SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended JUNE 30, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _____ to _____
Commission File Number: 0-28056
------------------
COACH USA, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 76-0496471
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE RIVERWAY, SUITE 600
HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 888-0104
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock of the Registrant, par value
$.01 per share, outstanding at August 12, 1997 was 19,519,774.
<PAGE>
COACH USA, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item I - Financial Statements
COACH USA, INC. PRO FORMA COMBINED
Introduction to Pro Forma Combined Statements of Income........ 3
Pro Forma Combined Statements of Income........................ 4
Notes to Pro Forma Combined Statements of Income............... 5
COACH USA, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets.......................... 6
Condensed Consolidated Statements of Income.................... 7
Condensed Consolidated Statements of Stockholders' Equity...... 8
Condensed Consolidated Statements of Cash Flows................ 9
Notes to Condensed Consolidated Financial Statements........... 10
Item II - Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 15
PART II - OTHER INFORMATION
Item 1 - Legal proceedings............................................... 20
Item 2 - Changes in Securities........................................... 20
Item 3 - Defaults Upon Senior Securities................................. 20
Item 4 - Submission of Matters to a Vote of Security Holders............. 20
Item 5 - Other Information............................................... 20
Item 6 - Exhibits and Reports on Form 8-K................................ 20
(a) Exhibits.
Exhibit 10.1 Credit Agreement Among Coach USA, Inc. as Borrower,
The Financial Institutions named in this Credit Agreement as
Banks and NationsBank of Texas, N.A., as Agent for the Banks
dated August 13, 1997.
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K.
Signature................................................................... 22
2
<PAGE>
COACH USA, INC.
PART I, ITEM 1 -- FINANCIAL INFORMATION
GENERAL INFORMATION
INTRODUCTION TO PRO FORMA COMBINED STATEMENTS OF INCOME
In September 1995, Coach USA, Inc. ("Coach USA" or the "Company"), was
founded to create a national company providing motorcoach transportation
services, including charter and tour services, and related passenger ground
transportation services.
In May 1996, Coach USA acquired, simultaneously with the closing of an
initial public offering (the "Initial Public Offering"), six established
businesses. Consideration for these businesses consisted of a combination of
cash and common stock of Coach USA. These six businesses along with Coach USA
prior to the Initial Public Offering are referred to herein as the "Founding
Companies" and the transaction pursuant to which these six businesses were
acquired is referred to herein as the "Merger" or "Mergers." Coach USA has
acquired additional businesses in 1996 and 1997. Of these additional businesses
acquired (collectively the "Acquisitions"), several acquisitions were accounted
for as poolings-of-interests and are referred to herein as the "Pooled
Companies." The remaining businesses acquired were accounted for as purchases
and are referred to herein as the "Purchased Companies."
The accompanying pro forma combined statements of income of the Company
for the six months ended June 30, 1996 and 1997, respectively, include the
combined operations of the Pooled Companies and the Founding Companies from
January 1, 1996, and the Purchased Companies from the date of their acquisition.
The Founding Companies were not under common control or management
through May 1996. The Pooled Companies and Purchased Companies were not under
common control or management prior to their acquisition. This pro forma
information may not be indicative of the actual results if the transactions had
occurred on the dates indicated or the actual results which may be realized in
the future. Expected benefits and cost reductions anticipated by the Company,
future corporate costs of Coach USA, and interest expense savings as a result of
the offering proceeds have not been reflected in the pro forma information for
1996.
Operating results for the interim periods are not necessarily indicative
of the results for full years. The results of the Company have historically been
subject to significant seasonal fluctuations. It is suggested that these pro
forma combined financial statements be read in conjunction with the consolidated
financial statements of the Company and the Founding Companies and the notes
thereto included in the Company's Annual Report on Form 10-K (File No. 28056),
as filed with the Securities and Exchange Commission ("SEC") and the
supplemental consolidated financial statements of the Company included in Form
8-K dated August 8, 1997.
3
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA )
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1996 1997
----------- -----------
<S> <C> <C>
REVENUES.................................................$ 139,214 $ 199,329
OPERATING EXPENSES....................................... 109,062 150,893
----------- -----------
Gross profit.................................. 30,152 48,436
GENERAL AND ADMINISTRATIVE EXPENSES...................... 19,970 22,128
GOODWILL AND OTHER AMORTIZATION.......................... 234 1,342
ACQUISITION RELATED COSTS................................ -- 348
----------- -----------
Operating income.............................. 9,948 24,618
INTEREST EXPENSE......................................... 5,043 7,343
----------- -----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS....... 4,905 17,275
PROVISION FOR INCOME TAXES............................... 2,201 7,208
----------- -----------
INCOME BEFORE EXTRAORDINARY ITEMS........................ 2,704 10,067
EXTRAORDINARY ITEMS (NET OF INCOME TAXES)................ -- (400)
----------- -----------
NET INCOME ..............................................$ 2,704 $ 9,667
=========== ===========
PRO FORMA ADJUSTMENTS:
Income before extraordinary items..................$ 2,704 $ 10,067
Pro forma compensation and interest differential... 4,848 425
Acquisition related costs.......................... -- 348
Less: Pro forma provision for income taxes........ 1,849 172
----------- -----------
PRO FORMA INCOME BEFORE EXTRAORDINARY ITEMS..............$ 5,703 $ 10,668
=========== ===========
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING................... 15,250 19,904
=========== ===========
PRO FORMA INCOME PER COMMON AND COMMON
EQUIVALENT SHARE BEFORE EXTRAORDINARY ITEMS..............$ .37 $ .54
=========== ===========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
statements of income.
4
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED STATEMENTS OF INCOME
The Founding Companies, Pooled Companies and Purchased Companies have
been managed prior to their acquisitions as independent private companies.
Therefore, general and administrative expenses and interest expense for the
periods presented reflect compensation and related benefits that owners received
from their respective businesses prior to acquisition. Additional pro forma
adjustments have been presented for the purpose of reflecting net income as if
the merger of the Founding Companies and the acquisition of the Pooled Companies
had occurred January 1, 1996. Certain stockholders agreed to reductions in
salaries, benefits and the conversion of outstanding debt to equity in
connection with the Acquisitions. Certain stockholders also have entered into
employment agreements which provide for a set base salary, participation in
future incentive bonus plans, certain other benefits and two-year covenants not
to compete following termination of such person's employment.
The pro forma data presents compensation at the level that certain
stockholders of the Company agreed to receive from the Founding and Pooled
Companies subsequent to the Merger and Pooled Company acquisitions as well as a
non-recurring non-cash charge recorded by the Company in March 1996. In
addition, the pro forma data presents the reduction of interest expense related
to the conversion of stockholders' debt to equity at one of the Pooled
Companies, the reduction of the acquisition related costs incurred in the
acquisition of the Pooled Companies, and the incremental provision for income
taxes as if all entities had been subject to federal and state income taxes and
for the impact of the compensation differential and interest reduction discussed
above.
PRO FORMA NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
The computation of pro forma net income per common and common equivalent
share for the six months ended June 30, 1996 is based upon 15,249,587 weighted
average shares outstanding which includes (i) 2,165,724 shares issued by Coach
USA prior to the Initial Public Offering, (ii) 5,099,687 shares issued to the
stockholders of the Founding Companies in connection with the Initial Public
Offering, (iii) 1,700,714 of the 4,140,000 shares sold in the Initial Public
Offering to pay the cash portion of the consideration for the Founding
Companies, (iv) 118,142 of the 4,140,000 shares sold in the Initial Public
Offering attributed to excess S Corporation distributions, (v) 561,156 of the
4,140,000 shares sold in the Initial Public Offering, net of shares sold to
cover the purchase of the Founding Companies, (vi) 5,027,305 shares issued in
connection with the acquisition of the Pooled Companies, (vii) 425,039 shares
issued in connection with the conversion of indebtedness to equity at one of the
Pooled Companies, and (viii) 151,820 shares representing the weighted average
portion of shares for the dilution attributable to outstanding options to
purchase the Company's common stock, using the treasury stock method.
The computation of pro forma net income per common and common equivalent
share for the six months ended June 30, 1997 is based upon 19,904,180 weighted
average shares outstanding, common and common equivalent shares, which include
(i) 18,942,062 shares issued and outstanding for the entire six month period and
(ii) 981 shares issued to minority interests of the Pooled Companies, and (iii)
285,231 representing the weighted average portion of shares issued in connection
with the Acquisitions completed in 1997, and (iv) 675,906 shares representing
the weighted average portion of shares for the dilution attributable to
outstanding options to purchase the Company's common stock, using the treasury
stock method.
5
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------- ---------
ASSETS (Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents.................................................................$ 2,786 $ 1,512
Accounts receivable, less allowance of $2,579 and $2,997.................................. 23,216 32,766
Notes receivable, current portion......................................................... 2,811 3,438
Inventories............................................................................... 9,670 13,080
Prepaid expenses and other current assets................................................. 13,797 20,399
------------- -------------
Total current assets............................................................... 52,280 71,195
PROPERTY AND EQUIPMENT, net........................................................................ 224,830 346,102
NOTES RECEIVABLE, less allowance of $500 and $500.................................................. 4,231 6,142
GOODWILL, net...................................................................................... 30,561 91,905
OTHER ASSETS, net.................................................................................. 17,916 23,447
------------- -------------
Total assets.......................................................................$ 329,818 $ 538,791
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term obligations...............................................$ 19,872 $ 13,764
Accounts payable and accrued liabilities.................................................. 45,885 111,619
------------- -------------
Total current liabilities.......................................................... 65,757 125,383
LONG-TERM OBLIGATIONS, net of current maturities................................................... 108,955 56,510
SENIOR SUBORDINATED NOTES.......................................................................... -- 150,000
CONVERTIBLE SUBORDINATED NOTES, net of current maturities.......................................... 18,500 40,580
DEFERRED INCOME TAXES.............................................................................. 24,027 34,961
------------- -------------
Total liabilities.................................................................. 217,239 407,434
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock $.01 par, 30,000,000 shares authorized, 18,942,062 and
19,488,034 shares issued and outstanding............................................... 189 194
Additional paid-in capital................................................................ 103,274 112,470
Cumulative translation adjustment......................................................... (209) (222)
Retained earnings......................................................................... 9,325 18,915
------------- -------------
Total stockholders' equity......................................................... 112,579 131,357
------------- -------------
Total liabilities and stockholders' equity.........................................$ 329,818 $ 538,791
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- -----------------------------
1996 1997 1996 1997
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES............................................................ $ 56,713 $ 119,083 $ 94,276 $ 199,329
OPERATING EXPENSES.................................................. 42,747 87,322 71,437 150,893
----------- ----------- ------------ ------------
Gross profit............................................. 13,966 31,761 22,839 48,436
GENERAL AND ADMINISTRATIVE EXPENSES................................. 6,492 12,074 12,893 22,128
AMORTIZATION EXPENSE................................................ 122 813 234 1,342
ACQUISITION RELATED COSTS........................................... -- 231 -- 348
----------- ----------- ------------ ------------
Operating income......................................... 7,352 18,643 9,712 24,618
INTEREST EXPENSE.................................................... 1,482 3,871 3,409 7,343
----------- ----------- ------------ ------------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS.............................................. 5,870 14,772 6,303 17,275
PROVISION FOR INCOME TAXES.......................................... 2,598 6,153 2,638 7,208
----------- ----------- ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEMS................................... 3,272 8,619 3,665 10,067
EXTRAORDINARY ITEMS (NET OF INCOME TAXES)........................... -- (311) -- (400)
----------- ----------- ------------ ------------
NET INCOME.......................................................... $ 3,272 $ 8,308 $ 3,665 $ 9,667
=========== =========== ============ ============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING..................................... 10,908 20,028 8,362 19,904
=========== =========== ============ ============
INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
BEFORE EXTRAORDINARY ITEMS.......................................... $ .30 $ .43 $ .44 $ .51
EXTRAORDINARY ITEMS ................................................ -- (.02) -- (.02)
----------- ----------- ------------ ------------
NET INCOME ......................................................... $ .30 $ .41 $ .44 $ .49
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE RETAINED TOTAL
COMMON STOCK PAID-IN TRANSLATION EARNINGS STOCKHOLDERS'
SHARES AMOUNT CAPITAL ADJUSTMENT (DEFICIT) EQUITY
-------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995.............................. 5,028 $ 50 $ 6,932 $ (200) $ (1,192) $ 5,590
Issuance of Common Stock:
Proceeds of stock offerings....................... 6,224 62 96,502 -- -- 96,564
Merger with Predecessor........................... 2,166 22 2,055 -- (2,053) 24
Acquisition of Founding Companies................. 5,099 51 6,323 -- 9,155 15,529
Cash Distribution to Founding
Companies' Shareholders............................ -- -- (23,810) -- (23,810)
Reorganization ....................................... -- -- 4,402 -- (4,402) --
Conversion from S Corporation to C
Corporation Founding Companies..................... -- -- -- -- (5,426) (5,426)
Conversion of debt to equity.......................... 425 4 10,198 -- -- 10,202
S Corporation dividends paid by
certain Pooled Companies........................... -- -- -- -- (2,139) (2,139)
Adjustment to conform fiscal year ....................
ends of Pooled Companies........................... -- -- -- -- 267 267
Net income............................................ -- -- -- 15,115 15,115
Capital contributions equal to the current income
taxes of S Corporations............................ -- -- 341 -- -- 341
Other................................................. -- -- 331 (9) -- 322
-------- ---------- ---------- ----------- ----------- ----------
BALANCE AT DECEMBER 31, 1996.............................. 18,942 $ 189 $ 103,274 $ (209) $ 9,325 $ 112,579
Issuance of Common Stock:.............................
