such
qualification; and (c) make all required contributions to any Plan subject to
Section 412 of the Code.
6.10 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each of its Subsidiaries to maintain proper books of
record and account, in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of the Company and such Subsidiary.
The Company shall permit, and shall cause each of its Subsidiaries to permit,
representatives of the Bank to visit, inspect, and audit any of their respective
properties, to examine their respective corporate, financial and operating
records, and make copies thereof or abstracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective directors,
officers, and independent public accountants, all at the expense of the Company
and at such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Company; provided,
however, when an Event of Default exists the Bank may do any of the foregoing at
the expense of the Company at any time during normal business hours and without
advance notice.
6.11 Environmental Laws.
(a) The Company shall, and shall cause each of its Subsidiaries to,
conduct its operations and keep and maintain its property in compliance in all
material respects with all applicable Environmental Laws, except such as may be
contested in good faith by appropriate proceedings or as to which a bona fide
dispute may exist and resolution of which is being sought by appropriate
proceedings.
(b) Upon the written request of the Bank, the Company shall submit
and cause each of its Subsidiaries to submit, to the Bank, at the Company's sole
cost and expense, at reasonable intervals, a report providing an update of the
status of any environmental, health or safety compliance, hazard or liability
issue identified in any notice or report required pursuant to subsection
6.03(d), that could, individually or in the aggregate, result in liability
having a Material Adverse Effect.
6.12 Use of Proceeds. The Company shall use the proceeds of the Revolving
Loans for working capital and other general corporate purposes and not in
contravention of any Requirement of Law or of any Loan Document.
6.13 Solvency. The Company shall at all times be, and shall cause SPC to
be, Solvent.
6.14 Protection of Collateral; Access. The Company shall take all steps
reasonably necessary or advisable to preserve and protect the Collateral and
ensure that the Bank's rights and access to and interests in the Collateral are
not in any way materially impaired or adversely affected.
6.15 Further Assurances.
(a) The Company shall ensure that all written information, exhibits
and reports furnished to the Bank do not and will not contain any untrue
statement of a material fact and do not and will not omit to state any material
fact or any fact necessary to make the statements contained therein not
misleading in light of the circumstances in which made, and will promptly
disclose to the Bank and correct any defect or error that may be discovered
therein or in any Loan Document or in the execution, acknowledgement or
recordation thereof.
(b) Promptly upon request by the Bank, the Company shall do,
execute, acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, security
agreements, mortgages, assignments, estoppel certificates, financing statements
and continuations thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments the Bank may
reasonably require from time to time in order (i) to carry out more effectively
the purposes of this Agreement or any other Loan Document, (ii) to subject to
the Liens created by any of the Collateral Documents any of the properties,
rights or interests covered by any of the Collateral Documents, (iii) to perfect
and maintain the validity, effectiveness and priority of any of the Collateral
Documents and the Liens intended to be created thereby, and (iv) to better
assure, convey, grant, assign, transfer, preserve, protect and confirm to the
Bank the rights granted or now or hereafter intended to be granted to the Bank
under any Loan Document or under any other document executed in connection
therewith.
ARTICLE VII
NEGATIVE COVENANTS
The Company hereby covenants and agrees that, so long as the Bank shall
have any commitment to extend credit hereunder, or any Loan, L/C Obligation, or
other outstanding monetary Obligation shall remain unpaid or unsatisfied, unless
the Bank waives compliance in writing:
7.01 Limitation on Liens. The Company shall not, and shall not suffer or
permit any of its Restricted Subsidiaries to, directly or indirectly, make,
create, incur, assume or suffer to exist any Lien upon or with respect to any
part of its property, whether now owned or hereafter acquired, other than the
following ("Permitted Liens"):
(a) Any Lien (other than Liens on the Collateral) existing on the
property of the Company or its Subsidiaries on the Closing Date and set forth in
Schedule 7.01 securing Indebtedness outstanding on such date or refinancings
thereof provided that each such refinancing of an Indebtedness shall not result
in any of the following: (1) an increase in the interest rate and/or the then
outstanding principal amount of the Indebtedness being refinanced, (2) any
additional assets of the Company or any of its Restricted Subsidiaries securing
the Indebtedness being refinanced, (3) the Company or any Restricted Subsidiary
incurring any Guaranty Obligation in connection therewith; and (4) an increase,
during the term of this Agreement and for one year thereafter, in the principal
payments of the Indebtedness being refinanced, and (5) any restriction on the
ability of the Company to perform its obligations under this Agreement and any
other Loan Document;
(b) Any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 6.07, provided that no Notice
of Lien has been filed or recorded. For purposes of this subsection, "Notice of
Lien" means any "notice of lien" or similar document intended to be filed or
recorded with any court, registry, recorder's office, central filing office or
other Governmental Authority for the purpose of evidencing, creating, perfecting
or preserving the priority of a Lien securing obligations owing to a
Governmental Authority;
(d) Carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not delinquent or remain payable without penalty or which
are being contested in good faith and by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens (other than Liens on the Collateral) on the property of
the Company or any of its Restricted Subsidiaries securing (i) the
non-delinquent performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, (ii) contingent obligations on surety and
appeal bonds, and (iii) other non-delinquent obligations of a like nature; in
each case, incurred in the ordinary course of business, provided all such Liens
in the aggregate would not (even if enforced) cause a Material Adverse Effect;
(g) Liens (other than Liens on the Collateral) consisting of
judgment or judicial attachment liens, provided that the enforcement of such
Liens is effectively stayed;
(h) Easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its Restricted
Subsidiaries;
(i) Liens on assets of Persons which become Restricted Subsidiaries
after the date of this Agreement, provided, however, that such Liens existed at
the time the respective Persons became Subsidiaries and were not created in
anticipation thereof;
(j) Security interests on any property acquired or held by the
Company or its Restricted Subsidiaries in the ordinary course of business, other
than the Collateral, securing Indebtedness in an aggregate outstanding principal
amount which cannot exceed at any time $25,000,000;
(k) Liens securing Capital Lease Obligations on assets subject to
such Capital Leases, provided that such Capital Leases are permitted under
subsection 7.11;
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the Federal Reserve Board, and (ii) such deposit account is not intended by the
Company or any of its Restricted Subsidiaries to provide collateral to the
depository institution. The provisions of this subsection shall not apply to
cash collateral accounts maintained by SPC with any third Person;
(m) Liens securing Indebtedness permitted under Section 7.05(d);
(n) Liens upon the Collateral described in the Company Security
Agreement to secure Indebtedness permitted by subsection 7.05(j); and
(o) Liens upon the assets of SPC permitted pursuant to the Indenture
referenced in the definition of "Timber Notes."
