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EXHIBIT 10.14
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[EXECUTION VERSION]
SENIOR LOAN AGREEMENT
AMONG
SIERRA WELL SERVICE, INC.
AS BORROWER
THE SENIOR LENDERS NAMED IN THIS AGREEMENT,
AS SENIOR LENDERS
AND
JOINT ENERGY DEVELOPMENT INVESTMENTS II
LIMITED PARTNERSHIP
AS SENIOR AGENT
DATED AS OF MARCH 31, 1999
$24,408,000 SENIOR LOAN FACILITY
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TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS ..................................................1
Section 1.1 Certain Definitions ........................1
Section 1.2 Accounting Principles .....................11
ARTICLE 2
AMOUNT AND TERM OF THE SENIOR LOAN ..........................11
Section 2.1 Senior Loan ...............................11
Section 2.2 Repayment Obligations; Prepayments ........11
Section 2.3 Payments and Computations .................13
Section 2.4 Interest ..................................14
Section 2.5 Senior Notes ..............................14
Section 2.6 Taxes .....................................15
Section 2.7 Increased Costs ...........................15
Section 2.8 Illegality ................................16
ARTICLE 3
CONDITIONS OF CLOSING .......................................16
ARTICLE 4
REPRESENTATIONS AND WARRANTIES ..............................19
Section 4.1 Corporate Existence. ......................19
Section 4.2 Corporate Power and Authorization .........19
Section 4.3 Binding Obligations .......................20
Section 4.4 No Legal Bar Or Resultant Lien ............20
Section 4.5 No Consent ................................20
Section 4.6 Financial Condition .......................20
Section 4.7 Liabilities ...............................20
Section 4.8 Litigation ................................21
Section 4.9 Taxes; Governmental Charges ...............21
Section 4.10 Ownership of Property; Liens;
Leases of Equipment .......................21
Section 4.11 Intellectual Property .....................21
Section 4.12 Defaults ..................................21
Section 4.13 Casualties; Taking of Properties ..........22
Section 4.14 Margin Stock ..............................22
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Section 4.15 Location of Business and Offices ..........22
Section 4.16 Compliance with the Law ...................22
Section 4.17 No Material Misstatements .................23
Section 4.18 ERISA .....................................23
Section 4.19 Environmental Matters .....................23
Section 4.20 Subsidiaries; Partnerships ................25
Section 4.21 Certain Fees ..............................25
Section 4.22 Purpose of Loans ..........................25
Section 4.23 Support and Security Documents ............25
Section 4.24 Employment ................................25
Section 4.25 Year 2000 Compliance ......................26
Section 4.26 Insurance .................................26
Section 4.27 Hedging Agreements ........................27
Section 4.28 Capital Stock .............................27
ARTICLE 5
AFFIRMATIVE COVENANTS .......................................28
Section 5.1 Financial Statements and Reports ..........28
Section 5.2 Certificates of Compliance ................29
Section 5.3 Accountants' Certificate ..................29
Section 5.4 Taxes Other Liens .........................29
Section 5.5 Compliance with Laws ......................29
Section 5.6 Further Assurances ........................29
Section 5.7 Insurance .................................30
Section 5.8 Accounts and Records ......................30
Section 5.9 Right of Inspection .......................30
Section 5.10 Notice of Certain Events ..................30
Section 5.11 ERISA Information and Compliance ..........31
Section 5.12 Environmental Reports and Notices .........31
Section 5.13 Maintenance ...............................31
Section 5.14 New Subsidiary ............................31
Section 5.15 Performance on Borrower's Behalf ..........32
Section 5.16 Change of Principal Place of Business .....32
Section 5.17 New Bank Accounts .........................32
Section 5.18 Year 2000 Compliant .......................32
ARTICLE 6.............................................................33
NEGATIVE COVENANTS ..........................................33
Section 6.2 Mergers ...................................33
Section 6.3 Indebtedness and Other Obligations ........33
Section 6.4 Dividends; Compensation ...................34
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Section 6.5 Investments ...............................34
Section 6.6 Sale or Discount of Receivables ...........35
Section 6.7 Nature of Business ........................35
Section 6.8 Amendment of Articles of
Incorporation or Bylaws ...................35
Section 6.9 Asset Sales ...............................35
Section 6.10 Transactions with Affiliates ..............35
Section 6.11 Partnerships ..............................36
Section 6.12 Subsidiaries ..............................36
Section 6.13 Equity Proceeds ...........................36
Section 6.14 Public Disclosures ........................36
Section 6.15 Limitation on Payment Restrictions
Affecting Subsidiaries ....................36
Section 6.16 Fixed Charge Coverage Ratio ...............37
ARTICLE 7
EVENTS OF DEFAULT............................................37
Section 7.1 Events of Default .........................37
Section 7.2 Acceleration ..............................39
Section 7.3 Default Interest ..........................39
Section 7.4 Other Senior Loan Documents ...............39
Section 7.5 Right of Setoff ...........................39
Section 7.6 Cumulative Remedies .......................40
Section 7.7 Application of Payments ...................40
ARTICLE 8
THE SENIOR AGENT.............................................40
Section 8.1 Authorization and Action ..................40
Section 8.2 Senior Agent's Reliance, Etc. .............41
Section 8.3 The Senior Agent and Its Affiliates .......41
Section 8.4 Senior Lender Loan Decision ...............42
Section 8.5 Indemnification ...........................42
Section 8.6 Successor Senior Agent ....................42
ARTICLE 9
MISCELLANEOUS................................................43
Section 9.1 Interpretation and Survival
of Provisions .............................43
Section 9.2 Costs, Expenses and Taxes .................43
Section 9.3 No Waiver; Modifications in Writing .......45
Section 9.4 Binding Effect; Assignment ................46
Section 9.5 The Register ..............................47
Section 9.6 Procedures ................................48
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Section 9.7 Participation .............................48
Section 9.8 Communications ............................48
Section 9.9 Interest ..................................49
Section 9.10 Governing Law .............................50
Section 9.11 WAIVER OF JURY TRIAL ......................50
Section 9.12 LIMITATION ON DAMAGES .....................50
Section 9.13 Execution in Counterparts .................50
EXHIBITS:
Exhibit A - Form of Senior Note
Exhibit 5.1(a) - Consolidating Schedules
Exhibit 5.1(d) - Budget Requirements
Exhibit 5.2 - Form of Compliance Certificate
SCHEDULES:
Schedule 4.7 - Liabilities
Schedule 4.8 - Litigation
Schedule 4.10 - Certain Assets; Permitted Liens
Schedule 4.19 - Environmental
Schedule 4.20(a) - Subsidiaries
Schedule 4.20(b) - Partnerships; Joint Ventures
Schedule 4.26 - Insurance
Schedule 4.27 - Hedging Arrangements
Schedule 4.28 - Capital Stock
Schedule 6.3 - Certain Indebtedness
Schedule 6.9 - Excluded Asset Sales
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SENIOR LOAN AGREEMENT
This Senior Loan Agreement (the "Senior Loan Agreement") is made and
entered into as of March 31, 1999, among SIERRA WELL SERVICE, INC., a Delaware
corporation, as borrower, the SENIOR LENDERS, as defined below, and JOINT ENERGY
DEVELOPMENT INVESTMENTS II LIMITED PARTNERSHIP, a Delaware limited partnership,
as agent for the Senior Lenders ("Senior Agent").
The Loan Agreement dated September 30, 1997 (the "Original Loan
Agreement") was entered into between the Borrower and Joint Energy Development
Investments Limited Partnership ("JEDI"). The Original Loan Agreement was
assigned to Joint Energy Development Investments II Limited Partnership ("JEDI
II") from JEDI pursuant to the Notice of Assignment and Amendment. In
conjunction with the restructuring of the Borrower's capital structure, the
Borrower, the Senior Lenders and the Senior Agent have agreed to amend, restate,
and convert the Original Loan Agreement into two separate loan facilities: (1)
this Senior Loan Agreement and (2) the Subordinated Loan Agreement dated as of
even date herewith among the Borrower, the Subordinated Lenders identified
therein, and the Subordinated Agent (the "Subordinated Loan Agreement").
In consideration of the mutual covenants and agreements herein
contained and of the loans hereinafter referred to, the parties agree as
follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Definitions.
As used in this Agreement the following terms shall have the following
meanings:
"Acquisition" shall mean any direct or indirect acquisition, whether in
one or more related transactions, of all or substantially all of the assets,
liabilities, or securities of a Person, a division or business unit of a Person,
or any related group of the foregoing.
"Advance" shall mean the outstanding principal from a Senior Lender
which represents such Senior Lender's Pro Rata Share of the Senior Loan.
"Affiliate" of any specified Person shall mean any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control", when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing;
provided that no Person which would otherwise be an Affiliate of Enron Capital &
Trade Resources Corp. if not for this proviso shall be considered as an
Affiliate of the Borrower or its Subsidiaries.
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"Auction Package" means the auction of various vehicles and
miscellaneous obsolete equipment on or before May 31, 1999 in an amount not to
exceed $150,000.
"Bank Account Letter" shall mean the letter dated of even date herewith
executed by the Senior Agent and Bank One, Texas, N.A.
"Basic Documents" shall mean, collectively, the Senior Loan Documents
and the Equity Documents.
"Board of Directors" shall mean the Board of Directors of SWRH, SWRI or
the Borrower, as applicable, or any committee thereof duly authorized to act on
behalf of the applicable Board of Directors.
"Borrower" shall mean Sierra Well Service, Inc., a Delaware
corporation.
"Business Day" shall mean any day other than Saturday, Sunday, or a day
on which banking institutions in New York City are not required to open for
business.
"Capital Lease" shall mean any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"Capitalized Lease Obligation" shall mean the amount of the liability
under any Capital Lease that, in accordance with GAAP, is required to be
capitalized and reflected as a liability on the balance sheet.
"Capital Stock" of any Person shall mean any and all shares, interests,
participations, or other equivalents (however designated) of, or rights or
warrants, or options to purchase, corporate stock or any other equity interest
(however designated) of or in such Person.
"Change of Control" shall mean (i) the occurrence of any time when ▇.▇.
▇▇▇▇▇▇▇ III ever owns less than 51% of the voting securities of SWRH, (ii) any
time at which a wholly owned subsidiary of SWRH ceases to be the general partner
of Southwest Partners II, L.P. and Southwest Partners III, L.P., or (iii) any
time at which SWRH, SWRI, Southwest Partners II, L.P. and Southwest Partners
III, L.P. collectively own less than 45% of the voting securities of the
Borrower, or (iv) during any period of twelve (12) consecutive months beginning
with and after the Effective Date, the individuals who at the beginning of such
twelve (12) month period were directors of SWRH, or of the Borrower, shall cease
for any reason to constitute a majority of the Board of Directors of either SWRH
or the Borrower at any time during such period; provided, however, that "Change
of Control" shall not include any change of control occasioned by any of the
Senior Loan Documents, the Subordinated Loan Documents or the Equity Documents.
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"Change of Management" shall mean the occurrence of any time when ▇.▇.
▇▇▇▇▇▇▇ III ceases to act as chief executive officer of SWRH, whether in the
capacity of President or Chairman.
"Closing Date" shall mean the date upon which each of the conditions
precedent contained in Article 3 have been either (a) satisfied in full to the
Senior Agent's satisfaction or (b) waived by the Senior Agent in its sole
discretion; provided that in no event shall the Closing Date be a date occurring
after May 15, 1999.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, any successor statute, and the rules and regulation thereunder.
"Collateral" shall mean any real or personal property which may now or
hereafter be subject to a Lien securing the Senior Loan Obligations, including
the Liens granted by the Borrower concurrently with the execution of this Senior
Loan Agreement for the benefit of the Senior Lenders.
"Commitment" shall mean, for any Senior Lender, such Senior Lender's
commitment to make its Pro Rata Share of the Senior Loan pursuant to the terms
of this Senior Loan Agreement in an aggregate outstanding amount not to exceed
the Senior Lender's Maximum Commitment.
"Common Stock" shall mean the common stock, no par value per share, of
the Borrower or such other Capital Stock or other securities as shall constitute
the common equity of the Company.
"Debt/Lease Service" means, with respect to the Borrower and its
Subsidiaries and for any period of its determination, the sum of (a) the
aggregate amount of consolidated principal payments that became due and payable
or that were paid on account of long-term Indebtedness of the Borrower and its
Subsidiaries during such period, including any such amounts related to the
Capital Leases of the Borrower and its Subsidiaries, plus (b) the aggregate
consolidated lease expense of the Borrower and its Subsidiaries that became due
and payable or that was paid during such period, plus (c) the aggregate
consolidated interest expense of the Borrower and its Subsidiaries that became
due and payable or that was paid during such period, plus (d) the consolidated
Capital Expenditures of the Borrower and its Subsidiaries during such period. In
clarification of the foregoing, any interest amount deferred pursuant to Section
2.4(b) of the Subordinated Loan Agreement shall not be included in clause (c) of
this definition until the earlier of (i) the date such interest amount becomes
due and payable or (ii) the date such interest amount is paid.
"Default" shall mean any event which is, or after notice or passage of
time, or both, would be, an Event of Default.
"Default Rate" shall mean, for the applicable period, a per annum
interest rate equal to the applicable interest rate on the outstanding principal
balance of the respective Senior Notes as set forth in Section 2.6(c) for such
period plus 3.00% per annum.
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"EBITDA" means, with respect to any Person and for any period of its
determination, the consolidated net income of such Person for such period, plus
the consolidated interest expense, income taxes, and depreciation and
amortization of such Person for such period, in each case excluding (a)
unrealized gains or losses with respect to such Person's investment portfolio,
(b) any extraordinary gains or losses, (c) any gains or losses on the sale of
fixed assets and (d) any non-cash impairments of assets.
"Effective Date" shall mean the date of this Senior Loan Agreement.
"Environmental Laws" shall mean any and all laws, statutes, ordinances,
rules, regulations, orders, or determinations of any Governmental Authority
pertaining to health or the environment in effect in any and all jurisdictions
in which the Borrower or its Subsidiaries are conducting or at any time have
conducted business, or where any property of the Borrower or its Subsidiaries is
located, or where any hazardous substances generated by or disposed of by the
Borrower or its Subsidiaries are located, including but not limited to the Oil
Pollution Act of 1990 ("OPA"), as amended, the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act of 1980
("CERCLA"), as amended, the Federal Water Pollution Control Act, as amended, the
Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking
Water Act, as amended, the Toxic Substances Control Act, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, and other
environmental conservation or protection laws. The term "oil" has the meaning
specified in OPA; the terms "hazardous substance," "release" and "threatened
release" have the meanings specified in CERCLA, and the terms "solid waste,"
"disposal" and "disposed" have the meanings specified in RCRA; provided,
however, if either CERCLA, RCRA or OPA is amended so as to broaden the meaning
of any term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment, and provided, further, that, to the extent the
laws of the state in which any property of the Borrower or its Subsidiaries is
located establish a meaning for "oil," "hazardous substance," "release," "solid
waste" or "disposal" which is broader than that specified in either OPA, CERCLA
or RCRA, such broader meaning shall apply with respect to such property.
"Equipment" shall mean all of Borrower's and its Subsidiaries' present
and future owned or leased fixtures, equipment, mobile equipment, vehicles,
interstate commercial vehicles, workover rigs and inventory comprised of such
items, wherever located, including Vehicles, tongs, hooks, tubing elevators,
pumps, pipes, engines, containers, tires, parts inventory, and other oil-field
service equipment, and all parts thereof and all accessions and additions
thereto.