Acquisition of Purchased Companies (unaudited) 390 4 8,486 -- -- 8,490
Exercise of stock options (unaudited)............. 30 -- 420 -- -- 420
Equity of acquired companies treated as insignificant
poolings-of-interest (unaudited).................. 125 1 219 -- 241 461
Other (unaudited)..................................... 1 -- 71 (13) (318) (260)
Net income (unaudited)................................ -- -- -- -- 9,667 9,667
-------- ---------- ---------- ----------- ----------- ----------
BALANCE AT JUNE 30, 1997 (unaudited)...................... 19,488 $ 194 $ 112,470 (222) $ 18,915 $ 131,357
======== ========== ========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
8
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1996 1997
------------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income......................................................................................$ 3,665 $ 9,667
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization ............................................................. 5,357 13,017
Gain on disposal of assets................................................................. (180) (487)
Deferred tax provision .................................................................... 3,170 4,107
Changes in operating assets and liabilities-
Accounts receivable, net.............................................................. (5,546) (1,984)
Inventories........................................................................... (1,344) (1,417)
Notes receivable...................................................................... (1,479) (2,538)
Prepaid expenses and other current assets............................................. 1,915 (4,738)
Accounts payable and accrued liabilities.............................................. (1,074) 29,199
Other................................................................................. 632 (6,329)
------------- -------------
Net cash provided by operating activities........................................ 5,116 38,497
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment............................................................. (9,799) (67,715)
Proceeds from sales of property and equipment................................................... 2,098 5,568
Cash consideration paid for founding companies, net of cash acquired............................ (22,112) --
Cash consideration paid for Purchased Companies,
net of cash acquired.......................................................................... -- (36,656)
------------- -------------
Net cash used in investing activities............................................ (29,813) (98,803)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term obligations..................................................... (49,618) (84,519)
Proceeds from issuance of long-term obligations, net............................................ 27,571 143,367
Proceeds from issuance of common stock.......................................................... 48,062 420
S Corporation dividends paid by certain Pooled Companies........................................ (487) (236)
Other........................................................................................... (147) --
------------- -----------
Net cash provided by financing activities.................................................. 25,381 59,032
NET INCREASE (DECREASE) IN CASH....................................................................... 684 (1,274)
CASH AND CASH EQUIVALENTS, beginning of period........................................................ 5,251 2,786
------------- -------------
CASH AND CASH EQUIVALENTS, end of period..............................................................$ 5,935 $ 1,512
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.....................................................................$ 5,167 $ 7,672
Cash paid for income taxes................................................................. 891 775
Assets acquired under capital leases....................................................... 3,275 2,355
Debt issued for Purchased Companies........................................................ -- 22,080
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
9
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
In September 1995, Coach USA, Inc. ("Coach USA" or the "Company") was
founded to create a national company providing motorcoach transportation
services, including charter and tour services, and related passenger ground
transportation services.
In May 1996, Coach USA acquired, simultaneously with the closing of its
initial public offering (the "Initial Public Offering"), six established
businesses. Consideration for these businesses consisted of a combination of
cash and common stock of Coach USA (the "Common Stock"). These six businesses
along with Coach USA prior to the Initial Public Offering are referred to herein
as the "Founding Companies," and the transaction pursuant to which these six
businesses were acquired is referred to herein as the "Merger" or "Mergers."
Coach USA has acquired additional businesses in 1996 and 1997. Of these
additional businesses acquired, those accounted for as poolings-of-interests are
referred to herein as the "Pooled Companies." The remaining businesses were
accounted for as purchases and are referred to herein as the "Purchased
Companies" (see Note 6).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The unaudited condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the SEC. Certain information
and footnote disclosures, normally included in annual financial statements
prepared in accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to those rules and regulations, although the
Company believes that the disclosures made are adequate to make the information
presented not misleading. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary to fairly present the
financial position, results of operations and cash flows with respect to the
interim consolidated financial statements, have been included. The results of
operations for the interim periods are not necessarily indicative of the results
for the entire fiscal year.
It is suggested that these condensed consolidated financial statements
be read in conjunction with the audited supplemental consolidated financial
statements and notes thereto of Coach USA included in the Company's Form 8-K
filed with the SEC on August 8, 1997.
SEASONALITY
The timing of certain holidays, weather conditions and seasonal vacation
patterns may cause the Company's quarterly results of operations to fluctuate
significantly. The Company expects to realize higher revenues, operating income
and net income during the second and third quarters and lower revenues and net
income during the first and fourth quarters.
RECLASSIFICATIONS
Certain reclassifications have been made in prior periods to conform
with the current presentation.
10
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
3. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
The computation of net income per common and common equivalent share for
the three months ended June 30, 1996 is based upon 10,908,087 weighted average
shares outstanding which includes (i) the weighted average portion of 2,165,724
shares issued by Coach USA prior to the Initial Public Offering, (ii) the
weighted average portion of 5,099,687 shares issued to the stockholders of the
Founding Companies in connection with the Initial Public Offering, (iii) the
weighted average potion of 4,140,000 shares sold in the Initial Public Offering,
(iv) 5,027,305 shares issued in connection with the acquisition of the Pooled
Companies, and (v) 425,039 shares issued in connection with the conversion of
indebtedness to equity at one of the Pooled Companies.
The computation of net income per common and common equivalent share for
the six months ended June 30, 1996 is based upon 8,361,516 weighted average
shares outstanding which includes (i) the weighted average portion of 2,165,724
shares issued by Coach USA prior to the Initial Public Offering, (ii) the
weighted average portion of 5,099,687 shares issued to the stockholders of the
Founding Companies in connection with the Initial Public Offering, (iii) the
weighted average portion of 4,140,000 shares sold in the Initial Public
Offering, (iv) 5,027,305 shares issued in connection with the acquisition of the
Pooled Companies, and (v) 425,039 shares issued in connection with the
conversion of indebtedness to equity at one of the Pooled Companies.
The computation of net income per common and common equivalent share for the
three months ended June 30, 1997 is based upon 20,028,273 weighted average
shares outstanding, common and common equivalent share, which include (i)
18,942,062 shares issued and outstanding for the entire three month period, (ii)
981 shares issued to minority interest of the Pooled Companies, (iii) 465,128
representing the weighted average portion of shares issued in connection with
the Acquisitions completed in 1997, and (iv) 620,102 shares representing the
weighted average portion of shares for the dilution attributable to outstanding
options to purchase the Company common stock, using the treasury stock method.
The computation of net income per common and common equivalent share for the
six months ended June 30, 1997 is based upon 19,904,180 weighted average shares
outstanding, common and common equivalent share, which include (i) 18,942,062
shares issued and outstanding for the entire six month period, (ii) 981
shares issued to minority interest of the Pooled Companies, (iii) 285,231
representing the weighted average portion of shares issued in connection with
the Acquisitions completed in 1997, and (iv) 675,906 shares representing the
weighted average portion of shares for the dilution attributable to outstanding
options to purchase the Company common stock, using the treasury stock method.
Fully diluted net income per common and common equivalent share is equal
to primary earnings per share for all periods presented.
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." SFAS No.
128 revises the methodology to be used in computing earnings per share (EPS)
such that the computations required for primary and fully
11
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
diluted EPS are to be replaced with "basic" and "diluted" EPS. Basic EPS is
computed by dividing net income by the weighted average number of shares of
common stock outstanding during the year. Diluted EPS is computed in the same
manner as fully diluted EPS, except that, among other changes, the average share
price for the period is used in all cases when applying the treasury stock
method to potentially dilutive outstanding options.
The Company will adopt SFAS No. 128 effective December 15, 1997, and
will restate EPS for all periods presented. The Company anticipates that the
amounts reported for basic EPS for the unaudited six months ended June 30, 1996
and 1997 will be $.45 and $.50, and that basic EPS for the unaudited pro forma
six months ended June 30, 1996 and 1997 will be $.34 and $.55. The Company
anticipates that the amounts reported for diluted EPS for the unaudited six
months ended June 30, 1996 and 1997 will be $.44 and $.49 and that diluted EPS
for the unaudited pro forma six months ended June 30, 1996 and 1997 will be $.34
and $.54.
4. LONG TERM OBLIGATIONS
In May 1996, the Company entered into a revolving credit agreement with
a bank ("Credit Facility"). In August 1997, the Company amended and restated its
Credit Facility. The Credit Facility, as amended, provides for a revolving
facility of $300 million through a syndicate of seventeen banks, and allows the
Company to have other senior indebtedness of $80 million (in addition to fully
subordinated debt) outside the Credit Facility. The Credit Facility is secured
by substantially all of the assets of the Company and matures August, 2000, at
which time all amounts then outstanding become due. Interest on outstanding
borrowings is charged, at the Company's option, at the banks' prime rate plus up
to 0.25% or the London Interbank Offered Rate ("LIBOR") plus 0.50% to 1.75%
(6.63% at August 13, 1997), both as determined by the ratio of the Company's
funded debt to cash flow (as defined). A commitment fee ranging from 0.15% to
0.375% is payable on the unused portion of the Credit Facility. Under the terms
of the Credit Facility, the Company must maintain certain minimum financial
ratios, including minimum net worth, minimum fixed charge coverage ratios, and
maximum capital expenditure levels. The Credit Facility prohibits the payment of
cash dividends. As of August 13, 1997, the Company had a total of $105.8 million
outstanding under the Credit Facility and other sources and had utilized $7.5
million of the facility for letters of credit securing certain insurance
obligations and performance bonds, resulting in a borrowing availability of
$266.7 million under the Credit Facility and other sources. The Company's
obligations under the Credit Facility are guaranteed by the subsidiaries of the
domestic Company.
In June 1997, the Company completed the sale of $150.0 million aggregate
principal amount of 9 3/8% senior subordinated notes due 2007. The net proceeds
from the offering were used to repay amounts owed under the Credit Facility.
During 1997, the Company issued $22.1 million in convertible
subordinated notes (the Notes) to former owners of certain of the Purchased
Companies as partial consideration of the acquisition purchase price. The Notes
bear interest, payable quarterly, at a weighted average interest rate of 5.3
percent and are convertible by the holder into shares of the Company's Common
Stock at a weighted average price of $37.31 per share. The Notes are redeemable
for cash or the Company's Common Stock at any time after one year of issuance.
The terms of the Notes require $12.1 million of principal payments in 1999 and
10.0 million of principle payments in 2000.
12
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
5. BUSINESS COMBINATIONS
POOLINGS
During 1996 and through the second quarter of 1997, the Company acquired
all of the outstanding stock of ten companies in exchange for 5,027,305 shares
of Common Stock. These companies provide motorcoach transportation and taxicab
services. These acquisitions have been accounted for as poolings-of-interests
and the results of operations of these ten companies are included for all
periods presented herein.
PURCHASES
During 1996 and through the second quarter of 1997, the Company
completed several acquisitions accounted for as purchases. The aggregate
consideration paid in these transactions consisted of $59.9 million in cash,
515,311 shares of Common Stock and $44.6 million of notes convertible into
1,336,827 shares of Common Stock. The accompanying balance sheet as of June 30,
1997 includes preliminary allocations of the respective purchase prices and are
subject to final adjustment. The preliminary allocations reflected liabilities
in excess of assets of $93.4 million, which has been recorded as Goodwill and is
being amortized over 40 years. Set forth below are unaudited pro forma combined
revenue and income data reflecting the pro forma effect of these acquisitions on
the Company's results of operations for the year ended December 31, 1996 and the
six months ended June 30, 1997. The unaudited data presented below consists of
the income statement data as presented in these condensed consolidated financial
statements plus (i) the income statement data of the Founding Companies for the
periods prior to June 1, 1997 and (ii) all Purchased Companies as if the
acquisitions were effective on the first day of the year being reported. The
revenue and net income data are in thousands.
Year Ended Six Months
December 31, Ended June 30,
1996 1997
----------- --------------
Revenues...................................... $ 436,372 $ 222,162
Income before extraordinary items............. 18,025 9,199
Income per share before extraordinary items... 1.08 .48
Pro forma adjustments included in the amounts above primarily relate to:
(a) reductions in former owners, and certain key employees, salary and benefits;
(b) adjustment to depreciation and amortization expense due to the purchase
price allocations; (c) adjustment to the federal and state income tax provisions
based on the combined operations; (d) elimination of historical interest expense
related to certain obligations converted to equity; (e) to record interest
expense on cash expended and the convertible subordinated notes issued in the
acquisitions of the Purchased Companies, and, for the year ended December 31,
1996, an adjustment to record interest expense on the senior subordinated notes
(the Notes), amortization of deferred financing costs and related taxes, as if
the Notes had been outstanding for the year.
The pro forma results presented above are not necessarily indicative of
actual results which might have occurred had the operations and management teams
of the Company, the Founding Companies, the Pooled Companies and the Purchased
Companies been combined at the beginning of the periods presented.
13
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
CLAIMS AND LAWSUITS
The Company is subject to certain claims and lawsuits arising in the
normal course of business, most of which involve claims for personal injury and
property damage incurred in connection with its operations. The Company
maintains various insurance coverages in order to minimize financial risk
associated with the claims. The Company has provided for certain of these
actions in the accompanying interim condensed consolidated financial statements.
In the opinion of management, uninsured losses, if any, resulting from the
ultimate resolution of these matters will not be material to the Company's
financial position or results of operations.
REGULATORY MATTERS
The Surface Transportation Board ("STB") must approve or exempt any
consolidation or merger of two or more regulated interstate motorcoach operators
or the acquisition of one such operator by another. As of August 13, 1997, the
STB had exempted from regulatory approval requirements each of the acquisition
transactions involving federally-regulated interstate motorcoach operators
entered into by the Company through February 1997. There can be no assurance
that the Company will be able to obtain such approval or exemption with respect
to the acquisitions completed after February 1997 or future acquisitions.
ESTIMATED INSURANCE CLAIMS PAYABLE
The Company's operations include risks relating to bodily injury include
risks relating to property damage to third parties and workers' compensation.
The Company has commercial liability insurance policies that provide coverage by
the insurance company, subject to deductibles ranging from $5,000 to $250,000.
The Company is consolidating its insurance program under a program which
provides for deductibles ranging from $100,000 to $250,000. As such, any claim
within the deductible per incident would be the financial obligation of the
Company.
The accrued insurance claims payable represents management's estimate of
the Company's potential claims costs in satisfying the deductible provisions of
the insurance policies for claims occurring through June 30, 1997. The accrual
is based on known facts and historical trends. Management believes such accrual
to be adequate.
COLLECTIVE BARGAINING AGREEMENTS
The Company is a party to various collective bargaining agreements with
certain of its employees. The agreements require the Company to pay specified
wages and provide certain benefits to its union employees. These agreements will
expire at various times through 2000.
14
<PAGE>
PART I, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
This filing contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements are based
on current plans and expectations of the Company and involve risks and
uncertainties that could cause actual future activities and results of
operations to be materially different from those set forth in the
forward-looking statements. Important factors that could cause actual results to
differ include, among others, risks associated with acquisitions, fluctuations
in operating results because of acquisitions and variations in stock prices,
changes in government regulations, competition, and risks of operations and
growth of the newly acquired businesses.
Coach USA was founded in September 1995 to create a nationwide provider
of motorcoach and other ground transportation services. On May 17, 1996, Coach
USA acquired, simultaneously with the closing of the Initial Public Offering,
the six Founding Companies. Through the remainder of 1996, and through June 30,
1997, the Company completed the acquisition of several companies, some of which
have been accounted for as poolings-of-interest and some of which have been
accounted for as purchases. As a result, the pro forma combined financial
statements, including the pro forma combined results discussed below, include
the historical financial statements of each of the Founding Companies and the
Company (including the Pooled Companies) for all periods presented at historical
cost, as if these companies had always been members of the same operating group
and give effect to (i) the Compensation Differential; (ii) the elimination of
merger costs related to pooled acquisitions; (iii) certain tax adjustments
related to the taxation of certain Founding Companies and Pooled Companies as S
Corporations prior to the consummation of the mergers of the Founding Companies
and the subsequent acquisitions; and (iv) the tax impact of the Compensation
Differential in each period.