7.02 Disposition of Assets. The Company shall not, and shall not suffer
or permit any of its Restricted Subsidiaries to, directly or indirectly, sell,
assign, lease, convey, transfer or otherwise dispose of (whether in one or a
series of transactions) any property (including accounts and notes receivable,
with or without recourse) or enter into any agreement to do any of the
foregoing, except:
(a) Dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) The sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(c) Dispositions of all or part of Salmon Creek LLC or Salmon Creek
Property;
(d) Trading in short-term investment securities in the ordinary
course of business;
(e) Dispositions of assets by any Restricted Subsidiary to the
Company or any Wholly-Owned Restricted Subsidiary or by the Company to any
Wholly-Owned Restricted Subsidiary;
(f) Dispositions of assets by the Company in payment of a dividend
or distribution permitted by Section 7.12;
(g) Other dispositions of assets with an aggregate book value, on a
cumulative basis, not to exceed $25,000,000 during the term of this Agreement
and which assets are not subject to any Collateral Document;
(h) Dispositions of assets in the Scheduled Amortization Reserve
Account (as such term is defined in the Scotia Pacific Indenture); and
(i) Any Permitted Salmon Creek Transaction.
7.03 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any of its Restricted Subsidiaries to, merge, consolidate with
or into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to or in favor of any Person,
except:
(a) Any Restricted Subsidiary of the Company may merge with or into
the Company or any one or more Restricted Subsidiaries of the Company, provided
that (i) if any transaction shall be between a Restricted Subsidiary and a
Wholly-Owned Restricted Subsidiary, the Wholly-Owned Subsidiary shall be the
continuing or surviving corporation, and (ii) if any transaction shall be
between a Restricted Subsidiary and the Company, the Company shall be the
continuing or surviving corporation; and
(b) Any Restricted Subsidiary of the Company may sell or otherwise
dispose of all or substantially all of its assets (upon voluntary liquidation or
otherwise), to the Company or another Wholly-Owned Restricted Subsidiary of the
Company.
7.04 Loans and Investments. The Company shall not purchase or acquire, or
suffer or permit any Restricted Subsidiary to purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit to make
any Acquisitions, or make or commit to make any advance, loan, extension of
credit or capital contribution to or any other investment in, any Person
including any Affiliate of the Company (together, "Investments"), except for:
(a) Investments in Cash Equivalents;
(b) Extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;
(c) Investments by the Company or any Restricted Subsidiary in the
Company, any Wholly-Owned Restricted Subsidiary, or any other Person that, after
giving effect to such Investment, becomes a Wholly-Owned Restricted Subsidiary;
(d) Investments made pursuant to cash management arrangements
consistent with the investment policy adopted by the Board of Directors of the
Company and reasonably satisfactory to the Bank;
(e) Extensions of credit in the ordinary course of business to its
employees and independent contractors which in the aggregate outstanding amount
do not exceed $1,000,000 at any time; and
(f) Investments to the extent that such Investments are funded by
Salmon Creek Proceeds;
(g) Investments of funds in the Scheduled Amortization Reserve
Account in SAR Eligible Investments (as such term is defined in the Scotia
Pacific Indenture);
(h) Any Permitted Salmon Creek Transaction; and
(i) Other Investments that do not exceed $1,000,000 in the aggregate
at any time outstanding (without giving effect to any write-downs thereof).