"Equity Documents" shall mean the Securities Purchase Agreement between
the Borrower and JEDI II dated as of the Effective Date, the Certificate of
Designation of Preferred Stock - Series A, the Certificate of Designation of
Preferred Stock - Series B, the Certificate of Designation of Preferred Stock -
Series C, and the Stockholders' Agreement, and Registration Rights Agreement,
each as defined therein.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, any successor statute, and the rules and
regulations thereunder.
"Event of Default" shall have the meaning specified in Section 7.1.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for any such day on
such transactions received by the Senior Agent from three Federal funds brokers
of recognized standing selected by it.
"Final Maturity Date" shall mean June 30, 2004.
"Financial Statements" shall mean consolidated balance sheets,
statements of operation and statements of cash flow, the consolidating schedules
used to prepare the same and, on an annual basis, appropriate footnotes prepared
in accordance with GAAP.
"Financing Statement" shall mean any document executed by either the
Borrower or any of its Subsidiaries required to perfect the pledge or security
interest granted by the Senior Loan Parties in any of the Collateral.
"Financing Statement Amendments" shall mean the amendments executed of
even date herewith amending the Financing Statement to, among other items, give
effect to the terms of this Senior Loan Agreement and the Subordinated Loan
Agreement.
"GAAP" shall mean generally accepted accounting principles, applied on
a consistent basis, as set forth in Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants or in statements of
the Financial Accounting Standards Board or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
observed in a current period are comparable in all material respects to those
accounting principles applied in preceding periods.
"Governmental Authority" shall mean any (domestic or foreign) federal,
native American Indian, state, province, county, city, municipal, or other
political subdivision or government, department, commission, board, bureau,
court, agency, or any other instrumentality of any of them, which exercises
jurisdiction over the Borrower, any of its Subsidiaries, or any of their
respective property.
"Guaranteed Debt" of any Person shall mean, without duplication, all
Indebtedness of any other Person guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed
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directly or indirectly by such Person through an agreement (i) to pay or
purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the holder
of such Indebtedness against loss, (iii) to supply funds to, or in any other
manner invest in, the debtor (including any agreement to pay for property or
services to be acquired by such debtor irrespective of whether such property is
received or such services are rendered), (iv) to maintain working capital or
equity capital of the debtor, or otherwise to maintain the net worth, solvency
or other financial condition of the debtor, or (v) otherwise to assure a
creditor against loss; provided that the term "guarantee" shall not include
endorsements for collection or deposit, in either case in the ordinary course of
business, or any obligation or liability of such Person in respect of leasehold
interests assigned by such Person to any other Person.
"Guaranty" shall mean any present or future guaranty in favor of the
Senior Agent for the benefit of the Senior Lenders guaranteeing the payment and
performance of the Senior Loan Obligations.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade accounts
payable and other accrued current liabilities incurred in the ordinary course of
business, (ii) all obligations of such Person evidenced by bonds, notes,
debentures, or other similar instruments, (iii) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (iv) all Capitalized Lease
Obligations of such Person, (v) all indebtedness referred to in (but not
excluded from) clause (i), (ii), (iii), or (iv) above of other Persons, the
payment of which is 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, without limitation, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for the
payment of such indebtedness, (vi) all Guaranteed Debt of such Person, (vii) all
Redeemable Capital Stock that has any redemptions, dividend payments, or other
obligations that are or could become due before the Final Maturity Date issued
by such Person.
"LIBOR Rate" shall mean, the interest rate per annum equal to the rate
per annum reported, on the day three Business Days prior to the day of its
determination, on Telerate Access Service Page 3750 (British Bankers Association
Interest Settlement Rates) provided by Telerate Systems Incorporated (or, if
such Telerate Page shall cease to be publicly available, as reported by Reuters
or any publicly available source of similar market data selected by the Senior
Agent) as the London Interbank Offered Rate for U.S. dollar deposits having a
term equal to six (6) months and in an amount substantially equal to the
outstanding principal amount of the Senior Loan.
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"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any Capital Lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under any applicable version of the Uniform Commercial Code in effect
from time to time or any comparable law of any jurisdiction in respect of any of
the foregoing).
"Majority Senior Lenders" shall mean, at any time, Senior Lenders
holding more than 50% of the then aggregate unpaid principal amount of the
Senior Loan at such time.
"Material Adverse Effect" shall mean any circumstances or events which
could (i) have a material adverse effect on the assets or properties,
liabilities, financial condition, business, operations, affairs, or
circumstances of the Borrower from the facts represented or warranted in any
Senior Loan Document or Equity Document (other than any representation or
warranty related solely to a different point in time), or (ii) materially impair
the ability of the Borrower to carry out its business as it exists on the date
of this Senior Loan Agreement or proposed at the date of this Senior Loan
Agreement to be conducted or to meet its obligations under the Senior Loan
Documents or Equity Documents on a timely basis.
"Maximum Rate" shall mean, at any particular time in question, the
maximum rate of interest which under applicable law may then be charged on the
Senior Notes. If such maximum rate changes after the date hereof, the Maximum
Rate shall be automatically increased or decreased, as the case may be, without
notice to the Borrower from time to time as of the effective date of each change
in such maximum rate.
"Mortgages" shall mean (a) such Security Documents requested by the
Senior Agent in form and substance satisfactory to the Senior Agent which shall
replace and/or amend and restate the existing Deeds of Trust, Security
Agreements, and Fixture Filings and Mortgages, Security Agreements, and Fixture
Filings executed in connection with the Original Loan Agreement, and (b) any
present or future deeds of trust, mortgages, or similar agreements made by the
Borrower or any Subsidiary, granting a first and prior lien and security
interest, subject only to Permitted Liens, in all real property, fixtures and
improvements owned by the respective Senior Loan Parties, including any
leasehold estate in real property, fixtures and improvements, in favor of the
Senior Agent for the benefit of the Senior Lenders securing the Senior Loan
Obligations.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Payment Date" shall mean the last Business Day of each March, June,
September, and December following the Effective Date until the Final Maturity
Date.
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"Permitted Liens" shall mean (i) Liens disclosed in Schedule 4.10, (ii)
ad valorem taxes not yet due and payable, laborers', vendors', repairmen's,
mechanics', worker's, or materialmen's liens arising by operation of law or
incident to the construction or improvement of property if the obligations
secured thereby are not yet due or are being contested in good faith by
appropriate legal proceedings (iii) minor irregularities in title to real
property which do not materially interfere with the occupation, use and
enjoyment by the Borrower or any Subsidiary of any of their respective
properties in the normal course of business as presently conducted or materially
impair the value thereof for such business, and (iv) so long as such liens are
not superior to the Liens created pursuant to the Security Instruments, Liens
securing the Subordinated Loan Obligations (as defined in the Subordinated Loan
Agreement).
"Person" shall mean any individual, corporation, limited liability
company, limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, or Government Authority.
"Plan" shall mean any plan subject to Title IV of ERISA and maintained
by the Borrower or any Subsidiary, or any such plan to which the Borrower or any
Subsidiary is required to contribute on behalf of their employees.
"Pledge Agreements" shall mean the Pledge Agreements dated as of the
Effective Date made by each of the Pledgors in favor of the Senior Agent for the
benefit of the Senior Lenders pledging the Capital Stock of the Borrower owned
by the Pledgors to the Senior Agent for the benefit of the Senior Lenders.
"Pledgors" shall mean (a) Southwest Partners II, L.P., a Delaware
limited partnership, (b) Southwest Partners III, L.P., a Delaware limited
partnership, (c) ▇▇▇▇ ▇. ▇▇▇▇▇▇, and (d) Dub ▇. ▇▇▇▇▇▇▇▇.
"Pro Rata Share" shall mean, with respect to any Senior Lender, (i)
while no Advances are outstanding, the ratio (expressed as a percentage) of such
Senior Lender's Maximum Commitment, at any given time, to the total of the
Maximum Commitments at such time and (ii) while Advances are outstanding, the
the ratio (expressed as a percentage) outstanding principal amount of Advances
of such Senior Lender at such time to the aggregate outstanding amount of
Advances at such time.
"Redeemable Capital Stock" of any Person means any Capital Stock of
such Person or any Subsidiary of such Person that, either by its terms, by the
terms of any security into which it is convertible or exchangeable or otherwise,
(i), is, or upon the happening of an event or passage of time would be, required
to be redeemed on or prior to the Final Maturity Date, or (ii) is redeemable at
the option of the holder thereof at any time prior to the Final Maturity Date,
or (iii) is convertible into or exchangeable for debt securities at any time
prior to the Final Maturity Date.
"Requirement of Law" shall mean as to any Person, the Certificate of
Incorporation and By-laws or other organizational or governing documents of such
Person, and any law, treaty, rule, or
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regulation or determination of an arbitrator or a court or other Governmental
Authority, domestic or foreign, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Responsible Officer" shall mean the chief executive officer,
president, executive vice president, general counsel, treasurer, or corporate
secretary of the Borrower or any of its Subsidiaries, as the case may be.
"Security Agreements" shall mean (a) the Security Agreement dated as of
the Effective Date, made by the Borrower, in favor of the Senior Agent for the
benefit of the Senior Lenders as security for the payment or performance of the
Senior Loan Obligations and (b) any future security agreements made by the
Borrower or any of the Subsidiaries, granting a first and prior security
interest in all of the assets and properties of the Senior Loan Parties, in
favor of the Senior Agent for the benefit of the Senior Lenders as security for
the payment or performance of the Senior Loan Obligations.
"Security Documents" shall mean this Senior Loan Agreement, the
Subordinated Loan Agreement, the Mortgages, the Security Agreements, the
Financing Statement Amendments, the Guaranties, the Security Agreements, the
Financing Statements, the Pledge Agreements, the Bank Account Letter and any and
all other agreements or instruments now or hereafter executed and delivered by
the Borrower, the Subsidiaries, or any other Person as security or support for
the payment or performance of the Senior Loan Obligations.
"Senior Agent's Account" shall mean an account located in New York as
specified by the Senior Agent as the Senior Agent's Account by written notice to
the Borrower.
"Senior Lenders" shall mean the Senior Lenders listed on the signature
pages of this Senior Loan Agreement and each assignee that shall become a party
to this Senior Loan Agreement pursuant to Section 9.4.
"Senior Lender's Account" shall mean, for any Senior Lender, the
account specified by such Senior Lender as its Senior Lender's Account by notice
in writing to the Senior Agent.
"Senior Loan" shall mean the loan evidenced by this Senior Loan
Agreement consisting of the Advances by the Senior Lenders.
"Senior Loan Documents" shall mean, collectively, the Senior Loan
Agreement, the Senior Notes, the Structuring Fee Agreement, the Security
Documents, the Subordination Agreement, and all other documents, agreements, and
other instruments executed in connection with the Senior Loan Agreement.
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"Senior Loan Obligations" shall mean all principal, interest, fees,
reimbursements, indemnifications, and other amounts or obligations now or
hereafter owed or performable by the Senior Loan Parties under the Senior Loan
Documents.
"Senior Loan Parties" shall mean the Borrower and the Subsidiaries.
"Senior Note" shall mean a promissory note in substantially the form of
Exhibit A made by the Borrower and payable to the order of any Senior Lender
evidencing indebtedness of the Borrower to such Senior Lender resulting from the
Senior Loan.
"Structuring Fee Agreements" means (a) the letter agreement dated as of
even date herewith between the Borrower and ECT Securities Limited Partnership
and (b) the letter agreement dated as of even date herewith between the Borrower
and JEDI II.
"Subsidiary" shall mean as to any Person, a corporation, partnership,
or other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership, or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly, through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Senior Loan Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
"Subordinated Loan Documents" shall have such meaning as defined in the
Subordinated Loan Agreement.
"Subordination Agreement" shall mean the Subordination and
Intercreditor Agreement dated as of even date herewith among the Borrower, the
Senior Agent, and the agent for the lenders under the Subordinated Loan
Agreement.
"SWRH" shall mean Southwest Royalties Holdings, Inc., a Delaware
corporation.
"SWRI" shall mean Southwest Royalties, Inc., a Delaware corporation.
"Vehicles" means all of Borrower's present and future owned or leased
crew cabs, pick-ups, vans, trucks, automobiles, tractors, trailers, and other
mobile equipment.
Section 1.2 Accounting Principles.
(a) The Borrower shall not, and shall not permit any of its
Subsidiaries to, materially change any method of accounting employed in
the preparation of their Financial Statements from the methods employed
in the preparation of the audited consolidated
16
Financial Statements dated as of December 31, 1998, unless required to
conform to GAAP or approved in writing by the Senior Agent.
(b) Except as expressly provided for in this Senior Loan
Agreement, all accounting terms, definitions, ratios, and other tests
described herein shall be construed in accordance with GAAP with the
same basis applied in the Financial Statements described in paragraph
(a) above.
(c) When the Financial Statements or financial results of any
group of Persons are described as "combined," that reference is to the
financial statements or financial results of such Persons, but not
their Subsidiaries, taken together on a combined basis after
eliminating significant inter-entity balances and transactions.
ARTICLE 2
AMOUNT AND TERM OF THE SENIOR LOAN
Section 2.1 Senior Loan. Subject to the terms, conditions and notice
requirements and relying on the representations and warranties contained in this
Senior Loan Agreement and the other Senior Loan Documents, on the Closing Date
but effective as of the Effective Date Twenty-Four Million Four Hundred Eight
Thousand and No/100 Dollars ($24,408,000) of the outstanding principal amount
owed by the Borrower under the Original Loan Agreement shall be converted into
the Senior Loan which shall consist of Advances owed to each Senior Lender in an
amount equal to such Senior Lender's Pro Rata Share of $24,408,000.
Section 2.2 Repayment Obligations; Prepayments.
(a) Principal.
(i) The outstanding principal balance of the Senior
Loan shall be due and payable to the Senior Agent for the
ratable benefit of the Senior Lenders beginning on September
30, 2000, and each Payment Date thereafter until the Final
Maturity Date in equal principal installments of $871,714.29.
The Borrower shall pay to the Senior Agent for the ratable
benefit of the Senior Lenders the aggregate outstanding
principal amount of the Senior Loan on the Final Maturity
Date.
(ii) In the event of a Change of Control, Borrower
shall repay to the Senior Agent for the ratable benefit of the
Senior Lenders within thirty days (30) of the Majority Senior
Lenders demand therefore, the aggregate outstanding principal
amount of the Senior Loan and all unpaid interest thereon. The
Majority Senior Lenders reserve the right to exercise the
terms and provision of this section at any time following a
Change of Control, regardless of the length of time following
the Change of Control that the Majority Senior Lenders
exercises their rights hereunder.
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Until such time as the Majority Senior Lenders make a demand
pursuant to the terms of this section, the Borrower shall
repay the principal amount of the Senior Loan in accordance
with the terms of Section 2.2(a)(i).
(b) Voluntary Prepayments. The Senior Loan may be prepaid in
whole or in part, from time to time, without penalty or premium,
following ten (10) days prior written notice to the Senior Agent. Any
voluntary partial prepayments of principal must be in whole multiples
of $100,000 and voluntary prepayments may only be made on a Payment
Date and shall include all interest accrued on the Senior Loan and
unpaid to the date of payment. Voluntary prepayments of principal may
not be reborrowed. Any prepayments shall be made to the Senior Agent
for the ratable benefit of the Senior Lenders.