The Company has begun to realize savings by consolidating certain
general administrative and purchasing functions and reducing insurance expenses.
In addition, the Company has begun to realize savings from its ability to borrow
at lower interest rates than the Founding Companies and the subsequent
acquisitions. These savings are being partially offset by the costs of being a
public company and the incremental increase in costs related to the Company's
new corporate management. Neither these savings nor the costs associated
therewith for the periods prior to the Initial Public Offering have been
included in the pro forma financial information discussed below. As a result,
pro forma results may not be comparable to, or indicative of, future
performance.
The Company's motorcoach revenues are derived from fares charged to
individual passengers and fees charged under contracts to provide motorcoach
services. Taxicab operation revenues are derived from fees and other services
charged to independent taxicab operators. Operating expenses consist primarily
of salaries and benefits for motorcoach drivers and mechanics, depreciation,
maintenance, fuel, oil, insurance and commissions to agents. General and
administrative expenses consist primarily of compensation and related benefits
to the owners and certain key employees of the Founding Companies, the Pooled
Companies, and the Purchased Companies, administrative salaries and benefits,
marketing, communications and professional fees.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
RESULTS OF OPERATIONS -- PRO FORMA COMBINED (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- -----------------------------
1996 1997 1996 1997
------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues............................................... $ 77,430 $ 119,083 $ 139,214 $ 199,329
Operating Expenses..................................... 58,612 87,322 109,062 150,893
------------- ------------- -------------- ------------
Gross Profit...................................... 18,818 31,761 30,152 48,436
General and Administrative Expenses.................... 7,812 11,923 15,797 21,703
Goodwill and Other Amortization........................ 122 813 234 1,342
Interest Expense....................................... 1,661 3,871 4,368 7,343
------------- ------------- -------------- ------------
Income Before Income Taxes and Extraordinary Items 9,223 15,154 9,753 18,048
Provision for Income Taxes............................. 3,765 6,203 4,050 7,380
------------- ------------- -------------- ------------
Pro Forma Income Before Extraordinary Items $ 5,458 $ 8,951 $ 5,703 $ 10,668
============= ============= =============== ============
</TABLE>
The pro forma combined results discussed below occurred when the combined
Founding Companies were under common control and management from June 1, 1996,
and the Pooled and Purchased Companies were under common control from the date
of their respective acquisitions. All other periods reflected were not under
common control or management and may not be comparable to, or indicative of,
future performance.
COMBINED RESULTS FOR THREE AND SIX MONTHS ENDED JUNE 1996 COMPARED TO 1997
Revenues increased by 53.8% and 43.2% to $119.1 million and $199.3
million, respectively, for the three and six months ended June 30, 1997. The
increase in revenues was largely due to the revenues of the Purchased Companies
of $35.2 million and $49.9 million, respectively, for the three and six months
ended June 30, 1997.
Operating expenses increased 49.0% and 38.4% to $87.3 million and $150.9
million for the three and six months ended June 30, 1997. The increase in
operating expenses was the result of the increased operations offset by savings
in the Company's insurance program and parts buying program.
General and Administrative expenses, after elimination of the Compensation
Differential, and acquisition related costs increased 52.6% and 37.4% as
compared to the three and six months ended June 30, 1996, respectively. The
increase in general and administrative expenses in the six month period ended
June 30, 1997 was largely due to an increase of $1.7 million related to the
establishment of the corporate management group required to execute the
acquisition program and to manage the consolidated group of companies.
Interest expense increased $2.2 million and $2.9 million as compared to
the three and six months ended June 30, 1996, due to the higher level of debt
related to additional equipment and debt related to the Purchased Companies,
partially offset by the repayment of debt through the use of proceeds of the
Initial Public Offering, a secondary offering of Coach USA common stock, and due
to lower rates from the credit facility.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Pro forma combined net income before extraordinary items, which has
been adjusted for the Compensation Differential and the pro forma provision for
taxes, increased during the three and six months ended June 30, 1997 as compared
to the three and six months ended June 30, 1996 primarily due to continued
revenue growth and the effects of increased purchasing power on lowering certain
costs.
RESULTS OF OPERATIONS -- HISTORICAL (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- ----------------------------
1996 1997 1996 1997
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues................................................... $ 56,713 $ 119,083 $ 94,276 $ 199,329
Operating Expenses......................................... 42,747 87,322 71,437 150,893
----------- ----------- ------------- -------------
Gross Profit.......................................... 13,966 31,761 22,839 48,436
General and Administrative Expenses........................ 6,492 12,074 12,893 22,128
Goodwill Amortization...................................... 122 813 234 1,342
Acquisition Costs.......................................... -- 231 -- 348
Interest and Other......................................... 1,482 3,871 3,409 7,343
----------- ----------- ------------- -------------
Income Before Income Taxes and Extraordinary Items......... 5,870 14,772 6,303 17,275
Provision for Income Taxes................................. 2,598 6,153 2,638 7,208
----------- ----------- ------------- -------------
Income Before Extraordinary Items.......................... $ 3,272 $ 8,619 $ 3,665 $ 10,067
=========== =========== ============= =============
</TABLE>
The historical results discussed below occurred when the
combined Founding Companies were under common control and management from June
1, 1996, and the Pooled and Purchased Companies were under common control from
September 1, 1996. All other periods reflected were not under common control or
management and may not be comparable to, or indicative of, future performance.
HISTORICAL RESULTS FOR THREE AND SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO 1997
Revenues increased by 110.0% and 111.4% to $119.1 million and $199.3
million for the three and six months ended June 30, 1997 compared to the
comparable period in the prior year. The increase in revenues was largely due to
the revenues of the Founding Companies of $26.4 and $44.9 million and revenues
of the Purchased Companies of $35.2 and $49.9 million, and incremental increases
at certain Pooled Companies.
Operating expenses increased 104.3% and 111.2% to $87.3 million and
$150.9 million for the three and six months ended June 30, 1997 compared to the
comparable period in the prior year. The increase in operating expenses was
directly related to increased revenues.
General and Administrative expenses increased 86.0% and 71.6% as
compared to the three and six months ended June 30, 1996. The increase in
general and administrative expenses in the three and six month period ended June
30, 1997 was primarily due to the overall increase in operations and the
establishment of the corporate management group required to execute the
acquisition program and to manage the consolidated group of companies.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Interest expense increased $3.9 million as compared to the six months
ended June 30, 1996, due to the higher level of debt related to additional
equipment and debt related to the Purchased Companies, partially offset by the
repayment of debt through the use of proceeds of the Initial Public Offering, a
secondary offering of Coach USA common stock, and due to lower rates from the
credit facility.
Net income increased during the three and six months ended June 30,
1997 as compared to the three and six months ended June 30, 1996 primarily due
to the acquisitions of the Founding Companies and Purchased Companies and the
effects of increased purchasing power on lowering certain costs.
EFFECTS OF COMBINATION
Effective in the second quarter of 1996, the Company began incurring
expenses, including salaries for members of senior management and administrative
staff, travel and office expenses, related to the establishment of its corporate
and administrative infrastructure. Management believes that these additional
costs will be offset by operational efficiencies achieved through integration of
the operations of these companies. Specifically the Company expects insurance,
financing and benefits efficiencies to be derived as a result of the Company's
acquisition program.
LIQUIDITY AND CAPITAL RESOURCES -- PRO FORMA COMBINED
Net cash provided by operating activities was $38.6 million for the
six months ended June 30, 1997. Capital expenditures during the period totaled
$67.7 million. The majority of the capital expenditures were for the purchase of
motorcoach equipment for fleet additions.
In 1996, the Company completed the Initial Public Offering of
4,140,000 shares of Common Stock and a secondary offering of 2,084,307 shares of
Common Stock, resulting in net proceeds of approximately $96.6 million. The net
proceeds were used to pay the cash portion of the purchase price for the
Founding Companies, repay certain indebtedness assumed by the Company in the
Mergers and to repay amounts owed under the Credit Facility.
In August 1997, the Company further amended and restated its credit
agreement (the "Credit Facility"). The Credit Facility agreement, as amended,
provides for a revolving credit facility of $300 million through a syndicate of
eight banks, and allows for an additional $80 million of debt (other than fully
subordinated debt) outside the credit facility. The Credit Facility is secured
by substantially all of the assets of the Company and matures in August 2000.
Interest on outstanding borrowings is charged, at the Company's option, at the
banks' prime rate plus up to .25% or the London Interbank Offered Rate ("LIBOR")
plus .50% to 1.75%, both as determined by the ratio of the Company's funded debt
to cash flow (as defined). A commitment fee ranging from 0.15% to 0.375% is
payable on the unused portion of the Credit Facility. Under the terms of the
Credit Facility, the Company must maintain certain minimum financial ratios. The
Credit Facility prohibits the payment of cash dividends. As of August 13, 1997,
the Company had a total of $105.8 million outstanding under the Credit Facility
and other outside credit facilities and had utilized $7.5 million of the
facility for letters of credit securing certain insurance obligations and
performance bonds, resulting in a borrowing availability of $266.7 million under
the Credit Facility.
In June 1997, the Company completed the sale of $150.0 million
aggregate principal amount 9 3/8% senior subordinated notes due 2007. The net
proceeds from the offering were used to repay amounts owed under the Credit
Facility.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
In exchange for all outstanding shares of stock of the Pooled
Companies together with certain real estate owned and conversion of certain debt
by the principals of such companies, the Company issued 5,452,344 shares of
Common Stock. In exchange for all outstanding shares of stock of the Purchased
Companies, the Company paid $242.4 million, comprised of $44.6 million in
convertible subordinated notes convertible into 1,336,827 shares of Common
Stock, 515,311 shares of Common Stock and $59.9 million in cash. Total debt
assumed by the Company in connection with these acquisitions was approximately
$155.7 million.
Management believes that the Company's revolving credit facility, its
cash flows from operations, and shares of Common Stock available under its shelf
registration statement will provide sufficient liquidity or acquisition currency
to execute the Company's acquisition and internal growth plans for the next 12
months. Should the Company accelerate its acquisition program, the Company may
need to seek additional financing through the public or private sale of equity
or debt securities. There can be no assurance that the Company could secure such
financing if and when it is needed or on terms the Company deems acceptable.
19
<PAGE>
COACH USA, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of stockholders in Houston, Texas
on June 5, 1997. The following sets forth matters submitted to a vote of the
stockholders:
(a) The following individuals were elected to the Board of
Directors as stated in the Company's Proxy Statement dated
May 5, 1997, for terms expiring at the 2000 annual
stockholders' meeting or until their successors have been
elected and qualified - Class I Directors: Frank P.
Gallagher, Lawrence K. King, Thomas A. Werbe and William J.
Lynch.
Every Director was elected by a vote of 14,772,092 shares,
being more than a majority of the outstanding shares of
Common Stock of the Company, with 112,500 shares withheld.
(b) The stockholders approved the amended and restated
certificate of incorporation to increase the number of
authorized shares of Common Stock of the Company from
30,000,000 to 100,000,000 by a vote of 11,708,323 shares,
being more than a majority of the outstanding shares of
Common Stock of the Company, with 3,175,521 shares voted
against, 1,050 shares abstaining and 3,266,546 shares not
voted.
(c) The stockholders ratified the appointment of Arthur
Andersen, LLP to audit the financial statements of the
Company and its subsidiaries for the year 1997, by a vote of
14,844,881 shares, being more than a majority of the
outstanding shares of Common Stock of the Company, with
37,245 shares voted against, 2,768 shares abstaining and
3,266,546 shares not voted.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
20
<PAGE>
COACH USA, INC.
PART II - OTHER INFORMATION--
(CONTINUED)
(a) Exhibits
Exhibit 10.1 Credit Agreement Among Coach USA, Inc. as Borrower,
The Financial Institutions named in this Credit Agreement as
Banks and NationsBank of Texas, N.A., as Agent for the Banks
dated August 13, 1997.
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
21
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Coach USA, Inc., has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
COACH USA, INC.
Dated: August 14, 1997 By: /s/ LAWRENCE K. KING
Name: Lawrence K. King
Title: Senior Vice President and Chief
Financial Officer
22
EXHIBIT 10.1
[Execution Version]
CREDIT AGREEMENT
Among
COACH USA, INC.
as Borrower,
THE FINANCIAL INSTITUTIONS
NAMED IN THIS CREDIT AGREEMENT
as Banks,
and
NATIONSBANK OF TEXAS, N.A.,
as Agent for the Banks
$300,000,000
August 13, 1997
Arranged by:
NATIONSBANC CAPITAL MARKETS, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS...........................1
1.1 Certain Defined Terms......................................1
1.2 Computation of Time Periods...............................18
1.3 Accounting Terms; Preparation of Financials...............19
1.4 Types.....................................................19
1.5 Interpretation............................................19
ARTICLE 2. CREDIT FACILITIES.........................................20
2.1 Revolving Loan Facility...................................20
2.2 Letter of Credit Facility.................................23
2.3 Swing Line Facility.......................................27
2.4 Fees......................................................28
2.5 Interest..................................................29
2.6 Breakage Costs............................................32
2.7 Increased Costs...........................................33
2.8 Illegality................................................34
2.9 Market Failure............................................34
2.10 Payment Procedures and Computations.......................34
2.11 Taxes.....................................................36
ARTICLE 3. CONDITIONS PRECEDENT......................................38
3.1 Conditions Precedent to Initial Extensions of Credit......38
3.2 Conditions Precedent to Each Extension of Credit..........38
ARTICLE 4. REPRESENTATIONS AND WARRANTIES............................39
4.1 Organization..............................................39
4.2 Authorization.............................................39
4.3 Enforceability............................................39
4.4 Absence of Conflicts and Approvals........................39
4.5 Investment Companies......................................40
4.6 Public Utilities..........................................40
4.7 Financial Condition.......................................40
4.8 Condition of Assets.......................................41
4.9 Litigation................................................41
-i-
<PAGE>
4.10 Subsidiaries..............................................41
4.11 Laws and Regulations......................................41
4.12 Environmental Compliance..................................41
4.13 ERISA.....................................................42
4.14 Taxes.....................................................42
4.15 True and Complete Disclosure..............................42
ARTICLE 5. COVENANTS.................................................43
5.1 Organization..............................................43
5.2 Reporting.................................................43
5.3 Inspection................................................45
5.4 Use of Proceeds...........................................45
5.5 Financial Covenants.......................................46
5.6 Debt......................................................47
5.7 Liens.....................................................48
5.8 Other Obligations.........................................48
5.9 Corporate Transactions....................................48
5.10 Distributions.............................................50
5.11 Transactions with Affiliates..............................50
5.12 Insurance.................................................50
5.13 Investments...............................................51
5.14 Lines of Business.........................................51
5.15 Compliance with Laws......................................51
5.16 Environmental Compliance..................................52
5.17 ERISA Compliance..........................................52
5.18 Payment of Certain Claims.................................52
ARTICLE 6. DEFAULT AND REMEDIES......................................54
6.1 Events of Default.........................................54
6.2 Termination of Commitments................................56
6.3 Acceleration of Credit Obligations........................56
6.4 Cash Collateralization of Letters of Credit...............57
6.5 Default Interest..........................................57
6.6 Right of Setoff...........................................57
6.7 Actions Under Credit Documents............................57
6.8 Remedies Cumulative.......................................57
6.9 Application of Payments...................................58
-ii-
<PAGE>
ARTICLE 7. THE AGENT AND THE ISSUING BANK............................59
7.1 Authorization and Action..................................59
7.2 Reliance, Etc.............................................59
7.3 Affiliates................................................60
7.4 Bank Credit Decision......................................60
7.5 Expenses..................................................60
7.6 Indemnification...........................................61
7.7 Successor Agent and Issuing Bank..........................61
ARTICLE 8. MISCELLANEOUS.............................................62
8.1 Expenses..................................................62
8.2 Indemnification...........................................62
8.3 Modifications, Waivers, and Consents......................63
8.4 Survival of Agreements....................................63
8.5 Assignment and Participation..............................63
8.6 Notice....................................................66
8.7 Choice of Law.............................................66
8.8 Forum Selection...........................................66
8.9 Service of Process........................................67
8.10 Waiver of Jury Trial......................................67
8.11 Amendment and Restatement.................................67
8.12 Counterparts..............................................68
8.13 No Further Agreements.....................................69
-iii-
<PAGE>
EXHIBITS
Exhibit A - Form of Compliance Certificate
Exhibit B - Form of Borrowing Request
Exhibit C - Form of Continuation/Conversion Request
Exhibit D - Form of Revolving Loan Note
Exhibit E - Form of Assignment and Acceptance
Exhibit F - Closing Documents List
Exhibit G - Form of Joinder Agreement
Exhibit H - Form of Acquisition Certificate
Exhibit I - Form of Seller Subordinated Note
SCHEDULES
Schedule I - Administrative Information (Borrower; Agent; Banks)
Schedule II - Disclosures (Existing Letters of Credit; Existing Other
Debt; Existing Seller Subordinated Notes; Existing
Subsidiaries)
-iv-
<PAGE>
CREDIT AGREEMENT
This Credit Agreement dated as of August 13, 1997, is among Coach USA,
Inc., a Delaware corporation, as Borrower, the financial institutions named
herein, as Banks, and NationsBank of Texas, N.A., as Agent for the Banks.