7.05 Limitation on Indebtedness. The Company shall not, and shall not
suffer or permit any of its Restricted Subsidiaries to, create, incur, assume,
suffer to exist, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Accounts payable to trade creditors for goods and services and
current operating liabilities (not the result of the borrowing of money)
incurred in the ordinary course of business of the Company or such Restricted
Subsidiary in accordance with customary terms and paid within the specified
time, unless contested in good faith by appropriate proceedings and reserved for
in accordance with GAAP;
(c) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 7.08;
(d) Up to an aggregate outstanding principal amount of $5,000,000 in
tax-free financing, which amount shall be an aggregate limit for the period
covered by this Agreement;
(e) Indebtedness existing on the Closing Date and set forth in
Schedule 7.05, which Indebtedness may be refinanced on terms and conditions no
less favorable than those existing on the Closing Date;
(f) Indebtedness secured by Liens permitted by Section 7.01(i), (j)
and (k);
(g) Indebtedness incurred in connection with leases permitted
pursuant to Section 7.11;
(h) Extensions of credit permitted under Sections 7.04(c) and
7.04(e);
(i) Indebtedness incurred in connection with investments permitted
under Subsection 7.04(d); and
(j) Other Indebtedness in aggregate principal amount at any time
outstanding not to exceed $5,000,000.
7.06 Transactions with Affiliates.
(a) The Company shall not, and shall not suffer or permit any of its
Restricted Subsidiaries to, enter into any transaction with any Affiliate of the
Company or of any such Restricted Subsidiary, except (i) as expressly permitted
by this Agreement, or (ii) in its ordinary course of business and pursuant to
the reasonable requirements of the business of the Company or such Restricted
Subsidiary; in each case (i) and (ii), upon fair and reasonable terms no less
favorable to the Company or such Restricted Subsidiary than would obtain in a
comparable arm's-length transaction with a Person not an Affiliate of the
Company or such Restricted Subsidiary.
(b) The provisions contained in this Section shall not apply to: (i)
any transaction permitted by Section 7.12, (ii) the execution and delivery of,
the performance of, and the making of any payments required by, the Tax Sharing
Agreement, (iii) the execution and delivery of, the performance of, and the
making of any payments required by, the ▇▇▇▇▇ Lumber Agreement, (iv) any
Permitted Salmon Creek Transaction; (v) the making of payments to MAXXAM Group
Inc., MAXXAM Inc. and their Affiliates for reimbursement for actual services
provided thereby to the Company and its Restricted Subsidiaries based on actual
costs and an allocable share of overhead expenses consistent with prior
practices, (vi) compensation, indemnification and other benefits paid or made
available to officers, directors, managers and employees of the Company or a
Restricted Subsidiary for services rendered in such person's capacity as an
officer, director, manager, or employee (including reimbursement or advancement
of reasonable out-of-pocket expenses and directors' and officers' liability
insurance), (vii) any transaction between the Company and any Wholly-Owned
Restricted Subsidiary or between Wholly-Owned Restricted Subsidiaries or (viii)
Investments permitted by clause (f) of Section 7.04.
(c) The Company shall not amend or modify the ▇▇▇▇▇ Lumber Agreement
without the prior written consent of the Bank if such amendment would materially
alter the obligations or rights of the Company thereunder.
7.07 Use of Proceeds. The Company shall not and shall not suffer or
permit any of its Subsidiaries to use any portion of the proceeds of any
extension of credit under this Agreement, directly or indirectly, (i) to
purchase or carry Margin Stock, (ii) to repay or otherwise refinance
indebtedness of the Company or others incurred to purchase or carry Margin
Stock, (iii) to extend credit for the purpose of purchasing or carrying any
Margin Stock, or (iv) to acquire any security in any transaction that is subject
to Section 13 or 14 of the Exchange Act.
7.08 Contingent Obligations. The Company shall not, and shall not suffer
or permit any of its Restricted Subsidiaries to, create, incur, assume or suffer
to exist any Contingent Obligations except:
(a) Endorsements for collection or deposit in the ordinary course of
business;
(b) Contingent Obligations of the Company and its Restricted
Subsidiaries existing as of the Closing Date and listed in Schedule ---------
7.08;
(c) Contingent Obligations entered into in the ordinary course of
business;
(d) Contingent Obligations relating to Letters of Credit;
(e) Permitted Swap Obligations;
(f) Guaranty Obligations of the Company with respect to obligations
of Wholly-Owned Restricted Subsidiaries that are not prohibited hereby; and
(g) Other Contingent Obligations in aggregate amount not to exceed
$5,000,000 at any time outstanding.
7.09 Joint Ventures. The Company shall not, and shall not suffer or
permit any of its Restricted Subsidiaries to enter into any Joint Venture with
any Person other than the Company or a Wholly-Owned Restricted Subsidiary, other
than in the ordinary course of business.
7.10 ERISA. The Company shall not, and to the fullest extent permitted by
applicable law shall not suffer or permit any of its ERISA Affiliates to: (a)
engage in a prohibited transaction or violation of the fiduciary responsibility
rules with respect to any Plan which has resulted or could reasonably be
expected to result in liability of the Company in an aggregate amount in excess
of $5,000,000; or (b) engage in a transaction that could reasonably be expected
to be subject to Section 4069 or 4212(c) of ERISA and that could reasonably be
expected to have a Material Adverse Effect.
7.11 Lease Obligations. The Company shall not, and shall not suffer or
permit any of its Restricted Subsidiaries to, create or suffer to exist any
obligations for the payment of rent for any property under lease or agreement to
lease, except for:
(a) Leases of the Company and its Restricted Subsidiaries in
existence on the Closing Date and any renewal, extension or refinancing thereof;
(b) Capital Leases other than those permitted under subsection (a)
of this Section, entered into by the Company or any of its Restricted
Subsidiaries after the Closing Date to finance the acquisition of equipment;
provided that the aggregate annual rental payments for all such Capital Leases
shall not exceed $10,000,000 in the aggregate; and
(c) Operating leases entered into by the Company and its Restricted
Subsidiaries in the ordinary course of business.