(c) Mandatory Prepayments. In the event of any disposition or
transfer, including, without limitation, any transfer by merger or
operation of law, by the Borrower or any Subsidiary of any of their
respective assets, Capital Stock or debt securities, or should the
Borrower or any Subsidiary secure any loans other than the Senior Loan
or the Subordinated Loan, and whether such sales or loans are
undertaken with or without the consent of the Majority Senior Lenders,
the net proceeds thereof (after deducting all reasonable costs and
expenses incurred by the Borrower or Subsidiary in connection
therewith) shall be delivered to the Senior Agent for the ratable
benefit of the Senior Lenders as a mandatory prepayment of the Senior
Loan; provided that (i) with regard to any disposition or transfer of
any assets of the Borrower or its Subsidiaries, such prepayment shall
only be required to the extent that such disposition or transfer does
require the Senior Majority Lenders consent pursuant to Section 6.9 and
(ii) the mandatory prepayment provision contained within this Section
shall not apply to the Borrower's sale of its Lampasas Ranch property.
All mandatory prepayments shall be applied to the Senior Loan
Obligations in accordance with Section 7.7. Mandatory prepayments of
principal may not be reborrowed. Any disposition or transfer of
Equipment of which the proceeds are reinvested in like-kind Equipment
within 60 days shall not be subject to the terms hereof.
2.3 Section Payments and Computations.
(a) All payment hereunder shall be made in U.S. Dollars. The
Borrower shall make each payment under the Senior Loan Agreement and
under the Senior Notes not later than 12:00 noon (New York, New York
time) on the day when due to the Senior Agent's Account in immediately
available funds. All payments by the Borrower hereunder shall be made
without any offset, abatement, withholding, deduction, counterclaim, or
reduction. Upon receipt of payment from the Borrower of any principal,
interest, or fees due to the Senior Lenders, the Senior Agent shall
promptly after receipt thereof distribute to the Senior Lenders their
ratable share of such payments for the account of their respective
Senior Lender's Account. If and to the extent that the Senior Agent
shall not have so distributed to any Senior Lender its ratable share of
such payments, the Senior Agent agrees that it shall pay interest on
such amount for each day after the day when such amount is made
available
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to the Senior Agent by the Borrower until the date such amount is paid
to such Senior Lender by the Senior Agent at the Federal Funds Rate in
effect from time to time. Interest on such amount shall be due and
payable by the Senior Agent upon demand by such Senior Lender. Upon
receipt of other amounts due solely to the Senior Agent or a specific
Senior Lender, the Senior Agent shall distribute such amounts to the
appropriate party to be applied in accordance with the terms of the
Senior Loan Agreement. Whenever any payment shall be stated to be due
on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest. If the time
for payment for an amount payable is not specified in the Senior Loan
Documents, or in any other document, the payment shall be due and
payable ten (10) days after the date on which the Senior Agent or
applicable Senior Lender demands payment therefor.
(b) Unless the Senior Agent shall have received written notice
from the Borrower prior to any date on which any payment is due to the
Senior Lender that the Borrower shall not make such payment in full,
the Senior Agent may assume that the Borrower has made such payment in
full to the Senior Agent on such date and the Senior Agent may, in
reliance upon such assumption, cause to be distributed to each Senior
Lender on such date an amount equal to the amount then due such Senior
Lender. If and to the extent the Borrower shall not have so made such
payment in full to the Senior Agent, each Senior Lender shall repay to
the Senior Agent forthwith on demand such amount distributed to such
Senior Lender, together with interest thereon from the date such amount
is distributed to such Senior Lender until the date such Senior Lender
repays such amount to the Senior Agent, at an interest rate equal to,
the Federal Funds Rate in effect from time to time.
(c) Each Senior Lender agrees that if it should receive any
payment (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim
or cross action, by the enforcement of any right under the Senior Loan
Documents, or otherwise) in respect of any obligation of the Borrower
to pay principal, interest, fees, or any other obligation incurred
under the Senior Loan Documents in a proportion greater than the total
amount of such principal, interest, fees, or other obligation then owed
and due by the Borrower to such Senior Lender bears to the total amount
of principal, interest, fees, or other obligation then owed and due by
the Borrower to the Senior Lenders immediately prior to such receipt,
then such Senior Lender receiving such excess payment shall purchase
for cash without recourse from the other Senior Lenders an interest in
the obligations of the Borrower to such Senior Lenders in such amount
as shall result in a participation by all of the Senior Lenders, in
proportion with the Senior Lenders' respective pro rata shares, in the
aggregate unpaid amount of principal, interest, fees, or any such other
obligation, as the case may be, owed by the Borrower to all of the
Senior Lenders; provided that if all or any portion of such excess
payment is thereafter recovered from such Senior Lender, such purchase
shall be rescinded and the purchase price restored to the extent of
such recovery, in proportion with the Senior Lenders' respective Pro
Rata Shares.
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2.4 Section Interest.
(a) The outstanding principal balance of the Senior Loan shall
bear interest at a fluctuating rate per annum equal to the lesser of
(i) the LIBOR Rate in effect from time to time plus two and one-half
percent (2.5%) and (ii) the Maximum Rate. The Borrower shall pay to the
Senior Agent for the ratable benefit of the Senior Lenders all accrued
but unpaid interest on the Senior Loan on each Payment Date and on the
Final Maturity Date.
(b) Past due interest, principal and other amounts hereunder
shall bear interest at a fluctuating interest rate per annum that is
equal to the lesser of (i) the Default Rate or (ii) the Maximum Rate
from the date due until paid.
(c) The interest rate for the Senior Loan shall be
redetermined on the last Business Day of every March and September,
beginning with September of 1999, to give effect to any change in the
LIBOR Rate. All computations of interest based on the LIBOR Rate shall
be made on the basis of a 360 day year. All such computations shall be
made for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such
computation is being performed. Interest provided for under this Senior
Loan Agreement and the Senior Notes shall be calculated on the unpaid
sums actually loaned and outstanding pursuant to the terms of this
Senior Loan Agreement and the Senior Notes and only for the period from
the date or dates advanced until repaid. Each determination by the
Senior Agent of an interest rate shall be conclusive and binding for
all purposes, absent manifest error.
Section 2.5 Senior Notes. To evidence the Advance made by each of the
Senior Lenders pursuant to this Senior Loan Agreement, the Borrower will issue,
execute and deliver a Senior Note to each Senior Lender in the principal amount
of each Senior Lender's Maximum Commitment dated as of the Effective Date. The
records of the Senior Agent shall be deemed rebuttably presumptive evidence of
the principal amount owing on the Senior Notes. The liability for payment of
principal and interest evidenced by Senior Notes shall be limited to the
principal amounts actually loaned and outstanding under the Senior Notes and
this Senior Loan Agreement and interest on such amounts calculated in accordance
with the Senior Notes and this Senior Loan Agreement.
Section 2.6 Taxes.
(a) Any and all payments by the Senior Loan Parties shall be
made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges, or withholdings,
and all liabilities with respect thereto, excluding, in the case of the
Senior Lenders, taxes imposed on its income and franchise taxes imposed
on it by any jurisdiction of which any the Senior Lenders is a citizen
or resident or any political subdivision of such jurisdiction (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings,
and liabilities being hereinafter referred to as "Taxes"). If any
Senior Loan Party shall be required by law to deduct any Taxes from or
in respect of any sum
20
payable to any Senior Lender, (i) the sum payable shall be increased as
may be necessary so that, after making all required deductions
(including deductions applicable to additional sums payable under this
Section 2.6), such Senior Lender receive an amount equal to the sum it
would have received had no such deductions been made; (ii) such Senior
Loan Party shall make such deductions; and (iii) such Senior Loan Party
shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(b) The Borrower agrees to pay and hold each Senior Lender
harmless from and against any and all present and future stamp and
other similar taxes with respect to this Senior Loan Agreement and any
other Senior Loan Documents and save each Senior Lender harmless from
and against any and all liabilities with respect to or resulting from
any delay or omission to pay such taxes, and indemnify each Senior
Lender for the full amount of taxes paid by the Senior Lenders in
respect of payments made or to be made under this Senior Loan Agreement
or any other Senior Loan Document and any liability (including
penalties, interest, and expenses) arising therefrom or with respect
thereto, whether or not such taxes were correctly or legally asserted
(excluding taxes imposed on its income and franchise taxes imposed on
it by any jurisdiction of which such Senior Lender is a citizen or
resident or any political subdivision of such jurisdiction).
Section 2.7 Increased Costs.
(a) Cost of Funds. If, due to either the introduction of or
any change in or in the interpretation, application, or applicability
of, any law or regulation, or the compliance with any guideline or
request from any Governmental Authority (whether or not having the
force of law), there shall be any increase in the cost to such Senior
Lender of funding or maintaining the Senior Loan, or any reduction of
any Senior Lender's reasonably anticipated return on its investment,
then the Borrower shall from time to time upon demand by such Senior
Lender pay to such Senior Lender such additional amounts sufficient to
compensate such Senior Lender for such increased cost or reduced
return. A certificate as to the amount of such increased cost or
reduced return detailing the calculation thereof prepared by the Senior
Lenders and submitted to the Borrower shall be conclusive and binding
for all purposes, absent manifest error.
(b) Capital Adequacy. If due to any change in any law or
regulation or any interpretation, directive, or request of any court or
governmental or monetary authority, whether or not having the force of
law, there shall be any increase by an amount which any Senior Lender
reasonably deems to be material in the capital requirements of such
Senior Lender or its parent or holding company related to its
commitments to make or the making, funding, or maintaining the Senior
Loan hereunder, as such capital requirements are reasonably allocated
by such Senior Lender, then the Borrower shall from time to time upon
demand by such Senior Lender pay to the Senior Lenders additional
amounts sufficient to compensate such Senior Lender or its respective
parent or holding companies for such increase in costs (including an
amount equal to any reduction of the rate of return on assets
21
or equity of the Senior Lenders or their respective parent or holding
companies to a level below that which the Senior Lenders or their
respective parent or holding companies could have achieved but for such
change in law, regulation, interpretation, directive, or request). A
certificate as to such amounts and detailing the calculation of such
amounts prepared by such Senior Lender and submitted to the Borrower
shall be conclusive and binding for all purposes, absent manifest
error.
Section 2.8 Illegality. Notwithstanding any other provision in this
Senior Loan Agreement, if it becomes unlawful for any Senior Lender to maintain
the Senior Loan or to give effect to its obligations hereunder, the Senior
Lender will so notify the Borrower and the Senior Agent, and to the extent
necessary to prevent the violation of law the aggregate outstanding principal
amount of the Senior Loan made by the Senior Lenders, all accrued but unpaid
interest thereon, and any other amounts payable to the Senior Lenders under this
Senior Loan Agreement and the other Senior Loan Documents will be prepaid as
provided in such notice.
ARTICLE 3
CONDITIONS OF CLOSING
Section 3.1 The amendment and restatement of the Original Loan
Agreement pursuant to this Senior Loan Agreement is subject to the following
conditions precedent:
(a) The Senior Agent shall have received copies of each of the
following documents in form and content satisfactory to the Senior
Agent and its counsel, duly executed by the parties thereto and, where
applicable, acknowledged:
(i) The Senior Loan Documents.
(ii) b Opinions of counsel to the Borrower delivered
on the Effective Date and on the Closing Date as the Senior
Agent may request and that are acceptable to the Senior Agent
addressing the existence and good standing of the Borrower and
each Subsidiary, the authorization of the Senior Loan
Documents, the enforceability of the Senior Loan Documents,
and the perfection of the liens under the Senior Loan
Documents, the absence of conflicts with law, other material
agreements, and court orders, the absence of litigation, and
such other matters as the Senior Agent may request.
(iii) Certificates, dated as of the Effective Date,
of the Secretary or an Assistant Secretary of each of the
Borrower and the Subsidiaries (A) certifying as true, complete
and correct the charter and by-laws of the Borrower and each
Subsidiary, and resolutions of the Board of Directors of the
Borrower and each respective Subsidiary attached thereto, (B)
as to the absence of proceedings or other action for
dissolution, liquidation or reorganization of the Borrower and
each
22
Subsidiary, (C) as to the incumbency of the officers of the
Borrower and the Subsidiaries who shall have executed
instruments, agreements, and other documents in connection
with the transactions contemplated hereby or by the Senior
Loan Documents, and (D) covering such other matters, and with
such other attachments thereto, as the Senior Agent may
request, and such certificate and the attachments thereto
shall be satisfactory in form and substance to the Senior
Agent.
(iv) Original Certificates of Title to each of the
certificated vehicles owned by the Borrower or any of the
Subsidiaries, each endorsed by the applicable Senior Loan
Party to evidence that such vehicle is subject to a security
interest in favor of the Senior Agent for the benefit of the
Senior Lenders.
(v) All other documents reasonably requested by the
Senior Agent in connection with the transaction contemplated
by this Senior Loan Agreement.
(b) Each of the Mortgages, Financing Statements, Financing
Statement Amendments and Certificates of Title referenced in
subparagraph (a) above, and any other document reasonably required by
the Senior Agent to be filed of record, shall have been filed of record
with the appropriate party in order to put third parties on notice of
the liens, security interests or other rights granted by the Senior
Loan Parties in the Collateral.
(c) Stock certificates of the Capital Stock of the Borrower
pledged pursuant to the Pledge Agreements, along with stock powers
endorsed in blank and financing statements executed by the each of the
Pledgors in connection with the perfection of the Liens created by the
Pledge Agreements.
(d) The Senior Agent shall have completed its due diligence
review of such matters as it shall deem appropriate, and all other
documents relating thereto, the Borrower's and each Subsidiaries'
properties and operations thereof, compliance with Environmental Laws,
and any available reports related thereto, and the results of such due
diligence review shall be satisfactory to the Senior Agent.
(e) The Senior Agent shall have received insurance
certificates for the Borrower and its Subsidiaries reflecting the
insurance coverage required under this Subordinated Loan Agreement.
(f) The Borrower shall have provided the Senior Agent with a
copy of a twelve (12) month projected income statement and capital
budget, commencing with the Effective Date, which has been approved by
Board of Director's of Borrower and which is satisfactory to the Senior
Agent in its sole discretion.
(g) The Borrower shall have delivered to the Senior Agent
copies of audited Financial Statements of the Borrower as of December
31, 1998, unaudited Financial
23
Statements of the Borrower as of January 31, 1999, and there shall not
have occurred any Material Adverse Effect in the business, assets or
financial condition of any of the Borrower or any of its Subsidiaries
since January 31, 1999.
(h) As of the Effective Date and the Closing Date, no Default
exists or would reasonably be expected to occur by virtue of making the
Senior Loan or the Subordinated Loan or after giving effect to the
transactions contemplated by the Basic Documents.
(i) All of the representations and warranties of the Borrower
and the Pledgors contained in the Basic Documents shall be true and
correct as of the Effective Date and as of the Closing Date, and the
making of any extension of credit hereunder, shall be deemed to be a
restatement, representation, and additional warranty of the
representations and warranties made by the Borrower and the Pledgors in
each Basic Document as of each such date (taking into account certain
fixed dates specified for certain representations and warranties in the
Basic Documents). The Basic Documents shall have been executed and
delivered by the Senior Loan Parties as appropriate and such documents
shall be in full force and effect.
(j) As of the Effective Date and the Closing Date, the
Borrower shall have performed and complied with all agreements and
conditions set forth in or contemplated hereunder or in any other
Senior Loan Document or in the Equity Documents required to be
performed or complied with by it at or prior to each of such dates.