The parties hereto agree as follows:
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS.
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings (unless otherwise indicated, such meanings to
be equally applicable to both the singular and plural forms of the terms
defined):
"ACQUISITION" means the direct or indirect purchase or acquisition,
whether in one or more related transactions, of any Person or group of Persons
or any related group of assets, liabilities, or securities of any Person or
group of Persons.
"ACQUISITION CERTIFICATE" means an acquisition certificate executed by a
Responsible Officer of the Borrower in substantially the form of EXHIBIT H.
"ADJUSTED PRIME RATE" means, for any day, the fluctuating rate per annum
of interest equal to the greater of (a) the Prime Rate in effect on such day and
(b) the Federal Funds Rate in effect on such day plus 0.50%.
"ADVANCE" means any Revolving Loan Advance.
"AFFILIATE" means, as to any Person, any other Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person or any Subsidiary of such Person. The
term "control" (including the terms "controlled by" or "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
ownership, by contract, or otherwise.
"AGENT" means NationsBank in its capacity as an agent pursuant to Article
7 and any successor agent pursuant to Section 7.7.
"AGENT FEE LETTER" means the confidential letter agreement dated as of May
21, 1997, among the Borrower, NationsBank, and NationsBanc Capital Markets,
Inc., regarding certain fees owed by the Borrower to NationsBank and NationsBanc
Capital Markets, Inc. in connection with this Agreement.
"AGREEMENT" means this Credit Agreement.
-1-
<PAGE>
"APPLICABLE MARGIN" means, with respect to interest rates, unused
commitment fees, and letter of credit fees and as of any date of its
determination, an amount equal to the percentage amount set forth in the table
below opposite the applicable ratio of (a) the difference between the
consolidated Funded Debt of the Borrower as of the end of the fiscal quarter
then most recently ended and the outstanding principal amount of the Seller
Subordinated Notes that have no principal payments scheduled during the next 12
months to (b) the consolidated EBITDA of the Borrower for the four fiscal
quarters then most recently ended (provided that in calculating the foregoing,
the financial results and balance sheet effects of any Acquisitions shall be
included in such calculations on a proforma basis for the full period and on the
relevant dates):
<TABLE>
<CAPTION>
FUNDED DEBT LESS SSN APPLICABLE MARGIN APPLICABLE MARGIN
TO EBITDA LIBOR TRANCHES PRIME RATE TRANCHES
<S> <C> <C>
(less than) 1.00 0.50% 0.00%
(greater than or equal to) 1.00 but (less than) 1.75 0.75% 0.00%
(greater than or equal to) 1.75 but (less than) 2.50 1.00% 0.00%
(greater than or equal to) 2.50 but (less than) 3.00 1.25% 0.00%
(greater than or equal to) 3.00 but (less than) 3.50 1.50% 0.00%
(greater than or equal to) 3.50 1.75% 0.25%
<CAPTION>
FUNDED DEBT LESS SSN APPLICABLE MARGIN APPLICABLE MARGIN
TO EBITDA UNUSED COMMITMENT FEE LETTER OF CREDIT FEE
(less than) 1.00 0.150% 0.50%
(greater than or equal to) 1.00 but (less than) 1.75 0.200% 0.75%
(greater than or equal to) 1.75 but (less than) 2.50 0.250% 1.00%
(greater than or equal to) 2.50 but (less than) 3.00 0.300% 1.25%
(greater than or equal to) 3.00 but (less than) 3.50 0.375% 1.50%
(greater than or equal to) 3.50 0.375% 1.75%
</TABLE>
Beginning on the date of this Agreement, the foregoing ratio shall be deemed to
be greater than or equal to 1.75 but less than 2.50 until receipt of the June
30, 1997, consolidated financial statements of the Borrower in accordance with
Section 5.2(b). Upon the receipt of such financial statements and thereafter,
the Agent shall periodically determine the Applicable Margin based upon the most
recent financial statements dated as of the end of a fiscal quarter delivered to
the Agent pursuant to Section 5.2(b) (subject to revisions in subsequent periods
based upon audited financial statements delivered pursuant to Section 5.2(a))
or, if any Acquisitions have occurred that are not reflected in such financial
statements, based upon historical proforma financial statements for the Borrower
and its Subsidiaries as of such date and for the appropriate period prepared in
accordance with Section 1.3(c) reflecting the financial status
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<PAGE>
and results of the Borrower and its Subsidiaries as if such Acquisitions had
occurred prior to the period. Any such adjustments to the Applicable Margin
shall become effective on the 45th day following the last day of each fiscal
quarter; provided, however, that if such financial statements or historical
proforma financial statements are not delivered when required hereunder, the
Applicable Margin shall increase to the maximum percentage amount set forth in
the table above from such 45th day following the last day of the applicable
quarter until such financial statements or historical financial statements are
received by the Agent.
In the event there shall occur any Acquisition since the date the Applicable
Margin was last redetermined as set forth above, the Agent shall make an interim
redetermination of the Applicable Margin using the method described above but
with the historical proforma financial statements revised to reflect the
Acquisition. Any such adjustment to the Applicable Margin shall become effective
on the effective date of the Acquisition.
Upon any change in the Applicable Margin, the Agent shall promptly notify the
Borrower and the Banks of the new Applicable Margin.
"APPLICABLE LENDING OFFICE" means, with respect to each Bank and for any
particular type of transaction, the office of such Bank set forth in SCHEDULE I
to this Agreement (or in the applicable Assignment and Acceptance by which such
Bank joined this Agreement) as its applicable lending office for such type of
transaction or such other office of such Bank as such Bank may from time to time
specify in writing to the Borrower and the Agent for such particular type of
transaction.
"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance in
substantially the form of EXHIBIT E executed by an assignor Bank, an assignee
Bank, and the Agent, in accordance with Section 8.5.
"BANKS" means the lenders listed as Banks on the signature pages of this
Agreement and each Eligible Assignee that shall become a party to this Agreement
pursuant to Section 8.5(b).
"BORROWER" means Coach USA, Inc., a Delaware corporation.
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<PAGE>
"BORROWER ACCOUNT" means the principal operating account of Borrower with
the Agent or any other account of Borrower with the Agent which is designated as
Borrower's "Borrower Account" in writing by the Borrower to the Agent.
"BORROWING" means any Revolving Loan Borrowing.
"BORROWING REQUEST" means a Borrowing Request in substantially the form of
EXHIBIT B executed by a Responsible Officer of the Borrower and delivered to the
Agent.
"BUSINESS DAY" means any Monday through Friday during which commercial
banks are open for business in Houston, Texas, Dallas, Texas, and, if the
applicable Business Day relates to any LIBOR Tranche, on which dealings are
carried on in the London interbank market.
"CANADIAN PLEDGE AGREEMENTS" means the Pledge Agreements made by the
Borrower and each Subsidiary of the Borrower holding equity interests in an
Exempt Canadian Subsidiary in favor of the Agent granting the Agent a first
priority security interest in the 65% of the stock of each Exempt Canadian
Subsidiary.
"CAPITAL EXPENDITURES" means, with respect to any Person and with respect
to any period of its determination, the consolidated expenditures of such Person
during such period that are required to be included in or are reflected by the
consolidated property, plant, or equipment accounts of such Person, or any
similar fixed asset or long term capitalized asset accounts of such Person, on
the consolidated balance sheet of such Person in conformity with generally
accepted accounting principles.
"CAPITAL LEASES" means, with respect to any Person, any lease of any
property by such Person which would, in accordance with generally accepted
accounting principles, be required to be classified and accounted for as a
capital lease on the balance sheet of such Person.
"CHANGE OF CONTROL" means, with respect to the Borrower, the direct or
indirect acquisition after the date hereof by any Person or related Persons
constituting a group of (a) beneficial ownership of issued and outstanding
shares of Voting Securities of the Borrower, the result of which acquisition is
that such Person or such group possesses 30% or more of the combined voting
power of all then-issued and outstanding Voting Securities of the
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<PAGE>
Borrower, or (b) the power to elect, appoint, or cause the election or
appointment of at least a majority of the members of the board of directors of
the Borrower.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
"COMMITMENTS" means the Revolving Loan Commitments.
"COMMONLY CONTROLLED ENTITY" means, with respect to any Person, any other
Person which is under common control with such Person within the meaning of
Section 414 of the Code.
"COMPLIANCE CERTIFICATE" means a compliance certificate executed by a
Responsible Officer of the Borrower in substantially the form of EXHIBIT A.
"CONTINUATION/CONVERSION REQUEST" means a Continuation/Conversion Request
in substantially the form of EXHIBIT C executed by a Responsible Officer of the
Borrower and delivered to the Agent.
"CREDIT DOCUMENTS" means this Agreement, the Notes, the Swing Line Note,
the Agent Fee Letter, the Letter of Credit Documents, the Guaranty, the Security
Documents, the Interest Hedge Agreements, and each other agreement, instrument,
or document executed at any time in connection with this Agreement.
"CREDIT OBLIGATIONS" means all principal, interest, fees, reimbursements,
indemnifications, and other amounts now or hereafter owed by the Borrower to the
Agent and the Banks (or with respect to the Interest Hedge Agreements, any
Affiliates of the Banks) under this Agreement, the Notes, the Letter of Credit
Documents, and the other Credit Documents and any increases, extensions, and
rearrangements of those obligations under any amendments, supplements, and other
modifications of the documents and agreements creating those obligations.
"CREDIT PARTIES" means the Borrower and the Guarantors.
"DEBT" means, with respect to any Person, without duplication, (a)
indebtedness of such Person for borrowed money, (b) obligations of such Person
evidenced by bonds, debentures, notes, or other similar instruments, (c)
obligations of such Person to pay the
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<PAGE>
deferred purchase price of property or services (other than trade debt and
normal operating liabilities incurred in the ordinary course of business), (d)
obligations of such Person as lessee under Capital Leases, (e) obligations of
such Person under or relating to letters of credit, guaranties, purchase
agreements, or other creditor assurances assuring a creditor against loss in
respect of indebtedness or obligations of others of the kinds referred to in
clauses (a) through (d) of this definition, and (f) nonrecourse indebtedness or
obligations of others of the kinds referred to in clauses (a) through (e) of
this definition secured by any Lien on or in respect of any property of such
Person. For the purposes of determining the amount of any Debt, the amount of
any Debt described in clause (e) of the definition of Debt shall be valued at
the maximum amount of the contingent liability thereunder and the amount of any
Debt described in clause (f) that is not covered by clause (e) shall be valued
at the lesser of the amount of the Debt secured or the book value of the
property securing such Debt.
"DEFAULT" means (a) an Event of Default or (b) any event or condition
which with notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
"DEFAULT RATE" means, with respect to any amount due hereunder, a per
annum interest rate equal to (a) if such amount is either outstanding principal
accruing interest based upon a rate established elsewhere in this Agreement or
accrued but unpaid interest thereon, the sum of (i) the interest rate
established elsewhere in this Agreement from time to time for such principal
amount, including any applicable margin, plus (ii) 2.00% per annum or (b) in all
other cases, the Adjusted Prime Rate in effect from time to time plus the
Applicable Margin for Prime Rate Tranches in effect from time to time plus 2.00%
per annum.
"DERIVATIVES" means any swap, hedge, cap, collar, or similar arrangement
providing for the exchange of risks related to price changes in any commodity,
including money.
"DOLLARS OR $" means lawful money of the United States of America.
"EBIT" 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 and income taxes of such Person for such
period.
"EBITDA" means, with respect to any Person and for any period of its
determination, the EBIT of such Person for such period, plus the consolidated
depreciation and amortization of such Person for such period.
-6-
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ELIGIBLE ASSIGNEE" means, with respect to any assignment hereunder at the
time of such assignment, any commercial bank organized under the laws of the
United States or any of the countries parties to the Organization for Economic
Cooperation and Development or any political subdivision of any thereof which
has primary capital (or its equivalent) of not less than $250,000,000, is
approved by the Agent, and, so long as no Event of Default exists, is approved
by the Borrower, in either case, such approval not to be unreasonably withheld.
"ENVIRONMENTAL LAW" means all federal, state, and local laws, rules,
regulations, ordinances, orders, decisions, agreements, and other requirements
now or hereafter in effect relating to the pollution, destruction, loss, or
injury of the environment, the presence of any contaminant in the environment,
the protection, cleanup, remediation, or restoration of the environment, the
creation, handling, transportation, use, or disposal of any waste product in the
environment, exposure of persons to any contaminant, waste, or hazardous
substance in the environment, and the health and safety of employees in relation
to their environment.