7.12 Restricted Payments. The Company shall not, and shall not permit any
of its Restricted Subsidiaries to, declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its capital stock or other equity
interest, or purchase, redeem or otherwise acquire for value any shares of its
capital stock or other equity interest or any warrants, rights or options to
acquire such shares or interests, now or hereafter outstanding (any of the
foregoing, a "Restricted Payment"), except:
(a) The Company or any Restricted Subsidiary may declare and make
Restricted Payments payable solely in its common stock or other equity interest;
(b) The Company or any Restricted Subsidiary may purchase, redeem or
otherwise acquire shares of its common stock or warrants or options to acquire
any such shares with the proceeds received from the substantially concurrent
issue of new shares of its common stock;
(c) Any Restricted Subsidiary may declare and make Restricted
Payments to the Company or any other Wholly-Owned Restricted Subsidiary;
(d) The Company may declare and make Restricted Payments for any
fiscal quarter, as long as (x) no Default or Event of Default exists at the time
of such Restricted Payment, (y) the financial statements with respect to such
fiscal quarter have been delivered to the Bank in compliance with Section
6.01(c), and (z) the aggregate Restricted Payments for that fiscal quarter and
the three preceding fiscal quarters, excluding from such aggregation all
Restricted Payments permitted by subsections 7.12(b) or (e), does not exceed the
Excess Cash Flow for the four most recent fiscal quarters for which financial
statements have been delivered pursuant to Section 6.01(c) hereof or of the
Prior Credit Agreement.
(e) Any Restricted Subsidiary of the Company can make Restricted
Payments to the extent funded with Salmon Creek Proceeds to the Company or to
any other Subsidiary of the Company and the Company can make Restricted Payments
to the extent funded with Salmon Creek Proceeds.
7.13 Change in Business. The Company shall not, and shall not permit any
of its Restricted Subsidiaries to, engage in any material line of business
substantially different from those lines of business carried on by it on the
date hereof.
7.14 Accounting Changes. The Company shall not, and shall not suffer or
permit any of its Restricted Subsidiaries to, make any significant change in
accounting treatment or reporting practices, except as required by GAAP or the
SEC or change the fiscal year of the Company or of any of its consolidated
Restricted Subsidiaries; provided, however, that the Company or any of its
consolidated Restricted Subsidiaries may change any of its significant
accounting methods or reporting practices provided that the alternative
accounting method chosen conforms with GAAP and the Company or any of its
consolidated Restricted Subsidiaries has obtained a "preferability letter" from
its independent public accountants stating that each such significant change in
accounting method is preferable in the circumstances.
7.15 Other Contracts. The Company shall not enter into any employment
contracts or other employment or service-retention arrangements whose terms,
including salaries, benefits and other compensation, are not normal and
customary in the industry.
7.16 Minimum Net Worth. The Company shall maintain, as of the end of each
fiscal quarter, a Net Worth of not less than $(296,000,000) (negative two
hundred ninety six million dollars), provided, however that the foregoing shall
be computed without giving effect to a direct or indirect dividend or
distribution to the stockholders of the Company or any of its Subsidiaries of
any Salmon Creek Proceeds.
ARTICLE VIII
EVENTS OF DEFAULT
8.01 Event of Default. Any of the following shall constitute an
"Event of Default":
(a) Non-Payment. The Company fails to make, (i) when and as required
to be made herein, payments of any amount of principal of any Loan, or (ii) when
and as required to be paid under any Specified Swap Contract, any payment or
transfer under such Specified Swap Contract, or (iii) within five days after the
same becomes due, payment of any interest, fee or any other amount payable
hereunder or under any other Loan Document (other than a Specified Swap
Contract); or
(b) Representation or Warranty. Any representation or warranty by
the Company or any Subsidiary of the Company made or deemed made herein, in any
other Loan Document other than a Specified Swap Contract, or which is contained
in any certificate, document or financial or other statement by the Company, any
Subsidiary of the Company, or any Responsible Officer of the Company, SPC, or
MGHI, furnished at any time under this Agreement, or in or under any other Loan
Document other than a Specified Swap Contract, is incorrect in any material
respect on or as of the date made or deemed made; or
(c) Other Defaults. The Company fails to perform or observe any
other term or covenant contained in this Agreement or any Loan Document, or any
default or event of default shall occur thereunder and such default shall
continue unremedied for a period of 30 days (the "30-Day Period") after the
earlier of (i) the date upon which a Responsible Officer of the Company knew or
should have known of such failure or (ii) the date upon which written notice
thereof is given to the Company by the Bank, unless (in both (i) and (ii)) the
default is curable, the Company has started to cure such default and continues
to try to cure such default, and the default is cured within the 60 days
starting on the first day of the 30-Day Period;
(d) Cross-Default. (i) The Company or any of its Restricted
Subsidiaries (A) fails to make any payment in respect of any Indebtedness or
Contingent Obligation (other than in respect of Swap Contracts), having an
aggregate principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $5,000,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) and such failure
continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure; or (B) fails to perform or
observe any other condition or covenant, or any other event shall occur or
condition exist, under any agreement or instrument relating to any such
Indebtedness or Contingent Obligation, and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure if the effect of such failure, event or condition is to
cause, or to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to
be declared to be due and payable prior to its stated maturity, or such