(k) As of the Effective Date and the Closing Date, no Change
of Control or Change of Management shall have occurred and all attached
and requested information in accordance with Section 2.3.
(l) The Borrower shall have paid to Senior Agent for the
benefit of the Senior Lenders all amounts payable pursuant to Section
9.2 of this Senior Loan Agreement and shall have paid to ECT Securities
Limited Partnership and JEDI II all payments required under the terms
of the Structuring Fee Agreement.
(m) The Borrower shall have provided schedules to the Basic
Documents in form and substance satisfactory to the Senior Agent.
(n) (i) The Subordinated Loan Agreement shall have been
executed and delivered and the conditions precedent set forth in
Article 3 of the Subordinated Loan Agreement shall have been satisfied
and (ii) the conditions precedent set forth in Article V of the
Securities Purchase Agreement shall have been satisfied.
(o) The Borrower shall have paid to the lender under the
Original Loan Agreement, all accrued interest, fees, and other amounts
owed thereunder as of the date of this Agreement.
24
(p) The Borrower shall have provided to the Senior Agent such
other information, documents, and agreements as it may reasonably have
requested.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
In order to induce the Senior Lenders to enter into this Senior Loan
Agreement and to make the Senior Loan hereunder, the Borrower represents and
warrants to the Senior Agent and each of the Senior Lenders that as of the
Effective Date and as of the Closing Date:
Section 4.1 Corporate Existence. The Borrower and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was incorporated and is
duly qualified as a foreign corporation in all jurisdictions in which
qualification is required.
Section 4.2 Corporate Power and Authorization. The Borrower is duly
authorized and empowered to create and issue the Senior Notes and is duly
authorized and empowered to execute, deliver, and perform its obligation
pursuant to, each of the Senior Loan Documents to which it is a party. Each
Subsidiary is duly authorized and empowered to execute, deliver, and perform its
obligations pursuant to, each of the Senior Loan Documents to which it is a
party. All corporate and other action on the Borrower's and each Subsidiaries'
part, requisite for the due execution, delivery, and performance of the Senior
Loan Documents to which each is a party has been duly and effectively taken.
Section 4.3 Binding Obligations. The Senior Loan Documents constitute
valid and binding obligations of the Borrower and each Subsidiary, respectively,
enforceable in accordance with their respective terms (except that enforcement
may be subject to any applicable bankruptcy, insolvency, or similar debtor
relief laws now or hereafter in effect and relating to or affecting the
enforcement of creditors rights generally).
Section 4.4 No Legal Bar Or Resultant Lien. The Senior Loan Documents
do not and will not violate any provisions of any contract, agreement, law,
regulation, order, injunction, judgment, decree, or writ to which the Borrower
or any of its Subsidiaries is subject, or result in the creation or imposition
of any lien or other encumbrance upon any assets or properties of the Borrower
or any of its Subsidiaries other than those contemplated by this Senior Loan
Agreement.
Section 4.5 No Consent. The execution, delivery, and performance by
the Borrower and each Subsidiary of the Senior Loan Documents to which each is a
party does not require the consent or approval of any other person or entity,
including without limitation any Governmental Authority.
25
Section 4.6 Financial Condition. The audited consolidated Financial
Statements of the Borrower dated December 31, 1998, which have been delivered to
the Senior Agent are complete and correct in all material respects, and fully
and accurately reflect in all material respects the financial condition and
results of the operations of the Borrower and the Subsidiaries as of the date or
dates and for the period or periods stated, and such Financial Statements have
been prepared in accordance with GAAP. The unaudited consolidated Financial
Statements of the Borrower dated January 31, 1999, which have been delivered to
the Senior Agent are complete and correct in all material respects, and fully
and accurately reflect in all material respects the financial condition and
results of the operations of the Borrower and the Subsidiaries as of the date or
dates and for the period or periods stated, and such Financial Statements have
been prepared in accordance with GAAP. Since January 31, 1999, no change has
occurred in the condition, financial or otherwise, of the Borrower or any of the
Subsidiaries which could have a Material Adverse Effect.
Section 4.7 Liabilities. Neither the Borrower nor any of its
Subsidiaries have any material (individually or in the aggregate) liability,
direct or contingent, except as disclosed in the Financial Statements described
in Section 4.6 and on Schedule 4.7 attached hereto. No unusual or unduly
burdensome restrictions, restraint, or hazard exists by contract, law or
governmental regulation, or otherwise relative to the business, assets, or
properties of the Borrower or any of its Subsidiaries.
Section 4.8 Litigation. Except as described in the consolidated
Financial Statements of the Borrower described in Section 4.6, or as otherwise
disclosed in Schedule 4.8 attached hereto, there is no litigation, legal or
administrative proceeding, investigation, or other action of any nature pending
or, to the knowledge of the officers of the Borrower, threatened against or
affecting the Borrower or any of its Subsidiaries which involves the possibility
of any judgment or liability not fully covered by insurance.
Section 4.9 Taxes; Governmental Charges. The Borrower and each of its
Subsidiaries have filed all tax returns and reports required to be filed and has
paid all taxes, assessments, fees, and other governmental charges levied upon it
or its assets, properties, or income which are due and payable, including
interest and penalties or has provided adequate reserves, if required, in
accordance with GAAP for the payment thereof, except such as are being contested
in good faith by appropriate proceedings and for which adequate reserves for the
payment thereof as required by GAAP has been provided and levy and execution
thereon have been stayed and continue to be stayed.
Section 4.10 Ownership of Property; Liens; Leases of Equipment.
Attached hereto as Schedule 4.10 is a true and correct list of (i) all real
property owned by the Borrower and each Subsidiary, (ii) all real property
leased by the Borrower and each Subsidiary, (iii) all Capital Leases of the
Borrower and each Subsidiary, and (iv) all motorized vehicles owned by the
Borrower and each Subsidiary, whether such vehicle is certificated or not, and
in each instance identifying such vehicle by year, type and make (where
available), its vehicle registration number (where certificated) and its serial
number (where not certificated), including all work-over rigs, semis, trailers,
trucks and other rolling stock. Each of the Borrower and its Subsidiaries has
good and marketable title in fee
26
simple (except for exceptions to title as will not in the aggregate materially
interfere with the present or contemplated use of the property affected thereby)
to, or a valid leasehold interest in, all its real property, and good and
marketable title to all its other property, and in all cases enjoys peaceful and
undisturbed possession thereof, and none of such property is subject to any Lien
except Permitted Liens. None of the equipment or inventory owned by Borrower or
any of its Subsidiaries has been leased by such Person as lessor.
Section 4.11 Intellectual Property. Borrower and each Subsidiary owns,
or is licensed to use, all trademarks, trade names, trade secrets, copyrights,
technology, know-how, and processes necessary for the conduct of its business as
currently conducted (the "Intellectual Property"). No claim has been asserted
and is pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does the Borrower know of any valid basis for any such claim. The
use of such Intellectual Property by the Senior Loan Parties does not infringe
on the rights of any Person.
Section 4.12 Defaults. Neither the Borrower nor any of its Subsidiaries
are in default and no event or circumstance has occurred which, but for the
passage of time or the giving of notice, or both, would constitute a default
under any loan or credit agreement, indenture, mortgage, deed of trust, security
agreement, or other agreement or instrument to which the Borrower or any of its
Subsidiaries is a party. No Event of Default hereunder has occurred and is
continuing.
Section 4.13 Casualties; Taking of Properties. Since the date of the
Financial Statements described in Section 4.6, neither the business nor the
assets or properties of the Borrower or any of its Subsidiaries have been
affected, as a result of any fire, explosion, earthquake, flood, drought,
windstorm, accident, strike, or other labor disturbance, embargo, requisition,
or taking of property or cancellation of contracts, permits, or concessions by
any domestic or foreign Governmental Agency thereof, riot, activities of armed
forces, or acts of God or of any public enemy.
Section 4.14 Margin Stock. The Borrower is not engaged principally or
as one of its important activities in the business of extending credit for the
purpose of purchasing or carrying any "margin stock" as defined in Regulation U
of the Board of Governors of the Federal Reserve System (12 C.F.R. part 221), or
for the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry a margin stock or for any other purpose which
might constitute this transaction a "purpose credit" within the meaning of said
Regulation U. Neither the Borrower nor any person or entity acting on behalf of
the Borrower have taken or will take any action which might cause the loans
hereunder or any of the Senior Loan Documents to violate Regulation U or any
other regulation of the Board of Governors of the Federal Reserve System or to
violate the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereafter be in
effect.
Section 4.15 Location of Business and Offices. The principal place of
business of the Borrower is located at ▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇.
27
Section 4.16 Compliance with the Law. Neither the Borrower nor any of
its Subsidiaries:
(a) is in violation of any law, judgment, decree, order,
ordinance, or governmental rule or regulation to which the Borrower or
any of its Subsidiaries, or any of their assets or properties are
subject;
(b) have failed to obtain any license, permit, franchise or
other governmental authorization necessary to the ownership of any of
its assets or properties or the conduct of their business;
which violation or failure is individually, or in the aggregate, reasonably
expected to have a Material Adverse Effect.
Section 4.17 No Material Misstatements.
(a) There are no facts or conditions relating to the Senior
Loan Documents or the financial condition, assets, or business
prospects of the Borrower or any of its Subsidiaries that could,
collectively or individually, have a Material Adverse Effect. No
certificate or representation or warranty of Borrower or its
Subsidiaries in the Basic Documents contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements in such Basic Documents not misleading.
(b) The Financial Statements and other related financial data
(excluding all projections and pro forma financial data) furnished to
the Senior Agent by or at the direction of the Borrower or any of its
Subsidiaries in connection with the negotiation of this Senior Loan
Agreement do not contain any material misstatement of fact and, when
considered with all other written statements furnished to the Senior
Agent in that connection, such Financial Statements, related financial
data (excluding all projections and pro forma financial data) do not
omit to state a material fact or any fact necessary to make the
statement contained therein not misleading.
Section 4.18 ERISA. The Borrower and of its Subsidiaries are in
compliance in all respects with the applicable provisions of ERISA, and no
"reportable event", as such term is defined in Section 4043 of ERISA, has
occurred with respect to any Plan of the Borrower or any of its Subsidiaries.
Section 4.19 Environmental Matters. Except as disclosed on Schedule
4.19:
(a) Environmental Laws, etc. None of the property of the
Borrower or any of its Subsidiaries nor the operations conducted
thereon violate any applicable order of any court or Governmental
Authority or Environmental Laws which could reasonably be expected to
result in remedial obligations assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions, and
circumstances, if any, pertaining to the relevant property.
28
(b) No Litigation. Without limitation of paragraph (a) above,
no property of the Borrower or any of its Subsidiaries, nor the
operations currently conducted thereon or by any prior owner or
operator of such property or operation, are in violation of or subject
to any existing, pending, or threatened action, suit, investigation,
inquiry, or proceeding by or before any Governmental Authority or to
any remedial obligations under Environmental Laws which could
reasonably be expected to result in remedial obligations assuming
disclosure to the applicable Governmental Authority of all relevant
facts, conditions, and circumstances, if any, pertaining to the
relevant property.
(c) Notices, Permits, etc. All notices, permits, licenses, or
similar authorizations, if any, required to be obtained or filed by the
Borrower or any of its Subsidiaries in connection with the operation or
use of any and all property of the Borrower or any of its Subsidiaries,
including but not limited to past or present treatment, storage,
disposal, or release of a hazardous substance or solid waste into the
environment, have been duly obtained or filed which could reasonably be
expected to result in remedial obligations assuming disclosure to the
applicable Governmental Authority of all relevant facts, conditions,
and circumstances, if any, pertaining to the relevant property.
(d) Hazardous Substances Carriers. All hazardous substances or
solid waste generated at any and all property of the Borrower or any of
its Subsidiaries have in the past been transported, treated, and
disposed of only by carriers maintaining valid permits under any
Environmental Law and only at treatment, storage, and disposal
facilities maintaining valid permits under any Environmental Law, which
carriers and facilities have been and are operating in compliance with
such permits which could reasonably be expected to result in remedial
obligations assuming disclosure to the applicable Governmental
Authority of all relevant facts, conditions, and circumstances, if any,
pertaining to the relevant property.
(e) Hazardous Substances Disposal. The Borrower and
Subsidiaries have taken all reasonable steps necessary to determine and
have determined that no hazardous substances or solid waste have been
disposed of or otherwise released and there has been no threatened
release of any hazardous substances on or to any property of the
Borrower or any of its Subsidiaries, except in compliance with
Environmental Laws which could reasonably be expected to result in
remedial obligations assuming disclosure to the applicable Governmental
Authority of all relevant facts, conditions, and circumstances, if any,
pertaining to the relevant property.
(f) OPA Requirements. To the extent applicable, the Borrower
and each of its Subsidiaries have complied with all design, operation,
and equipment requirements imposed by OPA or scheduled to be imposed by
OPA, and the Borrower does not have reason to believe that either it or
its Subsidiaries will not be able to maintain such compliance with OPA
requirements through the Final Maturity Date.
29
(g) No Contingent Liability. Neither the Borrower nor any of
its Subsidiaries have any contingent liabilities in connection with any
release or threatened release of any hazardous substance or solid waste
into the environment other than such contingent liabilities at any one
time and from time to time which could reasonably be expected to exceed
an aggregate of $500,000 in excess of applicable insurance coverage and
for which adequate reserves for the payment thereof as required by GAAP
have not been provided, or which could reasonably be expected to result
in remedial obligations assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions, and
circumstances, if any, pertaining to such release or threatened
release.
Section 4.20 Subsidiaries; Partnerships.
(a) There are no Subsidiaries of the Borrower other than as
set forth on Schedule 4.20(a). All of the issued and outstanding shares
of Capital Stock of the Subsidiaries of the Borrower have been duly and
validly authorized and issued and are fully paid and non-assessable and
free of preemptive rights, and, such shares are owned by the Borrower
or one of its Subsidiaries free and clear of any Lien. Except as set
forth on Schedule 4.20(a), there are no outstanding warrants, options,
or other rights to purchase or acquire any of the shares of Capital
Stock of any Subsidiary, nor any outstanding securities convertible
into such shares or outstanding warrants, options, or other rights to
acquire any such convertible securities.
(b) There are no partnerships, joint ventures, or similar
arrangements involving the Borrower or any of its Subsidiaries except
as set forth in Schedule 4.20(b).
Section 4.21 Certain Fees. Except for the structuring fee payable to
ECT Securities Limited Partnership pursuant to the Structuring Fee Agreement, no
fees or commissions will be payable by the Borrower to brokers, finders,
investment bankers, the Senior Agent or Senior Lenders with respect the
consummation of the transactions contemplated by this Senior Loan Agreement. The
Borrower agrees that it will indemnify and hold harmless the Senior Agent and
the Senior Lenders from and against any and all claims, demands, or liabilities
for broker's, finders, placement or other similar fees or commissions incurred
by the Borrower or alleged to have been incurred by the Borrower in connection
with the consummation of the transactions contemplated by this Senior Loan
Agreement.
Section 4.22 Purpose of Loans. As more fully set forth in Section 2.2,
the proceeds of the Senior Loan and the Subordinated Loan shall be used only for
restructuring the Indebtedness owed to JEDI II under the terms of the Original
Loan Agreement and for the reasonable fees, expenses, and financing costs
incurred by the Borrower in connection with the foregoing. The proceeds of the
Senior Loan shall not be used for any purpose which violates applicable
Requirements of Law, including laws regulating investments in foreign
jurisdictions.