"EVENT OF DEFAULT" has the meaning specified in Section 6.1.
"EXEMPT CANADIAN SUBSIDIARIES" has the meaning specified in Section
5.19(b).
"EXISTING LETTERS OF CREDIT" means the standby letters of credit issued by
the Issuing Bank for the account of the Borrower prior to the date of this
Agreement and listed in the attached SCHEDULE II under Existing Letters of
Credit.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating per annum
interest rate 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 Agent from three Federal funds brokers of
recognized standing selected by it.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any of its successors.
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<PAGE>
"FINANCIAL STATEMENTS" means the audited consolidated financial statements
of the Borrower dated as of December 31, 1996, including the consolidated
balance sheets of the Borrower as of the end of such fiscal year and the
consolidated statements of income and cash flows for such fiscal year.
"FUNDED DEBT" means, with respect to any Person, without duplication, (a)
indebtedness of such Person for borrowed money, (b) obligations of such Person
evidenced by bonds, debentures, notes, or other similar instruments, (c)
obligations of such Person to pay the deferred purchase price of property or
services (other than accounts payable to trade creditors and current operating
liabilities incurred in the ordinary course of business), and (d) obligations of
such Person as lessee under Capital Leases.
"GUARANTY" means the Guaranty dated as of August 13, 1997, made by the
Subsidiaries of the Borrower (other than Insurance Subsidiaries and Exempt
Canadian Subsidiaries) in favor of the Agent guaranteeing the Credit
Obligations.
"GUARANTORS" means (a) the Subsidiaries of the Borrower that have executed
the Guaranty and (b) any future Subsidiaries of the Borrower that execute the
Guaranty pursuant to Section 5.19.
"HAZARDOUS MATERIALS" means any substance or material identified as a
hazardous substance pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended and as now or hereafter in
effect; any substance or material regulated as a hazardous waste pursuant to the
Resource Conservation and Recovery Act of 1976, as amended and as now or
hereafter in effect; and any substance or material designated as a hazardous
substance or hazardous waste pursuant to any other Environmental Law.
"HIGHEST LAWFUL RATE" means the maximum lawful interest rate, if any, that
at any time or from time to time may be contracted for, charged, or received
under the laws applicable to the relevant Bank which are presently in effect or,
to the extent allowed by law, under such applicable laws which may hereafter be
in effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow. The maximum lawful rate under this Agreement shall be
the weekly indicated rate ceiling under Article 5069-1.04 of the Texas Revised
Civil Statutes, unless any other lawful rate ceiling exceeds the rate ceiling so
determined, and then the higher rate ceiling shall apply.
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<PAGE>
"INSURANCE SUBSIDIARY" means a Subsidiary of the Borrower solely in the
business of providing insurance for the Borrower and its Subsidiaries.
"INTEREST HEDGE AGREEMENTS" means any swap, hedge, cap, collar, or similar
arrangement between the Borrower and any Bank (or any Affiliate of any Bank)
providing for the exchange of risks related to price changes in the interest
rate on the Advances under this Agreement.
"INTEREST PERIOD" means, with respect to each LIBOR Tranche, the period
commencing on the date of such LIBOR Tranche and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The duration
of each such Interest Period shall be one, two, three, or six months, in each
case as the Borrower may select in the applicable Borrowing Request or
Continuation/Conversion Request (unless there shall exist any Default or Event
of Default, in which case the Borrower may only select one month Interest
Periods); provided, however, that:
(a) whenever the last day of any Interest Period would otherwise occur on
a day other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day; provided that if such
extension would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day;
(b) any Interest Period which begins on the last Business Day of the
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month in which it would have ended if there were a
numerically corresponding day in such calendar month; and
(c) the Borrower may not select an Interest Period for any LIBOR Tranche
under any Loan which ends after any date when outstanding principal amounts of
such Loan must be repaid unless, after giving effect to such selection, the
aggregate outstanding principal amount of Prime Rate Tranches under such Loan
and LIBOR Tranches under such Loan having Interest Periods which end on or
before such repayment date shall be at least equal to or greater than the
principal amount of such Loan due and payable on or before such date (and
therefore in no event shall any Interest Period for any LIBOR Tranche extend
beyond the applicable Maturity Date).
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<PAGE>
"INTERIM FINANCIAL STATEMENTS" means the consolidated financial statements
of the Borrower dated as of March 31, 1997, including the consolidated balance
sheets of the Borrower as of the end of such fiscal quarter and the consolidated
statements of income and cash flows for such fiscal quarter and for the fiscal
year to date period ending on last day of such fiscal quarter.
"ISSUING BANK" means NationsBank and any successor issuing bank pursuant
to Section 7.7.
"LIBOR" means, for any LIBOR Tranche for any Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "LIBOR" shall mean, for any LIBOR Tranche for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period; provided, however, if more than
one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates.
"LIBOR TRANCHE" shall mean any Tranche which bears interest based upon the
LIBOR, as determined in accordance with Section 2.5.
"LETTER OF CREDIT" means any commercial or standby letter of credit issued
by the Issuing Bank for the account of the Borrower pursuant to the terms of
this Agreement, including the Existing Letters of Credit.
"LETTER OF CREDIT APPLICATION" means the Issuing Bank's standard form
letter of credit application for either a commercial or standby letter of
credit, as the case may be, which has been executed by a Borrower and accepted
by the Issuing Bank in connection with the issuance of a Letter of Credit.
"LETTER OF CREDIT APPLICATION AMENDMENT" means the Issuing Bank's standard
form application to amend a letter of credit for either a commercial or standby
letter of credit, as
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<PAGE>
the case may be, which has been executed by a Borrower and accepted by the
Issuing Bank in connection with the increase or extension of a Letter of Credit.
"LETTER OF CREDIT COLLATERAL ACCOUNT" means a special cash collateral
account pledged to the Agent containing cash deposited pursuant to Section 6.4
to be maintained with the Agent in accordance with Section 2.2(g).
"LETTER OF CREDIT DOCUMENTS" means all Letters of Credit, Letter of Credit
Applications, Letter of Credit Application Amendments, and agreements,
documents, and instruments entered into in connection with or relating thereto.
"LETTER OF CREDIT EXPOSURE" means, as of any date of its determination,
the aggregate outstanding undrawn amount of Letters of Credit plus the aggregate
of the reimbursement obligations of the Borrower under the Letter of Credit
Applications and this Agreement.
"LETTER OF CREDIT SUBLIMIT" means $30,000,000.
"LIEN" means any mortgage, lien, pledge, charge, deed of trust, security
interest, encumbrance, or other type of preferential arrangement to secure or
provide for the payment of any obligation of any Person, whether arising by
contract, operation of law, or otherwise (including any title retention for such
purposes under any conditional sale agreement, any Capital Lease, or any other
title transfer or retention agreement).
"LOAN" means the Revolving Loan.
"MAINTENANCE CAPITAL EXPENDITURES" means, with respect to any Person and
with respect to any period of its determination, the consolidated Capital
Expenditures of such Person resulting from the scheduled or routine maintenance
of the assets of such Person.
"MAJORITY BANKS" means, at any time, Banks holding more than 51% of the
then aggregate unpaid principal amount of the Notes held by the Banks and the
Letter of Credit Exposure of the Banks at such time; provided that if no such
principal amount or Letter of Credit Exposure is then outstanding, "Majority
Banks" shall mean Banks having more than 51% of the aggregate amount of the
Commitments at such time.
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<PAGE>
"MATERIAL ADVERSE CHANGE" means any material adverse change in the
business, operations, or financial condition of the Borrower and its
Subsidiaries on a consolidated basis.
"MATURITY DATE" means the Revolving Loan Maturity Date.
"MINIMUM BORROWING AMOUNT" means, with respect to any Revolving Loan
Borrowing, $1,000,000.
"MINIMUM BORROWING MULTIPLE" means $500,000.
"MINIMUM TRANCHE AMOUNT" means, with respect to any Tranche, $1,000,000.
"MINIMUM TRANCHE MULTIPLE" means $500,000.
"NATIONSBANK" means NationsBank of Texas, N.A., in its individual
capacity.
"NET WORTH" means, with respect to any Person and as of any date of its
determination, the excess of (a) the assets of such Person over (b) the
liabilities of such Person.
"NOTE" means any Revolving Loan Note.
"PBGC" means Pension Benefit Guaranty Corporation or its successor.
"PERMITTED DEBT" means all of the following Debt:
(a) Debt in the form of the Credit Obligations;
(b) Debt in an aggregate outstanding amount not to exceed
$80,000,000, including the Debt listed in SCHEDULE II as Existing Other
Debt;
(c) Debt in the form of intercompany Debt among the Borrower and its
Subsidiaries provided that in each case the Debt is subordinated upon
terms satisfactory to the Agent to the obligations of the Borrower and its
Subsidiaries with respect to the Credit Obligations;
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<PAGE>
(d) Debt in the form of Subordinated Debt;
(e) Debt in the form of obligations to insurance providers for the
Borrower and its Subsidiaries for financing insurance premiums in an
aggregate outstanding amount not to exceed $1,000,000; and
(f) Debt in the form of indebtedness for borrowed money and letters
of credit owed by any Subsidiary of the Borrower prior to the acquisition
of such Subsidiary by the Borrower in an Acquisition transaction, or owed
by any Person that is the subject of any Acquisition assumed by the
Borrower or any Subsidiary of the Borrower in connection with such
Acquisition, provided that (i) with respect to any such indebtedness for
borrowed money, arrangements satisfactory to the Agent for the repayment
of such indebtedness within 60 days following the closing of the
Acquisition are made prior to the closing of the Acquisition and such
arrangements are executed, (ii) with respect to such Debt in the form of
letters of credit, arrangements satisfactory to the Agent for the
repayment of such indebtedness within 60 days following the closing of the
Acquisition are made prior to the closing of the Acquisition and such
arrangements are executed, and (iii) with respect to all such Debt, the
Borrower could obtain Advances or Letters of Credit, respectively, under
this Agreement in the aggregate outstanding amount of such corresponding
Debt.
"PERMITTED INVESTMENTS" means all of the following investments:
(a) investments in (i) wholly-owned Subsidiaries of the Borrower
other than Insurance Subsidiaries, (ii) Persons other than wholly-owned
Subsidiaries of the Borrower made in connection with Acquisitions that
have been approved by the Majority Banks, but no further investments
therein unless such further investments have been approved by the Majority
Banks, and (iii) Insurance Subsidiaries in an aggregate outstanding amount
not to exceed 5% of the Borrower's consolidated assets;
(b) investments in the form of loans, guaranties, open accounts, and
other extensions of trade credit in the ordinary course of business;
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<PAGE>
(c) investments in commercial paper and bankers' acceptances
maturing in twelve months or less from the date of issuance and which, at
the time of acquisition are rated A-2 or better by Standard & Poor's
Corporation and P-2 or better by Moody's Investors Services, Inc;
(d) investments in direct obligations of the United States, or
investments in any Person which investments are guaranteed by the full
faith and credit of the United States, in either case maturing in twelve
months or less from the date of acquisition thereof and repurchase
agreements having a term of less than one year and fully collateralized by
such obligations which are entered into with banks or trust companies
described in clause (e) below or brokerage companies having net worth in
excess of $250,000,000;
(e) investments in time deposits or certificates of deposit maturing
within one year from the date such investment is made, issued by a bank or
trust company organized under the laws of the United States or any state
thereof having capital, surplus, and undivided profits aggregating at
least $250,000,000 or a foreign branch thereof and whose long-term
certificates of deposit are, at the time of acquisition thereof, rated A-2
by Standard & Poor's Corporation or Prime-2 by Moody's Investors Services,
Inc.; and
(f) investments in money market funds which invest solely in the
types of investments described in paragraphs (c) through (e) above.
In valuing any investments for the purpose of applying the limitations set forth
in this Agreement, such investments shall be taken at the original cost thereof
(but without reduction for any subsequent appreciation or depreciation thereof)
less any amount actually repaid or recovered on account of capital or principal
(but without reduction for any offsetting investments made by the investee in
the investor). For purposes of this Agreement, at any time when a corporation
becomes a Subsidiary of the Borrower, all investments of such corporation at
such time shall be deemed to have been made by such corporation at such time.
"PERMITTED LIENS" means all of the following Liens:
(a) Liens securing the Credit Obligations;
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<PAGE>
(b) Liens securing purchase money debt or Capital Leases permitted
under clause (b) of the definition of Permitted Debt provided that no such
Lien is spread to cover any property not purchased or leased in connection
with the incurrence of such Debt;
(c) Liens on the assets of and Liens on up to 35% of the stock of
Exempt Canadian Subsidiaries securing the Debt of such Exempt Canadian
Subsidiaries to the extent permitted under clause (b) of the definition of
Permitted Debt and the requirements for Exempt Canadian Subsidiaries set
forth in Section 5.19(b);
(d) Liens on assets acquired in Acquisitions securing Debt described
under clause (f) of the definition of Permitted Debt provided that all
such Liens and the notations, filings, and recordings reflecting such
Liens are released within 90 days following the closing of the
Acquisition; and
(e) Liens arising in the ordinary course of business which are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not materially detract from the value of
any Restricted Entity's assets or materially interfere with any Restricted
Entity's business, including such (i) Liens for taxes, assessments, or
other governmental charges or levies; (ii) Liens in connection with
worker's compensation, unemployment insurance, or other social security,
old age pension, or public liability obligations; (iii) Liens in the form
of legal or equitable encumbrances deemed to exist by reason of negative
pledge covenants and other covenants or undertakings of like nature; (iv)
Liens in the form of vendors', carriers', warehousemen's, repairmen's,
mechanics', workmen's, materialmen's, construction, or other like Liens
arising by operation of law in the ordinary course of business or incident
to the construction or improvement of any property; (v) Liens in the form
of zoning restrictions, easements, licenses, and other restrictions on the
use of real property or minor irregularities in title thereto which do not
materially impair the use of such property in the operation of the
business of the applicable Restricted Entity or the value of such
property; and (vi) Liens in the form of precautionary financing statements
that have been filed to reflect operating leases of tires (to the extent
such filings could be considered Liens hereunder).
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<PAGE>
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, or other entity, or a government or any political subdivision or agency
thereof, or any trustee, receiver, custodian, or similar official.
"PLAN" means any (a) employee medical benefit plan under Section 3(1) of
ERISA, (b) employee pension benefit plan under Section 3(2) of ERISA, (c)
multiemployer plan under Section 4001(a)(3) of ERISA, and (d) employee account
benefit plan under Section 3(2) of ERISA.
"PRIME RATE" means, for any day, the fluctuating per annum interest rate
in effect on such day equal to the rate of interest publicly announced by the
Agent as its prime rate, whether or not the Borrower has notice thereof.