Contingent Obligation to become payable or cash collateral in respect thereof to
be demanded; or (ii) there occurs under any Specified Swap Contract an Early
Termination Date resulting from (1) any event of default under such Specified
Swap Contract as to which the Company is the Defaulting Party (as defined in
such Specified Swap Contract) or (2) any Termination Event (as defined in such
Specified Swap Contract) as to which the Company is an Affected Party (as
defined in such Specified Swap Contract), and, in either event, the Swap
Termination Value owed by the Company as a result thereof is greater than
$5,000,000; or (iii) an "Event of Default" exists as defined in the Indenture
referenced in the definition of Timber Notes herein; or
(e) Insolvency; Voluntary Proceedings. The Company, SPC, or any of
the Company's Restricted Subsidiaries (i) ceases or fails to be solvent, or
generally fails to pay, or admits in writing its inability to pay, its debts as
they become due, subject to applicable grace periods, if any, whether at stated
maturity or otherwise; (ii) voluntarily ceases to conduct its business in the
ordinary course; (iii) commences any Insolvency Proceeding with respect to
itself; or (iv) takes any action to effectuate or authorize any of the
foregoing; or
(f) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any of its Restricted
Subsidiaries or SPC, or any writ, judgment, warrant of attachment, execution or
similar process, is issued or levied against a substantial part of the Company's
or SPC's properties, and any such proceeding or petition shall not be dismissed,
or such writ, judgment, warrant of attachment, execution or similar process
shall not be released, vacated or fully bonded within 60 days after
commencement, filing or levy; (ii) the Company or SPC admits the material
allegations of a petition against it in any Insolvency Proceeding, or an order
for relief (or similar order under non-U.S. law) is ordered in any Insolvency
Proceeding; or (iii) the Company or SPC acquiesces in the appointment of a
receiver, trustee, custodian, conservator, liquidator, mortgagee in possession
(or agent therefor), or other similar Person for itself or a substantial portion
of its property or business; or
(g) ERISA. (i) An ERISA Event shall occur with respect to a Pension
Plan or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $5,000,000;
or (ii) the aggregate amount of Unfunded Pension Liability among all Pension
Plans at any time exceeds $5,000,000; or (iii) the Company or any ERISA
Affiliate shall fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in
excess of $5,000,000; or
(h) Monetary Judgments. One or more final (non-interlocutory)
judgments, orders, decrees or arbitration awards is entered against the Company
or any of its Restricted Subsidiaries involving in the aggregate a liability (to
the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, that would reasonably be expected to have
a Material Adverse Effect, and the same shall remain unsatisfied, unvacated and
unstayed pending appeal for a period of 30 days after the entry thereof; or
(i) Non-Monetary Judgments. Any non-monetary judgment, order or
decree is entered against the Company or any of its Restricted Subsidiaries
which does or would reasonably be expected to have a Material Adverse Effect,
and there shall be any period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(j) Change in Control. There occurs any Change in Control; or
(k) Collateral.
(1) (A) Any material provision of any Collateral Document shall
for any reason other than pursuant to the terms thereof cease to be valid and
binding on or enforceable against the Company thereto; or
(B) Any Collateral Document shall for any reason (other than
pursuant to the terms thereof) cease to create a valid security interest or Lien
in the Collateral purported to be covered thereby; or
(C) The Bank ceases to have, for any reason, a perfected and
first priority security interest or Lien on any item of Collateral (subject only
to Permitted Liens) and the failure to have such perfected first priority
security interest or Lien is not caused by the Bank's failure to timely file a
UCC continuation statement;
and the Effective Amount of Loans and L/C Obligations is more than the amount
computed pursuant to clause (a) of the definition of the Borrowing Base
(excluding, in the computation of the Borrowing Base for purposes of this clause
the Collateral encumbered by the Collateral Documents covered by clauses (A),
(B), and (C) of this subsection 8.01(k)(1)); or
(2) The Company shall state in writing its belief that any
material provision of any Collateral Document is not valid and binding or the
Company shall bring an action to limit its obligations or liabilities
thereunder; or
(3) The Bank, in good faith, considers any Collateral to be
unsafe or in danger of misuse to the extent that the Bank's prospect of or right
to payment or performance under this Agreement or any Loan Document is
materially impaired; or
(l) Regulatory Action. Any Governmental Authority takes or
institutes action which could reasonably be expected to have, on an
Unconsolidated Basis, a Material Adverse Effect on the Company's financial
condition or results of operations or ability to perform its obligations under
this Agreement or any other Loan Document.
8.02 Remedies. If any Event of Default exists, the Bank may:
(a) Declare its commitment to make Loans and/or Issue Letters of
Credit to be terminated, whereupon such commitment shall be terminated;
(b) Declare the unpaid principal amount of all outstanding Loans,
all Outstanding Letters of Credit (including the Company's reimbursement
obligations for Outstanding Letters of Credit), all L/C Obligations, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company; and
(c) Exercise on behalf of itself all rights and remedies available
to it under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified in subsection
(e) or (f) of Section 8.01 (in the case of clause (i) of subsection (f) upon the
expiration of the 60-day period mentioned therein), the obligation of the Bank
to make Loans and Issue Letters of Credit shall automatically terminate and the
unpaid principal amount of all outstanding Loans, all Outstanding Letters of
Credit (including the Company's reimbursement obligations for Outstanding
Letters of Credit), all L/C Obligations, and all interest and other amounts as
aforesaid shall automatically become due and payable without further act of the
Bank.