30
Section 4.23 Support and Security Documents. The Security Documents are
effective to create in favor of the Senior Agent for the benefit of the Senior
Lenders, a legal, valid, and enforceable mortgage lien, security interest, or
other interest in the Collateral pledged thereunder and the proceeds thereof in
accordance with the terms of the Security Documents.
Section 4.24 Employment. All inventory of Borrower and each Subsidiary
has been and will hereafter be produced, and all services of Borrower and each
Subsidiary has been and will hereafter be rendered, in compliance with all
applicable material laws, rules, regulations, and governmental standards,
including, without limitation, the minimum wage and overtime provisions of the
Fair Labor Standards Act, as amended (29 U.S.C. Sections 201-219), and the
regulations promulgated thereunder.
Section 4.25 Year 2000 Compliance.
(a) To the Borrower's knowledge after due inquiry, all
devices, systems, machinery, information technology, computer software
and hardware, and other date sensitive technology (jointly and
severally the "Systems") used by the Borrower and each of its
Subsidiaries to carry on their businesses as presently conducted and as
contemplated to be conducted in the future are Year 2000 Compliant or
will be Year 2000 Compliant within a period of time calculated to
result in no material disruption of any of the Borrower and each of its
Subsidiaries' business operations. For purposes of these provisions,
"Year 2000 Compliant" means that such Systems are designed to be used
prior to, during and after the Gregorian calendar year 2000 A.D. and
will operate during each such time period without error relating to
date data, specifically including any error relating to, or the product
of, date data which represents or references different centuries or
more than one century.
(b) The Borrower and its Subsidiaries have or will by
September 30, 1999: (1) undertaken a detailed inventory, review, and
assessment of all areas within their businesses and operations that
could be adversely affected by the failure of the Borrower and each of
its Subsidiaries to be Year 2000 Compliant on a timely basis; (2)
developed a detailed plan and time line for becoming Year 2000
Compliant on a timely basis, and (3) to date, implemented that plan in
accordance with that timetable in all material respects.
(c) The Borrower and its Subsidiaries have made or will make
by September 30, 1999 inquiry of each of its key suppliers, vendors,
and customers, and is undertaking to obtain in writing confirmations
from all such Persons as to whether such Persons have initiated
programs to become Year 2000 Compliant and on the basis of such
confirmations, the Borrower and each of its Subsidiaries reasonably
believe that all such Persons will be or become so compliant. For
purposes hereof, "key suppliers, vendors, and customers" refers to
those suppliers, vendors, and customers of the Borrower and each of its
Subsidiaries whose business failure would, with reasonable probability,
result in a material adverse change in the business, properties,
condition (financial or otherwise), or prospects of any of the Borrower
and each of its Subsidiaries.
31
(d) The fair market value of all real and personal property
pledged to the Senior Agent as Collateral to secure the Senior Loan
hereunder is not and shall not be less than currently anticipated or
subject to substantial deterioration in value because of the failure of
such Collateral to be Year 2000 Compliant.
Section 4.26 Insurance. Schedule 4.26 contains an accurate and complete
description of all material policies of fire, liability, workmen's compensation
and other forms of insurance owned or held by the Borrower and each of its
Subsidiaries. All such policies are in full force and effect, all premiums with
respect thereto covering all periods up to and including the Effective Date and
the Closing Date have been or will be paid, and no notice of cancellation or
termination has been received with respect to any such policy. Such policies are
sufficient for compliance with all requirements of law and of all agreements to
which the Borrower and each of its Subsidiaries is a party; are valid,
outstanding and enforceable policies; provide adequate insurance coverage in at
least such amounts and against at least such risks (but including in any event
public liability) as are usually insured against in the same general area by
companies engaged in the same or a similar business for the assets and
operations of the Borrower and each of its Subsidiaries; will remain in full
force and effect through the respective dates set forth in Schedule 4.26 without
the payment of additional premiums; and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this Senior
Loan Agreement. None of the Borrower nor any of its Subsidiaries has been
refused any insurance with respect to its Property or operations, nor has its
coverage been limited below usual and customary policy limits, by an insurance
carrier to which it has applied for any such insurance or with which it has
carried insurance during the last three years.
Section 4.27 Hedging Agreements. Schedule 4.27 sets forth, as of the
date hereof, a true and complete list of all hedging agreements, financing
transactions and swap transactions (including commodity price swap agreements,
forward agreements or contracts of sale which provide for prepayment for
deferred shipment or delivery of oil, gas or other commodities) of the Borrower
and each of its Subsidiaries, the material terms thereof (including the type,
term, effective date, termination date and notional amounts or volumes), the net
▇▇▇▇ to market value thereof, all credit support agreements relating thereto
(including any margin required or supplied), and the counter party to each such
agreement.
Section 4.28 Capital Stock. As of the Closing Date, the authorized
Capital Stock of the Company consists of 500,000 shares of Common Stock, no par
value per share and 2,500 shares of serial preferred stock. No shares of Capital
Stock are issued other than those shares of Common Stock listed on the attached
Schedule 4.28 and the preferred shares issued pursuant to the Equity Documents.
All outstanding shares of the Company's Capital Stock are validly issued, fully
paid and nonassessable. Other than the preferred shares issued pursuant to the
Equity Documents, there are no (i) outstanding securities convertible or
exchangeable into Capital Stock of the Company or (ii) contracts, commitments,
agreements, understandings, or arrangements of any kind to which the Company is
a party relating to the issuance of any Capital Stock of the Company.
32
ARTICLE 5
AFFIRMATIVE COVENANTS
From the Effective Date and for so long as any part of the Commitments
or the Senior Loan Obligations is outstanding, the Borrower shall and shall
cause each of its Subsidiaries to (and where applicable shall cause other
Persons to):
Section 5.1 Financial Statements and Reports. The Borrower shall
promptly furnish to the Senior Agent from time to time upon request such
information regarding the business and affairs and financial condition of the
Borrower and its Subsidiaries as the Senior Agent may request, and will furnish
to the Senior Agent:
(a) Annual Audited Financial Statements - as soon as
available, and in any event within ninety (90) days after the close of
each fiscal year, the annual audited Financial Statements (consolidated
and consolidating) of the Borrower, certified, without any
qualification or limit of the scope of the examination of matters
relevant to the Financial Statements, by KPMG Peat Marwick, L.L.P., any
nationally recognized public accounting firm or any other accounting
firm approved by the Senior Agent, such consolidating schedules being
prepared in accordance with Exhibit 5.1(a).
(b) Quarterly Financial Statements - as soon as available, and
in any event within forty-five (45) days after the last day of each
calendar quarter (except the last calendar quarter in any fiscal year),
the quarterly unaudited Financial Statements (consolidated and
consolidating) of the Borrower and its Subsidiaries.
(c) Monthly Financial Statements - as soon as available, and
in any event within forty-five (45) days after the last day of each
calendar month (except the last calendar month in any fiscal year), the
monthly unaudited Financial Statements (consolidated and consolidating)
of the Borrower.
(d) Budgets - as soon as available and in any event on or
before last Business Day of each November, the detailed income
statements and capital budgets for the coming calendar year as of the
date of the budget approved by the Board of Director's of Borrower for
the Borrower and its Subsidiaries, such budget being prepared in
accordance with Exhibit 5.1(d).
(e) Field Office - promptly following the request of the
Senior Agent, the income statements for each field office of Borrower
or any of its Subsidiary.
(f) Additional Information - promptly upon request of the
Senior Agent from time to time any additional financial information or
other information that the Senior Agent may reasonably request.
33
All such information, reports, and Financial Statements referred to in this
Section 5.1 shall be in such detail as the Senior Agent may reasonably request
and shall be prepared in a manner consistent with the requirements set forth
above and in Section 1.2.
Section 5.2 Certificates of Compliance. Concurrently with the
furnishing of the annual audited Financial Statements pursuant to Section 5.1(a)
hereof, the quarterly unaudited Financial Statements pursuant to Section 5.1(b),
and each of the monthly unaudited Financial Statements pursuant to Section
5.1(c) hereof, the Borrower will furnish or cause to be furnished to the Senior
Agent a certificate in the form of Exhibit 5.2. Borrower will furnish to Senior
Agent at Borrower's expense all certifications which the Senior Agent from time
to time reasonably requests, as to the accuracy and validity of or compliance
with all representations, warranties and covenants made by Borrower in any of
the Senior Loan Documents, the satisfaction of all conditions contained therein
and all other matters pertaining thereto.
Section 5.3 Accountants' Certificate. Concurrently with the furnishing
of the annual audited Financial Statements pursuant to Section 5.1(a) hereof,
the Borrower will furnish a statement from the firm of independent public
accountants which prepared such statements to the effect that nothing has come
to their attention to cause them to believe that there existed on the date of
such statements any Event of Default.
Section 5.4 Taxes Other Liens. The Borrower shall, and shall cause each
Subsidiary to, pay and discharge promptly all taxes, assessments, and
governmental charges or levies imposed upon the income or any assets or property
of any of such entities as well as all claims of any kind (including claims for
labor, materials, supplies, and rent) which, if unpaid, might become a Lien or
other encumbrance upon any or all of the assets or property of any of such
entities; provided, however, that the Borrower and each Subsidiary shall not be
required to pay any such tax, assessment, charge, levy, or claim if the amount,
applicability or validity thereof shall currently be contested in good faith by
appropriate proceedings diligently conducted, levy and execution thereon have
been stayed and continue to be stayed, and the Borrower and each Subsidiary, or
any of them, as the case may be, shall have set up adequate reserves therefor,
if required, under GAAP.
Section 5.5 Compliance with Laws. The Borrower shall, and shall cause
each Subsidiary to, observe and comply, in all material respects, with all
applicable laws, statutes, codes, acts, ordinances, orders, judgments, deuces,
injunctions, rules, regulations, orders, and restrictions of applicable
Governmental Authorities, including those relating to Environmental Laws.
Section 5.6 Further Assurances. The Borrower shall, and shall cause
each Subsidiary to, cure promptly any defects in the creation and issuance of
the Senior Loan Documents. The Borrower shall, and shall cause each Subsidiary
at their sole expense to, promptly execute and deliver to the Senior Agent upon
its reasonable request all such other and further documents, agreements, and
instruments in compliance with or accomplishment of the covenants and agreements
in the Senior Loan Documents including all documents, agreements and instruments
necessary to grant the Senior
34
Agent for the benefit of the Senior Lenders a first and prior lien on all assets
of the Senior Loan Parties.
Section 5.7 Insurance. The Borrower will at all times keep all of its
and each Subsidiaries' properties which are of an insurable nature insured with
insurers reasonably believed by the Borrower to be financially sound, reputable
and responsible, against loss or damage to the extent that property of similar
character is usually so insured by corporations similarly situated and owning
like properties, as determined by the Senior Agent. The Borrower shall, and
shall cause each of its Subsidiaries to, maintain the insurance required by the
Security Documents.
Section 5.8 Accounts and Records. The Borrower shall, and shall cause
each of its Subsidiaries to, keep books, records, and accounts in which full,
true, and correct entries will be made of all dealings or transactions in
relation to its business and activities, prepared in a manner consistent with
the requirements of Section 1.2. Upon request of the Senior Agent, the Borrower
shall furnish profit and loss statements for each field office of the Borrower
and its Subsidiaries.
Section 5.9 Right of Inspection. The Borrower shall, and shall cause
each of its Subsidiaries to, permit any officer, employee, or agent of the
Senior Agent to examine their books, records, and accounts, and take copies and
extracts therefrom, all at such reasonable times and as often as the Senior
Agent may reasonably request. The Senior Agent will keep all such information
confidential and will not without prior written consent disclose or reveal the
information or any part thereof to any person other than the Senior Lenders and
each of the Senior Agent's and Senior Lenders' officers, employees, legal
counsel, regulatory authorities, or advisors to whom it is necessary to reveal
such information for the purpose of effectuating the agreements and undertakings
specified herein or as otherwise required by law or in connection with the
enforcement of the Senior Agent's and the Senior Lenders' rights and remedies
under the Senior Loan Documents.
Section 5.10 Notice of Certain Events. The Borrower shall promptly and
in any event within five (5) days notify the Senior Agent if the Borrower or any
of its Subsidiaries learns of the occurrence of (i) an Event of Default
(including but not limited to, a Change of Control or Change of Management)
together with a detailed statement by the Borrower of the steps being taken to
cure the Event of Default; or (ii) any legal, judicial, or regulatory
proceedings affecting the Borrower or any of its Subsidiaries or any of the
assets or properties of the Borrower or any of its Subsidiaries; or (iii) any
dispute between the Borrower or any of its Subsidiaries and any Governmental
Authority or any other person or entity which, if adversely determined, could
cause a Material Adverse Effect; or (iv) any judgment, liability, casualty or
other loss that is not insured by the Borrower or its Subsidiaries; or (v) any
other matter that could reasonably be expected to have a Material Adverse
Effect.
Section 5.11 ERISA Information and Compliance. The Borrower shall
promptly furnish to the Senior Agent immediately upon becoming aware of the
occurrence of any "reportable event", as such term is defined in Section 4043 of
ERISA, or of any "prohibited transaction", as such term is defined in Section
4975 of the Internal Revenue Code of 1986, as amended, in connection with any
Plan or any trust created thereunder, a written notice signed by the president
or the chief
35
financial officer of the Borrower, specifying the nature thereof, what action
the Borrower is taking or proposes to take with respect thereto, and, when
known, any action taken by the Internal Revenue Service with respect thereto.
Section 5.12 Environmental Reports and Notices. The Borrower will
deliver to the Senior Agent (i) promptly upon its becoming available, one copy
of each report sent by the Borrower or any of its Subsidiaries to any court,
Governmental Agency, or instrumentality pursuant to any Environmental Law, (ii)
notice, in writing, promptly upon the Borrower's or any of its Subsidiaries'
learning that they have received notice or otherwise learned of any claim,
demand, action, event, condition, report, or investigation indicating any
potential or actual liability arising in connection with (x) the non-compliance
with or violation of the requirements of any Environmental Law; (y) the release
or threatened release of any toxic or hazardous waste into the environment or
which release the Borrower or any of its Subsidiaries would have a duty to
report to any court or Government Agency or instrumentality, or (iii) prompt
notice of the existence of any Lien related to violation of Environmental Laws
or any liabilities for cleanup thereunder on any properties or assets of the
Borrower or any of its Subsidiaries.
Section 5.13 Maintenance. The Borrower shall, and shall cause each
Subsidiary to (i) observe and comply in all material respects with all
Environmental Laws; (ii) (A) maintain all of the assets and properties of such
Person in good and workable condition at all times and (B) make all repairs,
replacements, additions, betterments, and improvements to such assets and
properties as are needed and proper so that with respect to clauses (A) and (B)
the business carried on by the Borrower and its Subsidiaries may be conducted
properly and efficiently at all times in accordance with the good faith
reasonable business judgment of the Borrower and its Subsidiaries provided,
however, that nothing in this Section shall prevent the Borrower and its
Subsidiaries from discontinuing the maintenance of any of their properties if
such discontinuance is, in the good faith reasonable business judgment of the
Borrower and its Subsidiaries, desirable in the conduct of the business of the
Borrower or any such Subsidiary and not disadvantageous in any material respect
to the Senior Lenders; (iii) take or cause to be taken whatever actions are
necessary or desirable to prevent an event or condition of default by the
Borrower or any Subsidiary under the provisions of any contract, agreement, or
lease comprising a part of the Collateral hereunder; and (iv) furnish to the
Senior Agent upon request evidence satisfactory to the Senior Agent that there
are no Liens, claims, or encumbrances superior to the Liens of the Senior
Lenders on such assets and properties, except Permitted Liens.