"PRIME RATE TRANCHE" shall mean any Tranche which bears interest based
upon the Adjusted Prime Rate, as determined in accordance with Section 2.5.
"PROHIBITED TRANSACTION" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code.
"RATABLE SHARE" OR "PRO RATA SHARE" means, with respect to any Bank and as
of any date of its determination, either (a) the ratio of such Bank's Commitment
at such time to the aggregate Commitments at such time or (b) if the Commitments
have been terminated, the ratio of such Bank's aggregate outstanding Advances
and share of the Letter of Credit Exposure at such time to the aggregate
outstanding Advances and Letter of Credit Exposure at such time.
"RELATED PARTIES" means, with respect to any Person, such Person's
stockholders, directors, officers, employees, agents, Affiliates, successors,
and assigns, and their respective stockholders, directors, officers, employees,
and agents, and, with respect to any Person that is an individual, such Person's
family relations and heirs.
"REPORTABLE EVENT" means any of the events set forth in Section 4043 of
ERISA.
"RESPONSIBLE OFFICER" means, with respect to any Person, such Person's
Chief Executive Officer, President, Chief Financial Officer, Secretary,
Treasurer, or any other officer of such Person designated by any of the
foregoing in writing from time to time.
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"RESTRICTED CAPITAL EXPENDITURES" means the Capital Expenditures other
than Capital Expenditures that are deemed to occur because of the making of an
Acquisition and Maintenance Capital Expenditures.
"RESTRICTED ENTITIES" means the Borrower and each Subsidiary of the
Borrower.
"REVOLVING LOAN" means the aggregate outstanding principal amount of the
Revolving Loan Borrowings.
"REVOLVING LOAN ADVANCE" means the outstanding principal from a Bank which
represents such Bank's ratable share of a Revolving Loan Borrowing.
"REVOLVING LOAN BORROWING" means any aggregate amount of principal
advanced on the same day and pursuant to the same Borrowing Request under the
revolving loan facility created in Section 2.1.
"REVOLVING LOAN COMMITMENT" means, for any Bank, the amount set forth
below such Bank's name on the signature pages of this Agreement as its Revolving
Loan Commitment, or if such Bank has entered into any Assignment and Acceptance
since the date of this Agreement, as set forth for such Bank as its Revolving
Loan Commitment in the Register maintained by the Agent pursuant to Section
8.5(c), in each case as such amount may be terminated pursuant to Section 6.2.
"REVOLVING LOAN MATURITY DATE" means August 13, 2000.
"REVOLVING LOAN NOTE" means a promissory note of the Borrower payable to
the order of a Bank, in substantially the form of EXHIBIT D, evidencing the
indebtedness of the Borrower to such Bank resulting from Revolving Loan Advances
made by such Bank to the Borrower.
"SECURITY AGREEMENT" means the Security Agreement dated as of August 13,
1997, made by the Borrower and the Subsidiaries of the Borrower in favor of the
Agent granting the Agent a security interest in the accounts receivable,
equipment, and inventory of each such Credit Party to secure the Credit
Obligations.
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"SECURITY DOCUMENTS" means the Security Agreement, the Canadian Pledge
Agreements, and any other document creating or consenting to Liens in favor of
the Agent securing Credit Obligations.
"SELLER SUBORDINATED NOTES" means (a) the Subordinated Debt of the
Borrower outstanding on the date of this Agreement and reflected in SCHEDULE II
that was issued to sellers for payment of an amount of the purchase price of an
Acquisition prior to such date and (b) any other Subordinated Debt of the
Borrower issued after the date of this Agreement to sellers for payment of an
amount of the purchase price of an Acquisition that is issued on terms at least
as favorable to the Banks as those set forth in EXHIBIT H, in each case to the
extent that the aggregate outstanding principal amount of the Subordinated Debt
described in clauses (a) and (b) above does not exceed $75,000,000.
"SENIOR SUBORDINATED NOTES" means the $150,000,000 9-3/8 % Senior
Subordinated Notes Due 2007 issued by the Borrower under the Indenture dated as
of June 24, 1997, made by the Borrower in favor of The Bank of New York, as
Trustee.
"SUBORDINATED DEBT" means, with respect to the Borrower and as of any date
of its determination, (a) the Seller Subordinated Notes, (b) the Senior
Subordinated Notes, and (c) any other unsecured indebtedness for borrowed money
not included in clause (a) or (b) for which the Borrower is directly and
primarily obligated that (i) arises after the date of this Agreement, (ii) does
not have any stated maturity before the latest maturity of any of the Credit
Obligations, (iii) has terms that are no more restrictive than the terms of the
Credit Documents, and (iv) is subordinated and has payment terms satisfactory to
the Agent and the Majority Banks, to the payment and collection of the Credit
Obligations.
"SUBSIDIARY" means, with respect to any Person, any other Person, a
majority of whose outstanding Voting Securities (other than directors'
qualifying shares) shall at any time be owned by such Person or one or more
Subsidiaries of such person.
"SWING LINE LENDER" means NationsBank.
"SWING LINE LOAN" means the aggregate outstanding principal amount of the
advances made under the Swing Line Note.
"SWING LINE NOTE" means the promissory note of the Borrower in the
principal amount of $10,000,000 payable to the order of the Swing Line Lender
evidencing the
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indebtedness of the Borrower to the Swing Line Lender resulting from advances to
the Borrower under the line of credit created thereunder.
"TRANCHE" means any tranche of principal outstanding under the same Loan
accruing interest on the same basis whether created in connection with new
advances of principal under such Loan pursuant to Section 2.5(a)(i) or by the
continuation or conversion of existing tranches of principal under such Loan
pursuant to Section 2.5(a)(ii) and shall include any Prime Rate Tranche or LIBOR
Tranche.
"TYPE" has the meaning set forth in Section 1.4.
"VOTING SECURITIES" means (a) with respect to any corporation, any capital
stock of the corporation having general voting power under ordinary
circumstances to elect directors of such corporation, (b) with respect to any
partnership, any partnership interest having general voting power under ordinary
circumstances to elect the general partner or other management of the
partnership, and (c) with respect to any other Person, such ownership interests
in such Person having general voting power under ordinary circumstances to elect
the management of such Person, in each case irrespective of whether at the time
any other class of stock, partnership interests, or other ownership interest
might have special voting power or rights by reason of the happening of any
contingency.
1.2 COMPUTATION OF TIME PERIODS. In this Agreement in the computation of
periods of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each means "to but
excluding."
1.3 ACCOUNTING TERMS; PREPARATION OF FINANCIALS.
(a) All accounting terms, definitions, ratios, and other tests
described herein shall be construed in accordance with United States generally
accepted accounting principles applied on a consistent basis with those applied
in the preparation of the Financial Statements, except as expressly set forth in
this Agreement.
(b) The Restricted Entities shall prepare their financial statements
in accordance with United States generally accepted accounting principles
applied on a consistent basis with those applied in the preparation of the
Financial Statements, unless otherwise approved in writing by the Agent.
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(c) The Restricted Entities shall prepare all proforma financial
statements reflecting Acquisitions in accordance with the requirements
established by the Securities and Exchange Commission for acquisition accounting
for reported acquisitions by public companies, whether or not the applicable
Acquisitions are required to be publicly reported, and applying such
requirements to make such proforma financial statements reflect the accounting
procedures used in the preparation of the regular financial statements of the
Restricted Entities unless otherwise approved in writing by the Agent. All
applications of the foregoing requirements regarding proforma financial
statements must be approved by the Agent prior to the consummation of any
Acquisition.
1.4 TYPES. The "Type" of a Tranche refers to the determination whether
such tranche is a LIBOR Tranche or a Prime Rate Tranche.
1.5 INTERPRETATION. Article, Section, Schedule, and Exhibit references are
to this 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." The word "or" shall mean
"and/or" wherever necessary to prevent interpretation of any provision against
the Agent or the Banks. Whenever the Borrower has an obligation under this
Agreement and the Credit Documents the expense of complying with that obligation
shall be an expense of the Borrower unless otherwise specified. Whenever any
determination is to be made by the Agent or any Bank, such determination shall
be in such Person's sole discretion unless otherwise specified in this
Agreement. If any provision in this Agreement and the Credit Documents is held
to be illegal, invalid, not binding, or unenforceable, such provision shall be
fully severable and this Agreement and the Credit Documents shall be construed
and enforced as if such illegal, invalid, not binding, or unenforceable
provision had never comprised a part of this Agreement and the Credit Documents,
and the remaining provisions shall remain in full force and effect. This
Agreement and the Credit Documents have been reviewed and negotiated by
sophisticated parties with access to legal counsel and shall not be construed
against the drafter. In the event of a conflict between this Agreement and the
Credit Documents, this Agreement shall control.
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ARTICLE 2. CREDIT FACILITIES.
2.1 REVOLVING LOAN FACILITY.
(a) COMMITMENT. Each Bank severally agrees, on the terms and
conditions set forth in this Agreement and for the purposes set forth in Section
5.4, to make Revolving Loan Advances to the Borrower as such Bank's ratable
share of Revolving Loan Borrowings requested by the Borrower from time to time
on any Business Day during the period from the date of this Agreement until the
Revolving Loan Maturity Date provided that the aggregate outstanding principal
amount of Revolving Loan Advances made by such Bank plus such Bank's ratable
share of the Letter of Credit Exposure plus such Bank's ratable share of the
Swing Line Loan shall not exceed such Bank's Revolving Loan Commitment.
Revolving Loan Borrowings must be made in an amount equal to or greater than the
Minimum Borrowing Amount and be made in multiples of the Minimum Borrowing
Multiple. Within the limits expressed in this Agreement, the Borrower may from
time to time borrow, prepay, and reborrow Revolving Loan Borrowings. The
indebtedness of the Borrower to the Banks resulting from the Revolving Loan
Advances made by the Banks shall be evidenced by Revolving Loan Notes made by
the Borrower.
(b) METHOD OF ADVANCING
(i) Each Revolving Loan Borrowing shall be made pursuant to a
Borrowing Request given by the Borrower to the Agent in writing or by telecopy
not later than the time required pursuant to Section 2.5(a)(i) to select the
interest rate basis for the Revolving Loan Borrowing. Each Borrowing Request
shall be fully completed and shall specify the information required therein, and
shall be irrevocable and binding on the Borrower unless such Borrowing Request
is rejected by the Agent as incomplete or improper. If the Borrowing Request is
accepted by the Agent, the Agent shall promptly forward notice of the Revolving
Loan Borrowing to the Banks. Each Bank shall, before 2:00 p.m. (local time at
the Applicable Lending Office of the Agent) on the date of the requested
Revolving Loan Borrowing, make available from its Applicable Lending Office to
the Agent at the Agent's Applicable Lending Office, in immediately available
funds, such Bank's ratable share of such Revolving Loan Borrowing. Subject to
the satisfaction of all applicable conditions precedent, after receipt by the
Agent of such funds, the Agent shall before close of business on the date
requested for such Revolving Loan Borrowing make such Revolving Loan Borrowing
available to the Borrower in immediately available funds at the Borrower
Account.
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(ii) Unless the Agent shall have received notice from a Bank
before the date of any Revolving Loan Borrowing that such Bank shall not make
available to the Agent such Bank's ratable share of such Revolving Loan
Borrowing, the Agent may assume that such Bank has made its ratable share of
such Revolving Loan Borrowing available to the Agent on the date of such
Revolving Loan Borrowing in accordance with paragraph (i) above and the Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Bank shall not have
so made its ratable share of such Revolving Loan Borrowing available to the
Agent, such Bank agrees that it shall pay interest on such amount for each day
from the date such amount is made available to the Borrower by the Agent until
the date such amount is paid to the Agent by such Bank at the Federal Funds Rate
in effect from time to time, provided that with respect to such Bank if such
amount is not paid by such Bank by the end of the second day after the Agent
makes such amount available to the Borrower, the interest rates specified above
shall be increased by a per annum amount equal to 2.00% on the third day and
shall remain at such increased rate thereafter. Interest on such amount shall be
due and payable by such Bank upon demand by the Agent. If such Bank shall pay to
the Agent such amount and interest as provided above, such amount so paid shall
constitute such Bank's Revolving Loan Advance as part of such Revolving Loan
Borrowing for all purposes of this Agreement even though not made on the same
day as the other Advances comprising such Revolving Loan Borrowing. In the event
that such Bank has not repaid such amount by the end of the fifth day after such
amount was made available to the Borrower, the Borrower agrees to repay to the
Agent on demand such amount, together with interest on such amount for each day
from the date such amount was made available to the Borrower until the date such
amount is repaid to the Agent at the interest rate charged to the Borrower for
such Revolving Loan Borrowing under the terms of this Agreement.
(iii) The failure of any Bank to make available its ratable
share of any Revolving Loan Borrowing shall not relieve any other Bank of its
obligation, if any, to make available its ratable share of such Revolving Loan
Borrowing. No Bank shall be responsible for the failure of any other Bank to
honor such other Bank's obligations hereunder, including any failure to make
available any funds as part of any Revolving Loan Borrowing.
(c) PREPAYMENT.
(i) The Borrower may prepay the outstanding principal amount
of the Revolving Loan pursuant to written notice given by the Borrower to the
Agent in
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writing or by telecopy not later than (A) 2:00 p.m. (local time at the
Applicable Lending Office of the Agent) on the third Business Day before the
date of the proposed prepayment, in the case of the prepayment of any portion of
the Revolving Loan which is comprised of LIBOR Tranches, or (B) 12:00 noon
(local time at the Applicable Lending Office of the Agent) on the same Business
Day of the proposed prepayment, in the case of the prepayment of any portion of
the Revolving Loan comprised solely of Prime Rate Tranches. Each such notice
shall specify the principal amount and the Tranches of the Revolving Loan which
shall be prepaid, the date of the prepayment, and shall be irrevocable and
binding on the Borrower. Prepayments of the Revolving Loan shall be made in
integral multiples of the Minimum Borrowing Multiple. If the prepayment would
cause the aggregate outstanding principal amount of any LIBOR Tranche comprising
the Revolving Loan or the aggregate outstanding principal amount of all Prime
Rate Tranches comprising the Revolving Loan, to be less than the Minimum Tranche
Amount, the prepayment must be in an amount equal to the entire outstanding
principal amount of such LIBOR Tranche under the Revolving Loan or the entire
outstanding principal amount of all such Prime Rate Tranches under the Revolving
Loan, as the case may be. Upon receipt of any notice of prepayment, the Agent
shall give prompt notice of the intended prepayment to the Banks. For each such
notice given by the Borrower, the Borrower shall prepay the Revolving Loan in
the specified amount on the specified date as set forth in such notice. The
Borrower shall have no right to prepay any principal amount of the Revolving
Loan except as provided in this Section 2.1(c)(i).