Amounts paid by the Company to be applied to prepayment of L/C Obligations and
to the Company's reimbursement obligations for Outstanding Letters of Credit may
be held by the Bank as cash collateral for such Obligations.
8.03 Specified Swap Contract Remedies. Notwithstanding any other
provision of this Article, each Swap Provider shall have the right, with prior
notice to the Bank, with respect to any Specified Swap Contract of such Swap
Provider, (a) to declare an event of default, termination event or other similar
event thereunder and to create an Early Termination Date, (b) to determine net
termination amounts in accordance with the terms of such Specified Swap
Contracts and to set-off amounts in accordance with the terms of such Specified
Swap Contracts, and (c) to prosecute any legal action against the Company to
enforce net amounts owing to such Swap Provider. The Company hereby grants the
Bank a security interest in all of the Company's rights, title, and interests in
the Company's rights to payment and performance by the Swap Provider in each of
the Specified Swap Contracts.
8.04 Rights Not Exclusive. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
8.05 Certain Financial Covenant Defaults. In the event that, after taking
into account any extraordinary charge to earnings taken or to be taken as of the
end of any fiscal period of the Company (a "Charge"), and if solely by virtue of
such Charge, there would exist an Event of Default due to the breach of Section
7.13 as of such fiscal period end date, such Event of Default shall be deemed to
arise upon the earlier of (a) the date after such fiscal period end date on
which the Company announces publicly it will take, is taking or has taken such
Charge (including an announcement in the form of a statement in a report filed
with the SEC) or, if such announcement is made prior to such fiscal period end
date, the date that is such fiscal period end date, and (b) the date the Company
delivers to the Bank its audited annual or unaudited quarterly financial
statements in respect of such fiscal period reflecting such Charge as taken.
ARTICLE IX
MISCELLANEOUS
9.01 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company therefrom, shall be effective unless the same shall be
in writing and signed by the Bank and the Company, and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
9.02 Notices.
(a) All notices, requests, consents, approvals, waivers and other
communications shall be in writing (including, unless the context expressly
otherwise provides, by facsimile transmission, provided that any matter
transmitted by the Company or the Bank by facsimile (i) shall be immediately
confirmed by a telephone call to the Bank or the Company, respectively, at the
number specified on the signature pages to this Agreement and (ii) shall be
followed promptly by delivery of a hard copy original thereof) and mailed, faxed
or delivered, to the address or facsimile number specified for notices on the
signature pages of this Agreement; or, as directed to the Company or the Bank,
to such other address as shall be designated by such party in a written notice
to the other party, and as directed to any other party, at such other address as
shall be designated by such party in a written notice to the other party.
(b) All such notices, requests, consents, approvals, and
communications shall, when transmitted by overnight delivery, or faxed, be
effective when delivered for overnight (next-day) delivery, or transmitted in
legible form by facsimile machine, respectively, or if mailed, upon the third
Business Day after the date deposited into the U.S. mail, or if delivered, upon
delivery; except that notices of borrowing, of conversion/continuation,
prepayment, and termination or reduction of commitments pursuant to Article II
shall not be effective until actually received by the Bank.
(c) Any agreement of the Bank herein to receive certain notices by
telephone or facsimile is solely for the convenience and at the request of the
Company. The Bank shall be entitled to rely on the authority of any Person
purporting to be a Person authorized by the Company to give such notice and the
Bank shall not have any liability to the Company or other Person on account of
any action taken or not taken by the Bank in reliance upon such telephonic or
facsimile notice. The obligation of the Company to repay the Loans, the L/C
Obligations, and the other Obligations shall not be affected in any way or to
any extent by any failure by the Bank to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Bank of a confirmation
which is at variance with the terms understood by the Bank to be contained in
the telephonic or facsimile notice.
9.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Bank, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.
9.04 Costs and Expenses. The Company shall:
(a) Whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Bank within 20 Business Days after demand
(subject to subsection 4.01(d)) for all costs and expenses incurred by the Bank
in connection with the development, preparation, delivery, administration and
execution of, and any amendment, supplement, waiver or modification to (in each
case, whether or not consummated), this Agreement, any Loan Document, and any
other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including
filing or recording taxes or fees in connection with any Collateral Documents
and reasonable Attorney Costs incurred by the Bank with respect thereto; and
(b) Pay or reimburse the Bank within 20 Business Days after demand
(subject to subsection 4.01(d)) for all costs and expenses (including Attorney
Costs) incurred by them in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this Agreement or
any other Loan Document during the existence of an Event of Default or after
acceleration of the Loans (including in connection with any "workout" or
restructuring regarding the Loans, and including in any Insolvency Proceeding or
appellate proceeding); and
(c) Pay or reimburse the Bank within 20 Business Days after demand
(subject to subsection 4.01(d)) for all reasonable appraisal (including the
allocated cost of internal appraisal services), audit, environmental inspection
and review (including the allocated cost of such internal services), search and
filing costs, fees and expenses, incurred or sustained by the Bank in connection
with the matters referred to under subsections (a) and (b) of this Section.