Section 5.14 New Subsidiary. Upon the formation or acquisition of any
new Subsidiary, the Borrower shall cause such Subsidiary to promptly execute and
deliver to the Senior Agent any joinder agreements requested by the Senior Agent
to cause such new Subsidiary to become a party to a Guaranty and any security
agreements, pledge agreements, mortgages, and other agreements requested by the
Senior Agent to cause such new Subsidiary to pledge its assets to the Senior
Agent for the benefit of the Senior Lenders. In connection therewith, the
Borrower shall provide corporate documentation and opinion letters reasonably
satisfactory to the Senior Agent reflecting the corporate status of such new
Subsidiary of the Borrower and the enforceability of such agreements.
36
Section 5.15 Performance on Borrower's Behalf. If Borrower fails to pay
any taxes, insurance premiums or other amounts it is required to pay under any
Senior Loan Document, Senior Agent may pay the same. Borrower shall immediately
reimburse Senior Agent for any such payments and each amount paid shall
constitute a part of the Senior Loan Obligations, shall be secured by the
Security Documents and shall bear interest at the rate described herein, from
the date such amount is paid by Senior Agent, until the date such amount is
repaid to the Senior Agent.
Section 5.16 Change of Principal Place of Business. The Borrower shall,
and shall cause the Subsidiaries to, give Senior Agent at least thirty (30) days
prior written notice of its intention to move its principal place of business
from the address set forth in Section 4.15 hereof.
Section 5.17 New Bank Accounts. The Borrower shall, and shall cause the
Subsidiaries to, promptly give notice to the Senior Agent of the creation of any
bank accounts after the date hereof. Prior to any funding of such account and in
no event later than 3 Business Days after the opening of such account, the
Borrower shall provide the Senior Agent with such information with respect to
such accounts and other documentation relating thereto as Senior Agent may
request including a letter from the bank in the form of the Bank Account Letter
as attached as Exhibit A to the Security Agreement.
Section 5.18 Year 2000 Compliant. The Borrower will, and will cause
each of its Subsidiaries to:
(a) Furnish such additional information, statements and other
reports with respect to the Borrower and each of its Subsidiaries
activities, course of action and progress towards becoming Year 2000
Compliant as the Senior Agent may request from time to time.
(b) In the event of any change in circumstances that causes or
will likely cause any of the Borrower's representations and warranties
with respect to its or any of its Subsidiaries being or becoming Year
2000 Compliant to no longer be true (hereinafter, referred to as a
"Change in Circumstances") then the Borrower shall promptly, and in any
event within ten (10) days of receipt of information regarding a Change
in Circumstances, provide the Senior Agent with written notice (the
"Notice") that describes in reasonable detail the Change in
Circumstances and how such Change in Circumstances caused or will
likely cause the Borrower's representations and warranties with respect
to being or becoming Year 2000 Compliant to no longer be true. The
Borrower shall, within ten (10) days of a request, also provide the
Senior Agent with any additional information the Senior Agent requests
of the Borrower in connection with the Notice and/or a Change in
Circumstances.
(c) Upon reasonable notice, give any representative of the
Senior Agent access during all reasonable business hours to, and permit
such representative to examine, copy or make excerpts from, any and all
books, records and documents in the possession of Borrower or any of
its Subsidiaries and relating to their affairs, and to inspect any of
the properties and
37
Systems of the Borrower or any of its Subsidiaries, and to project test
the Systems to determine if they are Year 2000 Compliant in an
integrated environment, all at the sole cost and expense of the
Borrower.
ARTICLE 6
NEGATIVE COVENANTS
From the Effective Date and for so long as any part of the Commitments or the
Senior Loan Obligations is outstanding, the Borrower shall not and shall cause
each of its Subsidiaries not to (and where applicable shall cause other Persons
not to):
Section 6.1 Liens. The Borrower shall not, and shall not permit any
Subsidiary to, create, incur, assume, or permit to exist any Lien on any of its
assets or properties except for Permitted Liens.
Section 6.2 Mergers. The Borrower shall not, and shall not permit any
of its Subsidiaries to, consolidate or merge with or into any other Person, to
liquidate, dissolve or incur a name change, including a change of trade name.
Section 6.3 Indebtedness and Other Obligations. The Borrower shall not,
and shall not permit any of the Subsidiaries to incur, create, assume, or in any
manner become or be liable in respect of any Indebtedness, liabilities, or other
obligations, or guarantee or otherwise in any manner become or be liable in
respect of any Indebtedness, liabilities, or other obligations of any other
Person, whether by agreement to purchase the Indebtedness, liabilities, or other
obligations of any other Person or agreement for the furnishing of funds to any
other Person through the purchase or lease of goods, supplies, or services (or
by way of stock purchase, capital contribution, advance, or loan) for the
purpose of paying or discharging the Indebtedness, liabilities, or other
obligations of any other Person, or otherwise, except that the foregoing
restrictions shall not apply to:
(a) Indebtedness under the Senior Loan Documents;
(b) Indebtedness under the Subordinated Loan Documents (as
defined in the Subordinated Loan Agreement);
(c) Indebtedness disclosed in Schedule 6.3;
(d) Indebtedness in the form of Capitalized Lease Obligations,
including those shown on the Financial Statements, incurred in
connection with the financing of assets in an aggregate outstanding
amount not to exceed $1,500,000;
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(e) taxes, assessments, or other government charges which are
not yet due or are being contested in good faith by appropriate action
promptly initiated and diligently conducted, if such reserve as shall
be required by GAAP shall have been made therefor and levy and
execution thereon have been stayed and continue to be stayed;
(f) obligations for trade payables and ordinary operating
liabilities payable within one hundred twenty (120) days from the date
incurred, incurred in the ordinary course of business as conducted on
the Effective Date; and
(g) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by
the Borrower of any Indebtedness of the Borrower described in clause
(a) and (b) above, including any successive refinancings by the
Borrower, so long as in each case the refinanced Indebtedness meets the
requirements of the Indebtedness being refinanced as set forth above
and, without limiting the foregoing, (i) any such new Indebtedness
shall be in a principal amount that does not exceed the principal
amount so refinanced, (ii) in the case of any refinancing of
nonrecourse indebtedness such new Indebtedness is also nonrecourse
indebtedness, and (iii) such new Indebtedness has a stated maturity
that is no shorter than the stated maturity of the Indebtedness being
refinanced.
Section 6.4 Dividends; Compensation. The Borrower shall not declare or
pay any cash dividend, purchase, redeem or otherwise acquire for value any of
its Capital Stock now or hereafter outstanding, return any capital to
stockholders, or make any distribution of its assets to its stockholders as
such. No salary, bonus or other compensation shall be paid by Borrower to an
officer or director of Borrower that is also a director of SWRH or SWRI, other
than standard board of director's fees.
Section 6.5 Investments.
(a) Without the Majority Senior Lenders' prior written
consent, Borrower shall not, and shall not permit any Subsidiary to
make any Acquisition, make or hold any direct or indirect investment in
any Person or any Equipment, including capital contributions to the
Person, investments in the debt or equity securities of the Person, and
loans, guaranties, trade credit, or other extensions of credit to the
Person, individually or in the aggregate, in excess of $50,000 per
year, without the Majority Senior Lenders prior written consent except
for (i) trade credit issued by the Borrower and its Subsidiaries to any
Person in the ordinary course of business in an aggregate outstanding
amount not to exceed $1,000,000 which is not outstanding greater than
sixty (60) days or more past the date of invoice and (ii) capital
expenditures of the Borrower and its Subsidiaries in an aggregate
amount not to exceed $1,500,000 during any fiscal year of the Borrower.
Notwithstanding the foregoing, all investments made by Borrower shall
be in the oil-field service industry.
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(b) The Borrower shall not, and shall not permit any
Subsidiary to, make or hold any direct or indirect investment in any
Affiliate of the Borrower, including capital contributions to the
Affiliate investments in the debt or equity securities of the Affiliate
and loans, guaranties, trade credit, or other extensions of credit to
the Affiliate without the Majority Senior Lenders' prior written
consent; provided that subject to Section 6.5(a), the Borrower may
extend trade credit to SWRI and SWRH on terms consistent with that
required by Section 6.10.
Section 6.6 Sale or Discount of Receivables. The Borrower shall not,
and shall not permit any Subsidiary to, discount or sell with recourse, or sell
for less than the greater of the face or market value thereof, any of their
notes receivable or accounts receivable.
Section 6.7 Nature of Business. The Borrower shall not, and shall not
permit any Subsidiary to, allow any material adverse change to be made in the
character of their business as carried on at the date hereof.
Section 6.8 Amendment of Articles of Incorporation or Bylaws. The
Borrower shall not, and shall not permit any Subsidiary to, allow any amendment
to, or other alteration of, their Articles of Incorporation, Bylaws or any
contract, agreement or instrument that could have a detrimental affect on the
Collateral.
Section 6.9 Asset Sales. With the exception of (i) the sales in
conjunction with the Auction Package, (ii) the sale of the Lampasas Ranch
property and (iii) any sales of assets received by the Company in lieu of cash
from arms-length exchanges of services by the Company for assets, the Borrower
shall not and shall not permit any Subsidiary to, sell, transfer or otherwise
convey any interest of the Borrower or the Subsidiary in any of their respective
assets without the prior written consent of the Majority Senior Lenders if the
aggregate amount of the consideration received from all such sales, transfers,
and conveyances during any fiscal year of the Borrower would exceed $100,000. No
sale, transfer or conveyance shall be for less than the fair market value of the
asset. The net proceeds of any asset sale, transfer, or conveyance which
requires the Majority Senior Lenders consent shall be delivered to the Senior
Agent for the ratable benefit of the Senior Lenders as a prepayment of interest
and principal on the Senior Loan in accordance with Section 2.2(c).
Section 6.10 Transactions with Affiliates. Without the prior written
consent of the Majority Senior Lenders, the Borrower shall not, and shall not
permit any of its Subsidiaries to, enter into any transaction with any of its
Affiliates, except transactions upon terms no less favorable to it than would be
obtained in a transaction negotiated at arm's length with an unrelated third
party.
Section 6.11 Partnerships. Neither the Borrower nor any of its
Subsidiaries will, without the prior written consent of the Majority Senior
Lenders, form any partnership, joint venture, or similar partnership arrangement
after the Effective Date that have the ability to incur Indebtedness with
recourse to the Borrower or any of its Subsidiaries, whether contractual or
through liability as a partner.
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Section 6.12 Subsidiaries.
(a) The Borrower will not, without the prior written consent
of the Majority Senior Lenders, sell or otherwise dispose of any of the
equity securities of its Subsidiaries.
(b) The Borrower shall not, and shall not permit any of the
Borrower's Subsidiaries to, create or acquire any additional
Subsidiaries without the consent of the Majority Senior Lenders, such
consent shall not be unreasonably withheld.
Section 6.13 Equity Proceeds. The Borrower shall not, and shall not
permit any Subsidiary to, issue any additional Capital Stock or debt securities
following the Effective Date, without the prior written consent of the Majority
Senior Lenders. The net proceeds of any such issuance shall be delivered to the
Senior Agent for the ratable benefit of the Senior Lenders as a prepayment of
interest and principal on the Senior Loan in accordance with Section 2.4(c).
Section 6.14 Public Disclosures. The Borrower will not, and will not
permit any Subsidiary to, disclose the identity of the Senior Agent or any
Senior Lender in any public announcement, governmental filing or otherwise
without the Senior Agent's and such Senior Lender, as applicable, prior written
consent unless such disclosure is compelled or required by law, stock exchange
rule or by order of a court of competent jurisdiction.
Section 6.15 Limitation on Payment Restrictions Affecting Subsidiaries.
The Borrower will not, and will not permit any of its Subsidiaries to, create or
otherwise cause to exist or become effective any consensual encumbrance or
consensual restriction of any kind, on the ability of any Subsidiary of the
Borrower to (a) pay dividends or make any other distribution on its Capital
Stock to the Borrower or any Subsidiary, (b) pay any Indebtedness owed to the
Borrower or any Subsidiary, (c) make investments in the Borrower or any
Subsidiary, or (d) transfer any of its property or assets to the Borrower or any
Subsidiary, except, in each case (i) any encumbrances or restrictions binding
upon a Person at the time such Person becomes a Subsidiary (unless the agreement
creating such encumbrance or restrictions was entered into in connection with,
or in contemplation of, such entity becoming Subsidiary), provided that such
encumbrances or restrictions shall not encumber or restrict any assets of the
Borrower or its other Subsidiaries other than such Subsidiary, (ii) any
encumbrance or restriction pursuant to any customary non-assignment provisions
in leases, (iii) any encumbrances or restrictions due to applicable law, (iv)
any such encumbrance or restriction with respect to a Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary or any such
encumbrance or restriction referred to in clause (d) above with respect to the
assets of a Subsidiary and imposed pursuant to an agreement entered into for the
sale of such assets (in either case, so long as such encumbrance or restriction,
by its terms, terminates on the earlier of the termination of such agreement or
the consummation of such agreement), and (v) any such encumbrance or restriction
pursuant to any agreement that amends, extends, refinances, renews or replaces
any agreement described in the foregoing clauses (i), (ii), and (iii), provided
that the terms and conditions of any
41
such encumbrances or restrictions are not materially less favorable to the
Borrower than those under or pursuant to the agreement amended, extended,
refinanced, renewed or replaced.
Section 6.16 Fixed Charge Coverage Ratio. Beginning June 30, 2000 and
as of the last day of each fiscal quarter of the Borrower thereafter, the
Borrower shall not permit the ratio of (i) the consolidated EBITDA of the
Borrower less cash income taxes for the preceding four fiscal quarters then most
recently ended to (ii) the consolidated Debt/Lease Service of the Borrower for
the preceding four fiscal quarters then most recently ended, to be less than
1.00 to 1.00.