(ii) Each prepayment of principal of any LIBOR Tranche under
the Revolving Loan pursuant to this Section 2.1(c) shall be accompanied by
payment of all accrued but unpaid interest on the principal amount prepaid and
any amounts required to be paid pursuant to Section 2.5 as a result of such
prepayment.
(d) REPAYMENT. The Borrower shall pay to the Agent for the ratable
benefit of the Banks the aggregate outstanding principal amount of the Revolving
Loan on the Revolving Loan Maturity Date.
2.2 LETTER OF CREDIT FACILITY.
(a) COMMITMENT FOR LETTERS OF CREDIT. The Issuing Bank shall, on the
terms and conditions set forth in this Agreement and for the purposes set forth
in Section 5.4, issue, increase, and extend Letters of Credit at the request of
the Borrower from time to time on any Business Day during the period from the
date of this Agreement until the Revolving
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Loan Maturity Date provided that (i) the Letter of Credit Exposure shall not
exceed the Letter of Credit Sublimit and (ii) the aggregate outstanding
principal amount of Revolving Loan Borrowings plus the Letter of Credit Exposure
plus the Swing Line Loan shall not exceed the aggregate amount of the Revolving
Loan Commitments. No Letter of Credit may have an expiration date later than 12
months after its issuance date, and each Letter of Credit which is
self-extending beyond its expiration date must be cancelable upon at least 30
days notice given by the Issuing Bank to the beneficiary of such Letter of
Credit. No Letter of Credit may have an expiration date later than 12 months
after the Revolving Loan Maturity Date unless approved by the Issuing Bank, the
Agent, and the Banks. Each Letter of Credit must be in form and substance
acceptable to the Issuing Bank. The indebtedness of the Borrower to the Issuing
Bank resulting from Letters of Credit requested by the Borrower shall be
evidenced by the Letter of Credit Applications made by the Borrower.
(b) REQUESTING LETTERS OF CREDIT. Each Letter of Credit shall be
issued, increased, or extended pursuant to a Letter of Credit Application or
Letter of Credit Application Amendment, as applicable, given by the Borrower to
the Issuing Bank in writing or by telecopy promptly confirmed in writing, such
Letter of Credit Application or Letter of Credit Application Amendment being
given not later than 2:00 p.m. (local time at the Applicable Lending Office of
the Agent) on the third Business Day before the date of the proposed issuance,
increase, or extension of the Letter of Credit. Each Letter of Credit
Application or Letter of Credit Application Amendment shall be fully completed
and shall specify the information required therein (including the proposed form
of the Letter of Credit or change thereto), and shall be irrevocable and binding
on the Borrower unless such Letter of Credit Application or Letter of Credit
Application Amendment is rejected by the Issuing Bank as incomplete or improper.
If the Issuing Bank accepts the Letter of Credit Application or Letter of Credit
Application Amendment, the Issuing Bank shall give prompt notice thereof to the
Agent, and the Agent shall promptly inform the Banks of the proposed Letter of
Credit or change thereto. Subject to the satisfaction of all applicable
conditions precedent, the Issuing Bank shall before close of business on the
date requested by the Borrower for the issuance, increase, or extension of such
Letter of Credit issue, increase, or extend such Letter of Credit to the
specified beneficiary. Upon the date of the issuance, increase, or extension of
a Letter of Credit, the Issuing Bank shall be deemed to have sold to each other
Bank and each other Bank shall be deemed to have purchased from the Issuing Bank
a ratable participation in the related Letter of Credit. The Issuing Bank shall
notify the Agent of each Letter of Credit issued, increased, or extended and the
date and amount of each Bank's participation in such Letter of Credit, and the
Agent shall in turn notify the Banks.
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(c) REIMBURSEMENTS FOR LETTERS OF CREDIT. With respect to any Letter
of Credit and in accordance with the related Letter of Credit Application, the
Borrower agrees to pay to the Issuing Bank on demand of the Issuing Bank any
amount due to the Issuing Bank under such Letter of Credit Application (provided
that fees due with respect to such Letter of Credit shall be payable as
specified in Section 2.4(c)). If the Borrower does not pay upon demand of the
Issuing Bank any amount due to the Issuing Bank under any Letter of Credit
Application, in addition to any rights the Issuing Bank may have under such
Letter of Credit Application, the Issuing Bank may upon written notice to the
Agent request the satisfaction of such obligation by the making of a Revolving
Loan Borrowing. Upon such request, the Borrower shall be deemed to have
requested the making of a Revolving Loan Borrowing in the amount of such
obligation and the transfer of the proceeds thereof to the Issuing Bank. Such
Revolving Loan Borrowing shall be comprised of a Prime Rate Tranche. The Agent
shall promptly forward notice of such Revolving Loan Borrowing to the Borrower
and the Banks, and each Bank shall, in accordance with the procedures of Section
2.1(b), other than limitations on the size of Revolving Loan Borrowings, and
notwithstanding the failure of any conditions precedent, make available such
Bank's ratable share of such Revolving Loan Borrowing to the Agent, and the
Agent shall promptly deliver the proceeds thereof to the Issuing Bank for
application to such Bank's share of the obligations under such Letter of Credit.
The Borrower hereby unconditionally and irrevocably authorizes, empowers, and
directs the Issuing Bank to make such requests for Revolving Loan Borrowings on
behalf of the Borrower, and the Banks to make Revolving Loan Advances to the
Agent for the benefit of the Issuing Bank in satisfaction of such obligations.
The Agent and each Bank may record and otherwise treat the making of such
Revolving Loan Borrowings as the making of a Revolving Loan Borrowing to the
Borrower under this Agreement as if requested by the Borrower. Nothing herein is
intended to release the Borrower's obligations under any Letter of Credit
Application, but only to provide an additional method of payment therefor. The
making of any Borrowing under this Section 2.2(c) shall not constitute a cure or
waiver of any Default or Event of Default caused by the Borrower's failure to
comply with the provisions of this Agreement or any Letter of Credit
Application.
(d) PREPAYMENTS OF LETTERS OF CREDIT. In the event that any Letters
of Credit shall be outstanding according to their terms after the Revolving Loan
Maturity Date, the Borrower shall pay to the Agent an amount equal to the Letter
of Credit Exposure allocable to such Letters of Credit to be held in the Letter
of Credit Collateral Account and applied in accordance with paragraph (g) below.
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(e) OBLIGATIONS UNCONDITIONAL. The obligations of the Borrower and
each Bank under this Agreement and the Letter of Credit Applications to
reimburse the Issuing Bank for draws under Letters of Credit and to make other
payments due in respect of Letters of Credit shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and the Letter of Credit Applications under all circumstances,
including: (i) any lack of validity or enforceability of any Letter of Credit
Document; (ii) any amendment, waiver, or consent to departure from any Letter of
Credit Document; (iii) the existence of any claim, set-off, defense, or other
right which the Borrower or any Bank may have at any time against any
beneficiary or transferee of any Letter of Credit (or any Persons for whom any
such beneficiary or any such transferee may be acting), the Issuing Bank, or any
other person or entity, whether in connection with the transactions contemplated
in this Agreement or any unrelated transaction; (iv) any statement or any other
document presented under such Letter of Credit proving to be forged, fraudulent,
invalid, or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; or (v) payment by the Issuing Bank under any Letter
of Credit against presentation of a draft or certificate which does not comply
with the terms of such Letter of Credit; provided, however, that nothing
contained in this paragraph (d) shall be deemed to constitute a waiver of any
remedies of the Borrower or any Bank in connection with the Letters of Credit or
the Borrower's or such Bank's rights under paragraph (e) below.
(f) LIABILITY OF ISSUING BANK. The Issuing Bank shall not be liable
or responsible for: (i) the use which may be made of any Letter of Credit or any
acts or omissions of any beneficiary or transferee in connection therewith; (ii)
the validity, sufficiency, or genuineness of documents related to Letters of
Credit, or of any endorsement thereon, even if such documents should prove to be
in any or all respects invalid, insufficient, fraudulent, or forged; (iii)
payment by the Issuing Bank against presentation of documents which do not
strictly comply with the terms of a Letter of Credit, including failure of any
documents to bear any reference or adequate reference to the relevant Letter of
Credit; or (iv) any other circumstances whatsoever in making or failing to make
payment under any Letter of Credit (INCLUDING THE ISSUING BANK'S OWN
NEGLIGENCE); except that the Issuing Bank shall be liable to the Borrower or any
Bank to the extent of any direct, as opposed to consequential, damages suffered
by the Borrower or such Bank which the Borrower or such Bank proves were caused
by (A) the Issuing Bank's gross negligence or willful misconduct in determining
whether documents presented under a Letter of Credit comply with the terms of
such Letter of Credit or (B) the Issuing Bank's willful failure to make or delay
in making lawful payment under any Letter of Credit after the presentation
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to it of documentation strictly complying with the terms and conditions of such
Letter of Credit.
(g) LETTER OF CREDIT COLLATERAL ACCOUNT.
(i) If the Borrower is required to deposit funds in the Letter
of Credit Collateral Account pursuant to Sections 2.2(d) or 6.4, then the
Borrower and the Agent shall establish the Letter of Credit Collateral Account
and the Borrower shall execute any documents and agreements, including the
Agent's standard form assignment of deposit accounts, that the Agent requests in
connection therewith to establish the Letter of Credit Collateral Account and
grant the Agent a first priority security interest in such account and the funds
therein. The Borrower hereby pledges to the Agent and grants the Agent a
security interest in the Letter of Credit Collateral Account, whenever
established, all funds held in the Letter of Credit Collateral Account from time
to time, and all proceeds thereof as security for the payment of the
Obligations.
(ii) Funds held in the Letter of Credit Collateral Account
shall be held as cash collateral for obligations with respect to Letters of
Credit and promptly applied by the Agent to any reimbursement or other
obligations under Letters of Credit that exist or occur. To the extent that any
surplus funds are held in the Letter of Credit Collateral Account above the
Letter of Credit Exposure, during the existence of an Event of Default the Agent
may (A) hold such surplus funds in the Letter of Credit Collateral Account as
cash collateral for the Credit Obligations or (B) apply such surplus funds to
any Credit Obligations in accordance with Section 6.9. If no Default exists, the
Agent shall release to the Borrower at the Borrower's written request any funds
held in the Letter of Credit Collateral Account above the amounts required by
Section 2.2(d).
(iii) Funds held in the Letter of Credit Collateral Account
shall be invested in money market funds of the Agent or in another investment if
mutually agreed upon by the Borrower and the Agent, but the Agent shall have no
other obligation to make any other investment of the funds therein. The Agent
shall exercise reasonable care in the custody and preservation of any funds held
in the Letter of Credit Collateral Account and shall be deemed to have exercised
such care if such funds are accorded treatment substantially equivalent to that
which the Agent accords its own property, it being understood that the Agent
shall not have any responsibility for taking any necessary steps to preserve
rights against any parties with respect to any such funds.
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(h) EXISTING LETTERS OF CREDIT. Upon the effectiveness of this
Agreement, all participations in Existing Letters of Credit shall be reallocated
among the Banks such that the Issuing Bank shall be deemed to have sold to each
other Bank and each other Bank shall be deemed to have purchased from the
Issuing Bank a ratable participation in each Existing Letter of Credit. The
Issuing Bank shall arrange with the Borrower and the Agent and the Banks to
prorate and ratably distribute to the Banks the fees payable to the Banks with
respect to such Existing Letters of Credit for the periods prior to the
effectiveness of this Agreement and after the effectiveness of this Agreement.
2.3 SWING LINE FACILITY.
(a) COMMITMENT. The Swing Line Lender agrees, on the terms and
conditions set forth in the Swing Line Note, to make advances to the Borrower
under the Swing Line Note. No Bank shall have any rights thereunder (but each
Bank shall have the obligation to reimburse the Swing Line Lender in accordance
with paragraph (b) below). The indebtedness of the Borrower to the Swing Line
Lender resulting from the advances under the Swing Line Note made by the Swing
Line Lender shall be evidenced by the Swing Line Note made by the Borrower.
(b) REIMBURSEMENTS FOR SWING LINE LOAN OBLIGATIONS. With respect to
the Swing Line Loan and the interest, premium, fees, and other amounts owed by
the Borrower to the Swing Line Lender in connection with the Swing Line Note,
and in accordance with the terms of the Swing Line Note, the Borrower agrees to
pay to the Swing Line Lender such amounts when due and payable to the Swing Line
Lender under the Swing Line Note. If the Borrower does not pay to the Swing Line
Lender any such amounts when due and payable to the Swing Line Lender under the
Swing Line Note, in addition to any rights the Swing Line Lender may have under
such Swing Line Note, the Swing Line Lender may upon written notice to the Agent
request the satisfaction of such obligation by the making of a Revolving Loan
Borrowing in the amount of any such amounts not paid when due and payable. Upon
such request, the Borrower shall be deemed to have requested the making of a
Revolving Loan Borrowing in the amount of such obligation and the transfer of
the proceeds thereof to the Swing Line Lender. Such Revolving Loan Borrowing
shall be comprised of a Prime Rate Tranche. The Agent shall promptly forward
notice of such Revolving Loan Borrowing to the Borrower and the Banks, and each
Bank shall, in accordance with the procedures of Section 2.1(b), other than
limitations on the size of Revolving Loan Borrowings, and notwithstanding the
failure of any conditions precedent, make available such Bank's ratable share of
such Revolving Loan Borrowing to the Agent,
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and the Agent shall promptly deliver the proceeds thereof to the Swing Line
Lender for application to such amounts owed to the Swing Line Lender. The
Borrower hereby unconditionally and irrevocably authorizes, empowers, and
directs the Swing Line Lender to make such requests for Revolving Loan
Borrowings on behalf of the Borrower, and the Banks to make Revolving Loan
Advances to the Agent for the benefit of the Swing Line Lender in satisfaction
of such obligations. The Agent and each Bank may record and otherwise treat the
making of such Revolving Loan Borrowings as the making of a Revolving Loan
Borrowing to the Borrower under this Agreement as if requested by the Borrower.
Nothing herein is intended to release the Borrower's obligations under the Swing
Line Note, but only to provide an additional method of payment therefor. The
making of any Borrowing under this Section 2.4(b) shall not constitute a cure or
waiver of any Default or Event of Default caused by the Borrower's failure to
comply with the provisions of this Agreement or the Swing Line Note.
2.4 FEES.
(a) UPFRONT FEES. The Borrower shall pay to the Agent for the
ratable benefit of each Bank an upfront fee for such Bank equal to the product
of the Commitment of such Bank under this Agreement multiplied by the upfront
fee percentage set forth below for the applicable level of commitment such Bank
offered to the Borrower and NationsBanc Capital Markets, Inc. (the "Offered
Commitment Level"), in writing prior to the allocation of Commitments under this
Agreement:
OFFERED COMMITMENT LEVEL UPFRONT FEE
(greater than or equal to)$25,000,000 0.175%
(less than)$25,000,000 but (greater than or equal to)$15,000,000 0.100%
For the purposes of determining the applicable upfront fee percentage above with
respect to Bank of Tokyo-Mitsubishi, Ltd., Houston Agency and Union Bank of
California, the Offered Commitment Levels of such Banks shall be aggregated and
treated as one Offered Commitment Level.