9.05 Company Indemnification.
(a) Whether or not the transactions contemplated hereby are
consummated, the Company shall indemnify, defend and hold the Bank, each
Affiliate of the Bank, and each of its respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including Attorney Costs) of any kind or nature whatsoever which may at any
time (including at any time following repayment of the Loans and L/C
Obligations, expiration of the Letters of Credit, and termination of all
Specified Swap Contracts) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein, or the transactions contemplated
hereby, or any action taken or omitted by any such Person under or in connection
with any of the foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding or appellate
proceeding) related to or arising out of this Agreement, the Specified Swap
Contracts, or the Letters of Credit, the Loans or the use of the proceeds
thereof, whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the "Indemnified Liabilities"); provided, that the
Company shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities resulting solely from the gross negligence or
willful misconduct of such Indemnified Person. The agreements in this Section
shall survive payment of all other Obligations.
(b) The obligations in this Section shall survive payment of all
other Obligations. Promptly after receipt by an Indemnified Person of notice of
the commencement of any proceeding indemnified against hereunder, such
Indemnified Person will, if a claim in respect thereof is to be made against the
Company hereunder, notify the Company in writing of the commencement thereof;
but the failure so to notify the Company (i) will not relieve it from liability
under subsections (a) and (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
Company of substantial rights and defenses and (ii) will not, in any event,
relieve the Company from any obligations to any Indemnified Person other than
the indemnification obligation provided above. The Company shall be entitled to
appoint counsel of the Company's choice at the Company's expense to represent
the Indemnified Person in any action for which indemnification is sought (in
which case the Company shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the Indemnified Person except as
set forth below); provided, however, that such counsel shall be reasonably
satisfactory to the Indemnified Person. Notwithstanding the Company's election
to appoint counsel to represent the Indemnified Person in an action, the
Indemnified Person shall have the right to employ separate counsel (including
local counsel), and the Company shall bear the reasonable fees, costs and
expenses of such separate counsel if (i) the use of counsel chosen by the
Company to represent the Indemnified Person would present such counsel with a
conflict of interest, (ii) the actual or potential defendants in, or targets of,
any such proceeding include both the Indemnified Person and the Company and the
Indemnified Person shall have reasonably concluded that there may be legal
defenses available to the Indemnified Person which are different from or
additional to those available to the Company, (iii) the Company shall not have
employed counsel reasonably satisfactory to the Indemnified Person to represent
the Indemnified Person within a reasonable time after notice of the institution
of such action, or (iv) the Company shall authorize the Indemnified Person to
employ separate counsel at the expense of the Company. The Company will not,
without the prior written consent of the Indemnified Person (which consent shall
not be unreasonably withheld), settle or compromise or consent to the entry of
any judgment with respect to any proceeding in respect of which indemnification
may be sought hereunder (whether or not the Indemnified Person is an actual or
potential party to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each Indemnified Person from all
liability arising out of such proceeding.
(c) All amounts owing under this Section shall be paid within 30
days after demand.
9.06 Marshalling; Payments Set Aside. The Bank shall be under no
obligation to ▇▇▇▇▇▇▇▇ any assets in favor of the Company or any other Person or
against or in payment of any or all of the Obligations. To the extent that the
Company makes a payment to the Bank, or the Bank exercises its right of set-off,
and such payment or the proceeds of such set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by the Bank in
its discretion) to be repaid to a trustee, receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then to the extent of
such recovery the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such set-off had not occurred.
9.07 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Bank.
9.08 Assignments, Participations, etc.
(a) The Bank may at any time, with the written consent of the
Company at all times other than during the existence of an Event of Default,
which consent shall not be unreasonably withheld, at any time assign and
delegate to one or more Persons (provided that no written consent of the Company
shall be required in connection with any assignment and delegation to an
Affiliate of the Bank and the costs charged to the Company shall not exceed the
costs that would have been charged had the Bank not made such assignment and
delegation) (each an "Assignee") all, or any ratable part of all, of the Loans,
the Company's reimbursement obligations for Outstanding Letters of Credit, the
L/C Obligations, the Bank's commitment to extend credit hereunder, and the other
rights and obligations of the Bank hereunder; provided, however, that the
Company may continue to deal solely and directly with the Bank in connection
with the interest so assigned to an Assignee until written notice of such
assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company
by the Bank and the Assignee.
(b) The Bank may at any time sell to one or more Persons (a
"Participant") participating interests in any Loans, the Company's reimbursement
obligations for any Outstanding Letters of Credit, any L/C Obligations, the
Bank's commitment to extend credit hereunder, and the other interests of the
Bank hereunder and under the other Loan Documents; provided, however, that (i)
the Bank's obligations under this Agreement shall remain unchanged, (ii) the
Bank shall remain solely responsible for the performance of such obligations,
(iii) the Company shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations under this Agreement and the
other Loan Documents, and (iv) the Participant shall, together with the Bank, be
entitled to the non-exclusive protection of Sections 3.01, 3.03 and 9.10 as
though it were also the "Bank" hereunder; except that the Company shall not be
obliged to pay the Participant an amount greater than what the Company would
have had to pay the Bank if it had not sold the participating interest to the
Participant. In the case of any such participation, if amounts outstanding under
this Agreement are due and unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as an
Assignee under this Agreement.