ARTICLE 7
EVENTS OF DEFAULT
Section 7.1 Events of Default. The occurrence of any of the following
shall be an "Event of Default" for the purposes of this Senior Loan Agreement
and the other Senior Loan Documents:
(a) Any Senior Loan Party shall fail to pay when due or
declared due any principal, interest, fee or any other amounts due
under this Senior Loan Agreement or any other Senior Loan Document; or
(b) Any representation or warranty made by any Senior Loan
Party under this Senior Loan Agreement, any other Senior Loan Document,
the Equity Documents, or in any certificate or statement furnished or
made to the Senior Agent or any Senior Lender pursuant thereto, or in
connection therewith, or in connection with any document furnished
hereunder, shall prove to be untrue in any material respect as of the
date on which such representation or warranty is made (or deemed made),
or any representation, statement (including Financial Statements),
certificate, report, or other data furnished or to be furnished or made
by the Borrower under any Senior Loan Document proves to have been
untrue in any material respect as of the date as of which the facts
therein set forth were stated or certified; or
(c) Any breach shall be made in the due observance or
performance of any of the affirmative covenants, negative covenants or
the agreements of any Senior Loan Party contained in the Senior Loan
Documents or the Equity Documents; or
(d) Default shall be made in respect of any obligation for
borrowed money, other than the Notes, for which any Senior Loan Party
is liable (directly, by assumption, as guarantor, or otherwise),
including any obligations secured by any Lien on any asset or property
of any Senior Loan Party, or in respect of any agreement relating to
any such obligations, and such default shall continue beyond the
applicable grace period, if any; or
(e) Any Senior Loan Party shall commence a voluntary case or
other proceedings seeking liquidation, reorganization or other relief
with respect to itself or its debts under any
42
bankruptcy, insolvency, or other similar law now or hereafter in effect
or seeking an appointment of a trustee, receiver, liquidator,
custodian, or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any corporate action or
authorizing the foregoing; or
(f) An involuntary case or other proceeding, shall be
commenced against any Senior Loan Party seeking liquidation,
reorganization, or other relief with respect to it or its debts under
any bankruptcy, insolvency, or similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian, or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or an order
for relief shall be entered against any Senior Loan Party under the
federal bankruptcy laws as now or hereinafter in effect; or
(g) A final judgment or order for the payment of money in
excess of $500,000 (or judgments or orders aggregating in excess of
$500,000) that is not fully insured shall be rendered against any
Senior Loan Party and such judgements or orders shall continue
unsatisfied and unstayed for a period of thirty 30 days; or
(h) A Change of Management shall occur; or
(i) Any Guaranty shall at any time and for any reason cease to
be in full force and effect or shall be contested by the guarantor
thereunder, or any guarantor under a Guaranty shall deny it has any
further liability or obligation thereunder; or
(j) Any Security Document shall at any time and for any reason
cease to create the Lien on the property purported to be subject to
such agreement in accordance with the terms of such agreement, cease to
be in full force and effect, or shall be contested by any party
thereto; or
(k) A Material Adverse Effect shall occur; or
(l) Any "Event of Default" shall occur under the Subordinated
Loan Agreement; or
(m) Any audited Financial Statement of the Borrower required
to be delivered hereunder shall be qualified, in the Majority Senior
Lenders' opinion, in any material respect.
Section 7.2 Acceleration. Upon the occurrence of any Event of Default
under Sections 7.1(e) or (f) ("Bankruptcy Event of Default"), the outstanding
principal amount of the Notes, all
43
accrued but unpaid interest thereon, and all other Senior Loan Obligations shall
immediately and automatically become due and payable. During the existence of
any Event of Default, the Senior Agent shall at the request of the Majority
Senior Lenders declare by written notice to the Borrower the outstanding
principal amount of the Notes, all accrued but unpaid interest thereon, and all
other Senior Loan Obligations to be immediately due and payable. In connection
with any of the foregoing, except for the notice provided for above, the
Borrower waives notice of intent to demand, demand, presentment for payment,
notice of nonpayment, protest, notice of protest, grace, notice of dishonor,
notice of intent to accelerate, notice of acceleration, and all other notices.
Section 7.3 Default Interest. During the existence of an Event of
Default, the Majority Banks may declare by written notice to the Borrower that
all Senior Loan Obligations (including the outstanding principal amount of the
Advances and, to the fullest extent permitted by law, all accrued but unpaid
interest thereon and all other Indebtedness) shall bear interest beginning on
the date of occurrence of such Event of Default, until paid in full, at the
applicable Default Rate, payable upon demand by the Senior Agent.
Section 7.4 Other Senior Loan Documents. During the existence of an
Event of Default, the Senior Agent shall at the request of the Majority Banks
take any and all actions permitted under the other Senior Loan Documents,
including the Security Documents.
Section 7.5 Right of Setoff. During the existence of an Event of
Default, the Senior Agent and each Senior Lender is hereby authorized at any
time, to the fullest extent permitted by law, to set off and apply any
indebtedness owed by the Senior Agent or such Senior Lender to the Borrower
against any and all of the obligations of the Borrower under the Senior Loan
Documents, irrespective of whether or not the Senior Agent or such Senior Lender
shall have made any demand under the Senior Loan Documents and although such
obligations may be contingent and unmatured. The Senior Agent and each Senior
Lender, as the case may be, agree promptly to notify the Borrower after any such
setoff and application made by the Senior Agent or such Senior Lender provided
that the failure to give such notice shall not affect the validity of such
setoff and application.
Section 7.6 Cumulative Remedies. No right, power, or remedy conferred
in this Senior Loan Agreement or the Notes, or now or hereafter existing at law,
in equity, by statute, or otherwise shall be exclusive, and each such right,
power, or remedy shall to the full extent permitted by law be cumulative and in
addition to every other such right, power, or remedy. No course of dealing and
no delay in exercising any right, power, or remedy conferred to the Senior Agent
or any Senior Lender in this Senior Loan Agreement or the Notes, or now or
hereafter existing at law, in equity, by statute, or otherwise shall operate as
a waiver of or otherwise prejudice any such right, power, or remedy.
Section 7.7 Application of Payments. Prior to any payment default upon
any maturity date or any acceleration of the Senior Loan Obligations, all
payments made on the Senior Loan Obligations hereunder shall be applied to the
Senior Loan Obligations as directed by the Borrower, subject to the rules
regarding the application of payments to certain Indebtedness provided for
44
hereunder and in the Senior Loan Documents. Following any payment default upon
any maturity date or any acceleration of the Senior Loan Obligations, all
payments and collections shall be applied to the Senior Loan Obligations in the
following order:
First, to the payment of the costs, expenses, reimbursements, and
indemnifications of the Senior Agent that are due and payable under the
Senior Loan Documents;
Then, ratably to the payment of the costs, expenses, reimbursements,
and indemnifications of the Senior Lenders that are due and payable
under the Senior Loan Documents;
Then, ratably to the payment of all outstanding principal due and
payable under the Senior Loan Documents;
Then, ratably to the payment of any other amounts due and owing with
respect to the Indebtedness; and
Finally, any surplus held by the Senior Agent and remaining after
payment in full of all the Senior Loan Obligations and reserve for
Indebtedness not yet due and payable shall be promptly paid over to the
Borrower or to whomever may be lawfully entitled to receive such
surplus.
ARTICLE 8
THE SENIOR AGENT
Section 8.1 Authorization and Action. Each Senior Lender hereby
appoints and authorizes the Senior Agent to take such action as agent on behalf
of such Senior Lender and to exercise such powers under this Senior Loan
Agreement as are delegated to the Senior Agent by the terms hereof and of the
other Senior Loan Documents, together with such powers as are reasonably
incidental thereto. As to any matters not expressly provided for by this Senior
Loan Agreement or any other Senior Loan Document (including, without limitation,
enforcement or collection of the Notes), the Senior Agent shall not be required
to exercise any discretion or take any action, but shall be required to act or
to refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Senior Lenders, and such
instructions shall be binding upon all Senior Lenders and all holders of the
Notes; provided, however, that the Senior Agent shall not be required to take
any action which exposes the Senior Agent to personal liability or which is
contrary to this Senior Loan Agreement, any other Senior Loan Document, or
applicable law.
Section 8.2 Senior Agent's Reliance, Etc. Neither the Senior Agent nor
any of the Senior Agent's directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken (including the Senior Agent's
own negligence) by it or them under or in connection with this Senior Loan
Agreement or the other Senior Loan Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Senior
45
Agent: (a) may treat the payee of any Note as the holder thereof until the
Senior Agent receives written notice of the assignment or transfer thereof
signed by such payee and in form satisfactory to the Senior Agent; (b) may
consult with legal counsel (including counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any Senior Lender and shall not be responsible to any Senior
Lender for any statements, warranties or representations made in or in
connection with this Senior Loan Agreement or the other Senior Loan Documents;
(d) shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Senior Loan
Agreement or any other Senior Loan Document on the part of SWRI, the Borrower,
or its Subsidiaries or to inspect the property (including the books and records)
of such Persons; (e) shall not be responsible to any Senior Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Senior Loan Agreement or any other Senior Loan Document; and (f) shall
incur no liability under or in respect of this Senior Loan Agreement or any
other Senior Loan Document by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopy, telegram, cable or telex)
reasonably believed by it to be genuine and signed or sent by the proper party
or parties.
Section 8.3 The Senior Agent and Its Affiliates. With respect to its
Commitment, the Loans made by it and the Note issued to it, the Senior Agent
shall have the same rights and powers under this Senior Loan Agreement as any
other Senior Lender and may exercise the same as though it were not an Senior
Agent hereunder. The term "Senior Lender" or "Senior Lenders" shall, unless
otherwise expressly indicated, include the Senior Agent in its individual
capacity. The Senior Agent and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with the Borrower or any of its Subsidiaries, and any Person who may
do business with or own securities of the Borrower, or any such Subsidiary, all
as if the Senior Agent were not an agent hereunder and without any duty to
account therefor to the Senior Lenders.
Section 8.4 Senior Lender Loan Decision. Each Senior Lender
acknowledges that it has, independently and without reliance upon the Senior
Agent or any other Senior Lender and based on the financial statements referred
to in Section 4.6 and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this Senior
Loan Agreement. Each Senior Lender also acknowledges that it will, independently
and without reliance upon the Senior Agent or any other Senior Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Senior Loan Agreement.
Section 8.5 Indemnification. The Senior Lenders severally agree to
indemnify the Senior Agent and each Affiliate thereof and their respective
directors, officers, employees and agents (to the extent not reimbursed by the
borrower), according to their respective pro rata shares from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by,
46
or asserted against the Senior Agent in any way relating to or arising out of
this Senior Loan Agreement or any action taken or omitted by the Senior Agent
under this Senior Loan Agreement or any other Senior Loan Document (INCLUDING
THE SENIOR AGENT'S OWN NEGLIGENCE), provided that no Senior Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Senior Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Senior Lender agrees to reimburse the Senior
Agent promptly upon demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by the agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Senior Loan
Agreement or any other Senior Loan Document, to the extent that the Senior Agent
is not reimbursed for such expenses by the Borrower.
Section 8.6 Successor Senior Agent. The Senior Agent may resign at any
time by giving written notice thereof to the Majority Senior Lenders and the
Borrower and may be removed at any time with cause by the Majority Senior
Lenders upon receipt of written notice from the Majority Senior Lenders to such
effect. Upon receipt of notice of any such resignation or removal, the Majority
Senior Lenders shall have the right to appoint a successor Senior Agent with, if
no Default exists, the consent of the Borrower, which consent shall not be
unreasonably withheld. If no successor Senior Agent shall have been so appointed
by the Majority Senior Lenders with the consent of the Borrower, if required,
and shall have accepted such appointment, within 30 days after the retiring
Senior Agent's giving of notice of resignation or the Majority Senior Lenders'
removal of the retiring Senior Agent, then the retiring Senior Agent may, on
behalf of the Senior Lenders and the Borrower, appoint a successor Senior Agent,
which shall be an Eligible Assignee. Upon the acceptance of any appointment as
Senior Agent by a successor Senior Agent, such successor Senior Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Senior Agent, and the retiring Senior Agent shall be
discharged from its duties and obligations under this Senior Loan Agreement and
the other Senior Loan Documents. After any retiring Senior Agent's resignation
or removal hereunder as Senior Agent, the provisions of this Article 8 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Senior Agent this Senior Loan Agreement and the other Senior Loan
Documents.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Interpretation and Survival of Provisions. Article,
Section, Schedule, and Exhibit references are to this Senior Loan Agreement,
unless otherwise specified. All references to instruments, documents, contracts,
and agreements are references to such instruments, documents, contracts, and
agreements as the same may be amended, supplemented, and otherwise modified from
time to time, unless otherwise specified. The word "including" shall mean
"including but not limited to." Whenever the Borrower has an obligation under
the Senior Loan Documents, the expense of
47
complying with that obligation shall be an expense of the Borrower unless
otherwise specified. Whenever any determination, consent, or approval is to be
made or given by the Senior Agent or the Senior Lenders, such action shall be in
the Senior Agent's or Senior Lenders', as applicable, sole discretion unless
otherwise specified in this Senior Loan Agreement. If any provision in the
Senior Loan Documents is held to be illegal, invalid, not binding, or
unenforceable, such provision shall be fully severable and the Senior Loan
Documents shall be construed and enforced as if such illegal, invalid, not
binding, or unenforceable provision had never comprised a part of the Senior
Loan Documents, and the remaining provisions shall remain in full force and
effect. The Senior Loan Documents have been reviewed and negotiated by
sophisticated parties with access to legal counsel and shall not be construed
against the drafter. The representations, warranties, and covenants made in this
Senior Loan Agreement and the Notes shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Borrower, the
Senior Agent, or any Senior Lender. All indemnification obligations of the
Borrower hereunder and the provisions of Section 9.2 shall remain operative and
in full force and effect unless such obligations are expressly terminated in a
writing referencing such obligations, regardless of any purported general
termination of this Senior Loan Agreement.
Section 9.2 Costs, Expenses and Taxes. The Borrower agrees to:
(a) pay all costs and expenses reasonably incurred by the
Senior Agent in connection with negotiation, preparation, printing,
execution and delivery of the Senior Loan Documents and the
transactions contemplated hereby and thereby. The Borrower shall also
pay any expenses of the Senior Agent reasonably incurred after the date
hereof in connection with any amendment or supplement to or
modification of any of the foregoing and any and all other documents
furnished pursuant hereto or thereto or in connection herewith or
therewith. In addition, the Borrower, to the extent permitted by
applicable law, shall pay any and all stamp, transfer, and other
similar taxes payable or determined to be payable in connection with
the execution and delivery of this Senior Loan Agreement and shall save
and hold the Senior Agent and the Senior Lenders harmless from and
against any and all liabilities with respect to or resulting from any
delay in paying, or omission to pay, such taxes;
(b) indemnify the Senior Agent, each Senior Lender, and its
respective officers, directors, employees, representatives, agents,
attorneys, and Affiliates (collectively, "Related Parties") from, hold
each of them harmless against and promptly upon demand pay or reimburse
each of them for, any and all actions, suits, proceedings (including
any investigations, litigation, or inquiries), claims, demands, and
causes of action, and, in connection therewith, all reasonable costs,
losses, liabilities, damages, or expenses of any kind or nature
whatsoever (collectively the "Indemnity Matters") which may be incurred
by or asserted against or involve any of them (whether or not any of
them is designated a party thereto) as a result of, arising out of, or
in any way related to (i) any actual or proposed use by Borrower of the
proceeds of the Senior Loan or the Subordinated Loan, (ii) the
operations of the business of Borrower or any Subsidiary, (iii) any
bodily injury or death or property
48
damage occurring in or upon or in the vicinity of any Collateral, (iv)
any claim by any third Person against any Collateral assigned to, or
paid to, the Senior Agent, for the benefit of the Senior Lenders
pursuant to any Security Agreement, (v) the failure of a Borrower or
any Subsidiary to comply with any Governmental Requirement, or (vi) any
other aspect of this Senior Loan Agreement and the other Senior Loan
Documents, including, without limitation, the reasonable fees and
disbursements of counsel and all other expenses incurred in connection
with investigating, defending or preparing to defend any such action,
suit, proceeding (including any investigations, litigation, or
inquiries), or claim and INCLUDING ALL INDEMNITY MATTERS ARISING BY
REASON OF THE NEGLIGENCE OF ANY INDEMNITEE (but not Indemnity Matters
related to the gross negligence or wilful misconduct of any
Indemnitee);
(c) pay and hold the Senior Agent and each Senior Lender
harmless from and against any and all present and future stamp and
other similar taxes with respect to this Senior Loan Agreement and
Senior Loan Documents and save the Senior Agent and each Senior Lender
harmless from and against any and all liabilities with respect to or
resulting from any delay or omission to pay such taxes, and will
indemnify the Senior Agent and each Senior Lender for the full amount
of taxes paid by the Senior Agent and each Senior Lender in respect of
payments made or to be made under this Senior Loan Agreement, any of
the Notes, or any other Senior Loan Document and any liability
(including penalties, interest, and expenses) arising therefrom or with
respect thereto, whether or not such taxes were correctly or legally
asserted;
(d) indemnify and hold harmless from time to time the Senior
Agent, each Senior Lender, and its respective Related Parties from and
against any and all losses, claims, cost recovery actions,
administrative orders or proceedings, damages, and liabilities to which
any such Person may become subject (i) under any Environmental Law
applicable to Borrower, any Subsidiary or any of their respective
properties, (ii) as a result of the breach or non-compliance by
Borrower or any Subsidiary with any Environmental Law applicable to
Borrower or any Subsidiary, (iii) due to past ownership by Borrower or
any Subsidiary of their respective properties or past activity on any
of their respective properties, or past activity on any of their
respective properties which, though lawful and fully permissible at the
time, could result in present liability, (iv) the presence, use,
release, storage, treatment, or disposal of hazardous substances on or
at any of the properties owned or operated by Borrower or any
Subsidiary, or (v) any other environmental, health, or safety condition
in connection with this Senior Loan Agreement or any other Senior Loan
Document, provided, however, no indemnity shall be afforded under this
Section 9.2(d) in respect of any property for any occurrence arising
solely and directly from the acts or omissions of the Senior Lenders
during the period after which such Person, its successors or assigns
shall have acquired such property through foreclosure or deed in lieu
of foreclosure;
(e) in the case of any indemnification hereunder, the Senior
Agent or other Person indemnified hereunder shall give notice to the
Borrower within a reasonable period of time of any such claim or demand
being made against the Senior Agent, the Senior Lenders or
49
other indemnified Person and the Borrower shall have the non-exclusive
right to join in the defense against any such claim or demand;
(f) no indemnitee may settle any claim to be indemnified
without the consent of the indemnitor, such consent not to be
unreasonably withheld; provided, that the indemnitor may not reasonably
withhold consent to any settlement that an indemnitee proposes, if the
indemnitor does not have the financial ability to pay all its
obligations outstanding and asserted against the indemnitee at that
time, including the maximum potential claims against the indemnitee to
be indemnified pursuant to this Section 9.2;
(g) this Section 9.2 shall not apply to actions, suits,
proceedings, investigations, demands, losses, liabilities, claims,
damages, deficiencies, interest, judgments, costs, or expenses arising
solely and directly from the acts or omissions of the Senior Agent or
any Senior Lender during the period after which such Person, its
successors or assigns shall have acquired such property through
foreclosure or deed in lieu of foreclosure; and
(h) the Borrower's obligations under this Section 9.2 shall
survive any termination of this Senior Loan Agreement and the payment
of the Indebtedness.
Section 9.3 No Waiver; Modifications in Writing.
(a) No failure or delay on the part of the Senior Agent or any
Senior Lender in exercising any right, power, or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right, power, or remedy preclude any other or further
exercise thereof or the exercise of any right, power, or remedy. The
remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to the Senior Agent or any Senior
Lender at law or in equity or otherwise.
(b) No modification or waiver of any provision of the Senior
Loan Agreement or the Notes, nor any consent required under the Senior
Loan Agreement or the Notes, shall be effective unless the same shall
be in writing and signed by the Senior Agent and Majority Senior
Lenders and the Borrower, and then such modification, waiver, or
consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no
modification, waiver, or consent shall, unless in writing and signed by
the Senior Agent, all the Senior Lenders, and the Borrower do any of
the following: (a) increase any Commitment of any Senior Lender, (b)
forgive or reduce any amount or rate of any principal, interest, or
fees payable under the Senior Loan Documents, or postpone or extend any
time for payment thereof, (c) release any Guaranty or all or
substantially all of the collateral securing the Indebtedness (except
as otherwise permitted or required herein), or (d) change the
percentage of Senior Lenders required to take any action under the
Senior Loan Agreement, the Notes, or the Security Documents, including
any amendment of the definition of "Majority Senior Lenders" or this
Section 9.3. No modification, waiver, or consent shall, unless in
writing and signed by the Senior Agent affect the rights or obligations
50
of the Senior Agent under the Senior Loan Documents. The Senior Agent
shall not modify or waive or grant any consent under any other Senior
Loan Document of such action would be prohibited under this Section 8.3
with respect to the Loan Agreement or the Notes.
Section 9.4 Binding Effect; Assignment. This Agreement and the Senior
Loan Documents shall bind and inure to the benefit of the Borrower and its
successors and assigns and the Senior Agent and the Senior Lenders and their
respective successors and assigns. The Borrower may not assign its rights or
delegate its duties under the Senior Loan Agreement or any Senior Loan Document.
(a) Assignments. Any Senior Lender may assign to any Person
all or any portion of its rights and obligations with respect to the
Senior Loan Agreement (including the Advances owing to it, the Note
held by it, and its Commitment) provided that (i) the parties to each
such assignment shall execute and deliver to the Senior Agent, for its
acceptance and recording in the Register, an assignment and acceptance
in form and substance reasonably satisfactory to the Senior Agent
(Assignment and Acceptance"), together with the Notes subject to such
assignment and (ii) each assignee shall pay to the Senior Agent a
$3,500 administrative fee. Upon such execution, delivery, acceptance
and recording, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least three
Business Days after the execution thereof, (A) the assignee thereunder
shall be a party hereto for all purposes and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Senior
Lender hereunder and (B) the assignor thereunder shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Senior Loan Agreement (and, in
the case of an Assignment and Acceptance covering all of such Senior
Lender's rights and obligations under the Senior Loan Agreement, such
Senior Lender shall cease to be a party hereto).
(b) Term of Assignments. By executing and delivering an
Assignment and Acceptance, the assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other parties
hereto as follows: (i) other than as provided in such Assignment and
Acceptance, the assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Senior Loan Agreement
or the execution, legality, validity, enforceability, genuineness,
sufficiency of value of the Senior Loan Agreement or any other
instrument or document furnished pursuant hereto; (ii) the assignor
makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Senior Loan Party or the
performance or observance by any Senior Loan Party of any of its
obligations under the Senior Loan Agreement or any other instrument or
document furnished pursuant hereto; (iii) the assignee confirms that it
has received a copy of the Senior Loan Agreement, together with such
other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
51
Acceptance; (iv) the assignee shall, independently and without reliance
upon the Senior Agent, the assignor or any other Senior Lender and
based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not
taking action under the Senior Loan Agreement; (v) the assignee
appoints and authorizes the Senior Agent to take such action as agent
on its behalf and to exercise such powers under the Senior Loan
Agreement as are delegated to the Senior Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and
(vi) the assignee agrees that it shall perform in accordance with their
terms all of the obligations which by the terms of the Senior Loan
Agreement are required to be performed by it as a Senior Lender.
Section 9.5 The Register. The Senior Agent shall maintain at its
address referred to in Section 9.8 a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Senior Lenders and the Commitments and Senior Notes of each
Senior Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Senior Agent, and the Senior Lenders may treat each Person whose
name is recorded in the Register as a Senior Lender hereunder for all purposes
of the Senior Loan Agreement. The Register shall be available for inspection by
the Borrower or any Senior Lender at any reasonable time and from time to time
upon reasonable prior notice.
Section 9.6 Procedures. Upon its receipt of an Assignment and
Acceptance executed by the assignor thereunder and the assignee thereunder,
together with the Notes subject to such assignment, the Senior Agent shall, if
such Assignment and Acceptance has been completed in the appropriate form, (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register, and (iii) give prompt notice thereof to the Borrower.
Within five Business Days after its receipt of such notice, the Borrower shall
execute and deliver to the Senior Agent in exchange for the surrendered Note new
Notes in the appropriate amounts to the order of the assignee and, if the
assignor has retained any rights and obligations hereunder, new Notes in the
appropriate amounts to the order of the assignor. Such new Notes shall be dated
the effective date of such Assignment and Acceptance and shall be in the
appropriate form.
Section 9.7 Participation. Each Senior Lender may sell participation to
one or more banks or other entities in or to all or a portion of its rights and
obligations under the Senior Loan Agreement (including the Advances owing to it,
the Notes held by it, and its Commitments); provided, however, that (i) such
Senior Lender's obligations under the Senior Loan Agreement (including its
Commitments to the Borrower hereunder) shall remain unchanged, (ii) such Senior
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Senior Lender shall remain the
holder of any Commitments and Notes for all purposes of the Senior Loan
Agreement, (iv) the Borrower, the Senior Agent, and the other Senior Lenders
shall continue to deal solely and directly with such Senior Lender in connection
with such Senior Lender's rights and obligations under the Senior Loan
Agreement, and (v) such Senior Lender shall not require the participant's
consent to any matter under the Senior Loan Agreement except for
52
those that require approval of all of the Senior Lenders under Section 8.3. The
Borrower hereby agrees that participants shall have the same rights under
Sections 2.6, 2.7, 2.8, and 9.2 as a Senior Lender to the extent of their
respective participation.
Section 9.8 Communications. All notices and demands provided for
hereunder shall be in writing, shall be given by registered or certified mail,
return receipt requested, telex, telegram, telecopy, air courier guaranteeing
overnight delivery or personal delivery, to the addresses specified under such
Person's signature block or to such other address as such Persons may designate
in writing. All other communications may be by regular mail. All such notices
and communications and all notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; four
days after being sent by certified mail, return receipt requested, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next Business Day if timely delivered to an air courier guaranteeing
overnight delivery.
Section 9.9 Interest. Notwithstanding anything herein or in the other
Senior Loan Documents or Equity Document to the contrary, it is the intention of
the parties hereto to conform strictly to usury laws applicable to this
transaction. Accordingly, if the transactions contemplated hereby would be
usurious under applicable law, then, in that event, notwithstanding anything to
the contrary in the Notes, this Senior Loan Agreement, any other Senior Loan
Document, or any Equity Document or agreement entered into in connection with or
as security for the Notes, it is agreed as follows: (a) the aggregate of all
consideration which constitutes interest under law applicable to the Senior
Lenders that is contracted for, taken, reserved, charged or received under the
Notes, this Senior Loan Agreement, any of the other Senior Loan Documents, the
Equity Documents or otherwise in connection with this transaction shall under no
circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be canceled automatically and, if already paid, shall be credited
by the Senior Lenders on the principal amount of the Notes (or, to the extent
that the principal amount of the Notes shall have been or would thereby be paid
in full, refunded to the Borrower); and (b) in the event that the maturity of
the Notes is accelerated for any reason, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to this transaction may never include more than the maximum
amount allowed by such applicable law, and (c) excess interest, if any, provided
for in this Senior Loan Agreement or otherwise in connection with the Senior
Loans shall be canceled automatically and, if already paid, shall be credited by
the Senior Lenders on the principal amount of the Notes (or, to the extent that
the principal amount of the Notes shall have been or would thereby be paid in
full, refunded by the Senior Lenders to the Borrower). The right to accelerate
the maturity of the Notes does not include the right to accelerate any interest
which has not otherwise accrued on the date of such acceleration, and the Senior
Lenders do not intend to collect any unearned interest in the event of
acceleration. All sums paid or agreed to be paid to the Senior Lenders for the
use, forbearance or detention of sums included in the Indebtedness shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term
53
of the Notes until payment in full so that the rate or amount of interest on
account of the Notes does not exceed the applicable usury ceiling, if any. As
used in this Section 9.9, the term "applicable law" shall mean the laws which
govern this Senior Loan Agreement as described in Section 9.10 (or the law of
any other jurisdiction whose laws may be mandatorily applicable notwithstanding
other provisions of this Senior Loan Agreement), or law of the United States of
America applicable to the Senior Lenders and the Senior Loan and the
Subordinated Loan which would permit the Senior Lenders to contract for, charge,
take, reserve or receive a greater amount of interest than under any other
applicable law. If the stated rate of interest under this Senior Loan Agreement
ever exceeds the Maximum Rate, then the outstanding principal amount of the
Senior Loan made hereunder shall bear interest at the Maximum Rate until the
difference between the interest which would have been due at the stated rates of
interest and the amount due at the Maximum Rate (the "Lost Interest") has been
recaptured by the Senior Lenders. If the Senior Loan made hereunder is repaid in
full and the Lost Interest has not been fully recaptured by the Senior Lenders
pursuant to the preceding sentence, then the Senior Loans made hereunder shall
be deemed to have accrued interest at the Maximum Rate since the date the Senior
Loan was made to the extent necessary to recapture the Lost Interest not
recaptured pursuant to the preceding sentence and, to the extent allowed by law,
the Borrower shall pay to the Senior Lenders the amount of the Lost Interest
remaining to be recaptured by the Senior Lenders.
Section 9.10 Governing Law. The laws of the State of New York will
govern this Senior Loan Agreement without regard to principles of conflicts of
laws.
Section 9.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE SENIOR
AGENT, AND THE SENIOR LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO ANY SENIOR LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
Section 9.12 LIMITATION ON DAMAGES. IN NO EVENT SHALL ANY PARTY HERETO
BE LIABLE TO ANY OTHER PARTY HERETO FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL,
INCIDENTAL, PUNITIVE, OR EXEMPLARY DAMAGES, INCLUDING WITHOUT LIMITATION, LOST
PROFITS OR SAVINGS, REGARDLESS OF THE FORM OF ACTION GIVING RISE TO SUCH A CLAIM
FOR SUCH DAMAGES, WHETHER IN CONTRACT OR TORT, INCLUDING NEGLIGENCE, EVEN IF A
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Section 9.13 Execution in Counterparts. This Senior Loan Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Senior Loan Agreement.
54
[SIGNATURE PAGE - SENIOR LOAN AGREEMENT]
IN WITNESS WHEREOF, the parties hereto execute this Senior Loan
Agreement, effective as of the date first above written.
Borrower: SIERRA WELL SERVICE, INC.,
A Delaware corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice Chairman
Address for notification:
Sierra Well Service, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Senior Agent: JOINT ENERGY DEVELOPMENT
INVESTMENTS II LIMITED PARTNERSHIP, as
Senior Agent
By: Enron Capital Management II Limited
Partnership, its sole general partner
By: Enron Capital II Corp., its sole
general partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ III
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ III
Title: Agent and Attorney-in-Fact
55
[SIGNATURE PAGE - SENIOR LOAN AGREEMENT]
Address for notification:
c/o Enron Capital & Trade Resources Corp.
Legal Department
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
c/o Enron Capital & Trade Resources Corp.
Compliance Department
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ or
(▇▇▇) ▇▇▇-▇▇▇▇
Senior Lender: JOINT ENERGY DEVELOPMENT
INVESTMENTS II LIMITED PARTNERSHIP
By: Enron Capital Management II Limited
Partnership, its sole general partner
By: Enron Capital II Corp., its
sole general partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ III
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ III
Title: Agent and Attorney-in-Fact
Address for notification:
c/o Enron Capital & Trade Resources Corp.
Legal Department
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
56
[SIGNATURE PAGE - SENIOR LOAN AGREEMENT]
c/o Enron Capital & Trade Resources Corp.
Compliance Department
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ or
(▇▇▇) ▇▇▇-▇▇▇▇