(c) Notwithstanding any other provision contained in this Agreement
or any other Loan Document to the contrary, the Bank may assign all or any
portion of the Loans held by it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank, provided that any payment in respect of such assigned
Loans made by the Company to or for the account of the Bank in accordance with
the terms of this Agreement shall satisfy the Company's obligations hereunder in
respect to such assigned Loans to the extent of such payment. No such assignment
shall release the Bank from its obligations hereunder.
9.09 Confidentiality. The Bank agrees to take and to cause its Affiliates
to take normal and reasonable precautions and exercise due care to maintain the
confidentiality of all information identified as "confidential" or "secret" by
the Company and provided to it by the Company or any Subsidiary of the Company,
under this Agreement or any other Loan Document, and neither it nor any of its
Affiliates shall use any such information other than in connection with or in
enforcement of this Agreement and the other Loan Documents or in connection with
other business now or hereafter existing or contemplated with the Company or any
Subsidiary of the Company; except to the extent such information (i) was or
becomes generally available to the public other than as a result of disclosure
by the Bank, or (ii) was or becomes available on a non-confidential basis from a
source other than the Company, provided that such source is not bound by a
confidentiality agreement with the Company known to the Bank; provided, however,
that the Bank may disclose such information (A) at the request or pursuant to
any requirement of any Governmental Authority to which the Bank is subject or in
connection with an examination of the Bank by any such authority; (B) pursuant
to subpoena or other court process; provided that the Bank shall, if permitted
by applicable law, offer the Company a reasonable opportunity to obtain a
protective order in connection therewith; (C) when required to do so in
accordance with the provisions of any applicable Requirement of Law; (D) to the
extent reasonably required in connection with any litigation or proceeding to
which the Bank or its Affiliates may be party; provided that the Bank shall, if
permitted by applicable law, offer the Company a reasonable opportunity to
obtain a protective order in connection therewith; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to the Bank's independent auditors and other
professional advisors if such advisors have a duty of confidentiality toward the
Bank; (G) to any Participant or Assignee, actual or potential, provided that
such Person agrees in writing to keep such information confidential to the same
extent required of the Bank hereunder; (H) as to the Bank or its Affiliate, as
expressly permitted under the terms of any other document or agreement regarding
confidentiality to which the Company or any Subsidiary of the Company is party
or is deemed party with the Bank or such Affiliate; and (I) to its Affiliates
provided that such Affiliates shall be subject to the same confidentiality
obligation as the Bank in instances where there is no document or agreement
regarding confidentiality between the Company or any Subsidiary or the Company
and the Bank or such Affiliate.
9.10 Set-off. In addition to any rights and remedies of the Bank provided
by law, if an Event of Default exists or the Loans have been accelerated, the
Bank is authorized at any time and from time to time, without prior notice to
the Company, any such notice being waived by the Company to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, the Bank to or for the credit or the account
of the Company against any and all Obligations owing to the Bank, now or
hereafter existing, irrespective of whether or not the Bank shall have made
demand under this Agreement or any Loan Document and although such Obligations
may be contingent or unmatured.
9.11 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
9.12 Severability; Conflicting Provisions.
(a) Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
(b) Conflicting Provisions. In the event of any conflict between any
provision contained in this Agreement and any provision contained in another
Loan Document, the provision contained in this Agreement shall prevail.
9.13 No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Company, the Bank, and each
Affiliate of the Bank and their permitted successors and assigns, and no other
Person shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with, this Agreement or any of
the other Loan Documents.
9.14 Governing Law and Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE BANK SHALL RETAIN
ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) Nothing contained in this Section shall override any contrary
provision contained in any Specified Swap Contract.
9.15 Verification of Receivables. The Bank may at any time, either orally
or in writing, request confirmation from any Receivable Debtor of the current
amount and status of the Receivable upon which such Receivable Debtor is
obligated.
9.16 Termination of Commitment to Lend under the Prior Credit Agreement.
Upon execution of this Agreement by the Company and the Bank, the Bank's
commitment to Issue Letters of Credit and to lend under the Prior Credit
Agreement shall automatically terminate without necessity of further act of the
Bank and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
THE PACIFIC LUMBER COMPANY
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President-Finance and
Administration
Address for Notices:
The Pacific Lumber Company
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Vice President-Finance
and Administration
Telephone: 707/▇▇▇-▇▇▇▇
FAX: 707/▇▇▇-▇▇▇▇
With a copy to:
MAXXAM Inc.
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Attention: Treasury Department
Telephone: 713/▇▇▇-▇▇▇▇
FAX: 713/▇▇▇-▇▇▇▇
BANK OF AMERICA N.A.
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
Address for notices:
Paper and Forest Products #9973
Bank of America, N.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - 12th Floor
Mail Code Number: CA5-705-12-12
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: 415/▇▇▇-▇▇▇▇
FAX: 415/▇▇▇-▇▇▇▇
Domestic and Offshore Lending Office:
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Place of Payment:
Bank of America, N.A.
ABA #11100012
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▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Account # 3750836479; Ref. The Pacific Lumber Company
Telephone: 925/▇▇▇-▇▇▇▇
FAX: 888/▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