(b) UNUSED COMMITMENT FEES. The Borrower shall pay to the Agent for
the ratable benefit of the Banks an unused commitment fee in an amount equal to
the product of the Applicable Margin for unused commitment fees in effect from
time to time multiplied by the average daily amount by which (i) the aggregate
amount of the Revolving Loan Commitments exceeds (ii) the aggregate outstanding
principal amount of the Revolving Loan
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plus the Letter of Credit Exposure. The unused commitment fee shall be due and
payable in arrears on the last day of each calendar quarter and the Revolving
Loan Maturity Date.
(c) FEES FOR LETTERS OF CREDIT. For each Letter of Credit issued by
the Issuing Bank, the Borrower shall pay to the Agent for the ratable benefit of
the Banks a letter of credit fee equal to the Applicable Margin for letter of
credit fees per annum on the face amount of such Letter of Credit for the stated
term of such Letter of Credit, with a minimum fee of $500. In addition, for each
Letter of Credit issued by the Issuing Bank, the Borrower shall pay to the Agent
for the benefit of the Issuing Bank a fronting fee of 0.125% per annum on the
face amount of such Letter of Credit for the stated term of such Letter of
Credit, with a minimum fee of $500. The Borrower shall pay such letter of credit
fees for each Letter of Credit quarterly in arrears within ten days after when
billed therefor by the Issuing Bank.
(d) AGENT FEE LETTER. The Borrower shall pay to the parties
specified therein the fees and other amounts payable under the Agent Fee Letter.
2.5 INTEREST.
(a) ELECTION OF INTEREST RATE BASIS. The Borrower may select the
interest rate basis for each Loan to the Borrower in accordance with the terms
of this Section 2.5(a):
(i) Under the Borrowing Request provided to the Agent in
connection with the making of each Borrowing under any Loan, the Borrower shall
select the amount and the Type of the Tranches, and for each LIBOR Tranche
selected, any permitted Interest Period for each such LIBOR Tranche, which will
comprise such Borrowing, provided that (A) at no time shall there be more than
eight separate LIBOR Tranches outstanding under any Loan and (B) each Tranche
must be in a principal amount equal to or greater than the Minimum Tranche
Amount and be made in multiples of the Minimum Tranche Multiple. Such interest
rate elections must be provided to the Agent in writing or by telecopy not later
than 1:00 p.m. (local time at the Applicable Lending Office of the Agent) on the
third Business Day before the date of any proposed Borrowing comprised of a
LIBOR Tranche or 11:00 a.m. (local time at the Applicable Lending Office of the
Agent) on the same day of any proposed Borrowing comprised solely of a Prime
Rate Tranche. The Agent shall promptly forward copies of such interest rate
elections to the Banks. In the case of any Borrowing comprised of a LIBOR
Tranche, upon determination by the Agent, the Agent shall promptly notify the
Borrower and the Banks of the applicable interest rate to such Tranche.
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(ii) With respect to any Tranche under any Loan, the Borrower
may continue or convert any portion of any LIBOR Tranche or Prime Rate Tranche
to form new LIBOR Tranches or Prime Rate Tranches under the same Loan in
accordance with this paragraph. Each such continuation or conversion shall be
deemed to create a new Tranche for all purposes of this Agreement. Each such
continuation or conversion shall be made pursuant to a Continuation/Conversion
Request given by the Borrower to the Agent in writing or by telecopy not later
than 2:00 p.m. (local time at the Applicable Lending Office of the Agent) on the
third Business Day before the date of the proposed continuation or conversion.
Each Continuation/Conversion Request shall be fully completed and shall specify
the information required therein, and shall be irrevocable and binding on the
Borrower. If the Continuation/Conversion Request is accepted by the Agent, the
Agent shall promptly forward notice of the continuation or conversion to the
Banks. In the case of any continuation or conversion into LIBOR Tranches, upon
determination by the Agent, the Agent shall notify the Borrower and the Banks of
the applicable interest rate. Continuations and conversions of Tranches shall be
made in integral multiples of the Minimum Tranche Multiple. No continuation or
conversion shall be permitted if such continuation or conversion would cause the
aggregate outstanding principal amount of any LIBOR Tranche which would remain
outstanding or the aggregate outstanding principal amount of all Prime Rate
Tranches which would remain outstanding to be less than the Minimum Tranche
Amount. At no time shall there be more than eight separate LIBOR Tranches
outstanding under any Loan. Any conversion of an existing LIBOR Tranche is
subject to Section 2.6. Subject to the satisfaction of all applicable conditions
precedent, the Agent and the Banks shall before close of business on the date
requested by the Borrower for the continuation or conversion, make such
continuation or conversion.
(iii) At the end of the Interest Period for any LIBOR Tranche
if the Borrower has not continued or converted such LIBOR Tranche into new
Tranches as provided for in paragraph (ii) above, the Borrower shall be deemed
to have continued such LIBOR Tranche as a new LIBOR Tranche under the same Loan
with an Interest Period of one month. Each Prime Rate Tranche shall continue as
a Prime Rate Tranche under the same Loan unless the Borrower converts such Prime
Rate Tranche as provided for in paragraph (ii) above.
(b) LIBOR TRANCHES. Each LIBOR Tranche shall bear interest during
its Interest Period at a per annum interest rate equal to the sum of the LIBOR
for such Tranche plus the Applicable Margin for LIBOR Tranches in effect from
time to time. The Borrower shall pay to the Agent for the ratable benefit of the
Banks all accrued but unpaid interest on
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each LIBOR Tranche on the last day of the applicable Interest Period for such
LIBOR Tranche (and with respect to LIBOR Tranches with Interest Periods of
greater than three months, on the date which is three months after the first
date of the Interest Period for such LIBOR Tranche), when required upon
prepayment as specified elsewhere in this Agreement, on any date when any
portion of any LIBOR Tranche is prepaid in full (but only to the extent of the
portion of any such LIBOR Tranche is prepaid), and on the applicable Maturity
Date for each such LIBOR Tranche.
(c) PRIME RATE TRANCHES. Each Prime Rate Tranche shall bear interest
at a per annum interest rate equal to the Adjusted Prime Rate in effect from
time to time plus the Applicable Margin for Prime Rate Tranches in effect from
time to time. The Borrower shall pay to the Agent for the ratable benefit of the
Banks all accrued but unpaid interest on outstanding Prime Rate Tranches on the
last day of each calendar quarter, when required upon prepayment as specified
elsewhere in this Agreement, on any date all Prime Rate Tranches are prepaid in
full, and on the applicable Maturity Date for each such Prime Rate Tranche.
(d) USURY PROTECTION.
(i) If, with respect to any Bank and the Borrower, the
effective rate of interest contracted for by such Bank with the Borrower under
the Credit Documents, including the stated rates of interest contracted for
hereunder and any other amounts contracted for under the Credit Documents which
are deemed to be interest, at any time exceeds the Highest Lawful Rate, then the
outstanding principal amount of the loans made by such Bank to the Borrower
hereunder shall bear interest at a rate which would make the effective rate of
interest on the loans made by such Bank to the Borrower under the Credit
Documents equal the Highest Lawful Rate until the difference between the amounts
which would have been due by the Borrower to such Bank at the stated rates and
the amounts which were due by the Borrower to such Bank at the Highest Lawful
Rate (the "Lost Interest") has been recaptured by such Bank. If, when the loans
made hereunder are repaid in full, the Lost Interest has not been fully
recaptured by such Bank pursuant to the preceding paragraph, then, to the extent
permitted by law, the interest rates charged by such Bank to the Borrower
hereunder shall be retroactively increased such that the effective rate of
interest on the loans made by such Bank to the Borrower under the Credit
Documents was at the Highest Lawful Rate since the effectiveness of this
Agreement to the extent necessary to recapture the Lost Interest not recaptured
pursuant to the preceding sentence and, to the extent allowed by law,
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the Borrower shall pay to such Bank the amount of the Lost Interest remaining to
be recaptured by such Bank.
(ii) In calculating all sums paid or agreed to be paid to any
Bank by the Borrower for the use, forbearance, or detention of money under the
Credit Documents, such amounts shall, to the extent permitted by applicable law,
be amortized, prorated, allocated, and spread in equal parts throughout the term
of the Credit Documents.
(iii) NOTWITHSTANDING THE FOREGOING OR ANY OTHER TERM IN THIS
AGREEMENT AND THE CREDIT DOCUMENTS TO THE CONTRARY, it is the intention of each
Bank and the Borrower to conform strictly to any applicable usury laws.
Accordingly, if any Bank contracts for, charges, or receives any consideration
from the Borrower which constitutes interest in excess of the Highest Lawful
Rate, then any such excess shall be canceled automatically and, if previously
paid, shall at such Bank's option be applied to the outstanding amount of the
loans made hereunder by such Bank to the Borrower or be refunded to the
Borrower.
2.6 BREAKAGE COSTS. If (i) any payment of principal on or any conversion
of any LIBOR Tranche is made on any date other than the last day of the Interest
Period for such LIBOR Tranche, whether as a result of any voluntary or mandatory
prepayment, any acceleration of maturity, or any other cause, (ii) any payment
of principal on any LIBOR Tranche is not made when due, or (iii) any LIBOR
Tranche is not borrowed, converted, or prepaid in accordance with the respective
notice thereof provided by the Borrower to the Agent, whether as a result of any
failure to meet any applicable conditions precedent for borrowing, conversion,
or prepayment, the permitted cancellation of any request for borrowing,
conversion, or prepayment, the failure of the Borrower to provide the respective
notice of borrowing, conversion, or prepayment, or any other cause not specified
above which is created by the Borrower, then the Borrower shall pay to each Bank
upon demand any amounts required to compensate such Bank for any losses, costs,
or expenses, including lost profits and administrative expenses, which are
reasonably allocable to such action, including losses, costs, and expenses
related to the liquidation or redeployment of funds acquired or designated by
such Bank to fund or maintain such Bank's ratable share of such LIBOR Tranche or
related to the reacquisition or redesignation of funds by such Bank to fund or
maintain such Bank's ratable share of such LIBOR Tranche following any
liquidation or redeployment of such funds caused by such action. Such Bank need
not prove matched funding of any particular funds, and a certificate as to the
amount of such loss, cost, or expense detailing the calculation thereof and
certifying that such Bank customarily charges
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such amounts to its other customers in similar circumstances submitted by such
Bank to the Borrower shall be conclusive and binding for all purposes, absent
manifest error.
2.7 INCREASED COSTS.
(a) COST OF FUNDS. If due to either (i) any introduction of, change
in, or change in the interpretation of any law or regulation after the date of
this Agreement or (ii) compliance with any guideline or request from any central
bank or other governmental authority having appropriate jurisdiction (whether or
not having the force of law) given after the date of this Agreement, there shall
be any increase in the costs of any Bank allocable to (x) committing to make any
Advance or obtaining funds for the making, funding, or maintaining of such
Bank's ratable share of any LIBOR Tranche in the relevant interbank market or
(y) committing to make Letters of Credit or issuing, funding, or maintaining
Letters of Credit (including any increase in any applicable reserve requirement
specified by the Federal Reserve Board, including those for emergency, marginal,
supplemental, or other reserves), then the Borrower shall pay to such Bank upon
demand any amounts required to compensate such Bank for such increased costs,
such amounts being due and payable upon demand by such Bank. A certificate as to
the cause and amount of such increased cost detailing the calculation of such
cost and certifying that such Bank customarily charges such amounts to its other
customers in similar circumstances submitted by such Bank to the Borrower shall
be conclusive and binding for all purposes, absent manifest error. No Bank may
make any claim for compensation under this Section 2.7(a) for increased costs
incurred before 90 days prior to the delivery of any such certificate.
(b) CAPITAL ADEQUACY. If, due to either (i) any introduction of,
change in, or change in the interpretation of any law or regulation after the
date of this Agreement or (ii) compliance with any guideline or request from any
central bank or other governmental authority having appropriate jurisdiction
(whether or not having the force of law) given after the date of this Agreement,
there shall be any increase in the capital requirements of any Bank or its
parent or holding company allocable to (x) committing to make Advances or
making, funding, or maintaining Advances or (y) committing to make Letters of
Credit or issuing, funding, or maintaining Letters of Credit, as such capital
requirements are allocated by such Bank, then the Borrower shall pay to such
Bank upon demand any amounts required to compensate such Bank or its parent or
holding company for such increase in costs (including an amount equal to any
reduction in the rate of return on assets or equity of such Bank or its parent
or holding company), such amounts being due and payable upon demand by such
Bank. A certificate as to the cause and amounts detailing the calculation of
such
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amounts and certifying that such Bank customarily charges such amounts to its
other customers in similar circumstances submitted by such Bank to the Borrower
shall be conclusive and binding for all purposes, absent manifest error. No Bank
may make any claim for compensation under this Section 2.7(b) for increased
costs incurred before 90 days prior to the delivery of any such certificate.
2.8 ILLEGALITY. Notwithstanding any other provision in this Agreement, if
it becomes unlawful for any Bank to obtain deposits or other funds for making or
funding such Bank's ratable share of any LIBOR Tranche in the relevant interbank
market, such Bank shall so notify the Borrower and the Agent and such Bank's
commitment to create LIBOR Tranches shall be suspended until such condition has
passed, all LIBOR Tranches applicable to such Bank shall be converted to Prime
Rate Tranches as of the end of each applicable Interest Period or earlier if
necessary, and all subsequent requests for LIBOR Tranches shall be deemed to be
requests for Prime Rate Tranches with respect to such Bank.
2.9 MARKET FAILURE. Notwithstanding any other provision in this Agreement,
if the Agent determines that: (a) quotations of interest rates for the relevant
deposits referred to in the definition of "LIBOR" are not being provided in the
relevant amounts, or maturities for purposes of determining the rate of interest
referred to in the definition of "LIBOR" or (b) the relevant rates of interest
referred to in the definition of "LIBOR" which are used as the basis to
determine the rate of interest for LIBOR Tranches are not likely to adequately
cover the cost to any Bank of making or maintaining such Bank's ratable share of
any LIBOR Tranche, then if the Agent so notifies the Borrower, the Agent and the
Banks' commitment to create LIBOR Tranches shall be suspended until such
condition has passed, all LIBOR Tranches shall be converted to Prime Rate
Tranches as of the end of each applicable Interest Period or earlier if
necessary, and all subsequent requests for LIBOR Tranches shall be deemed to be
requests for Prime Rate Tranches.
2.10 PAYMENT PROCEDURES AND COMPUTATIONS.
(a) PAYMENT PROCEDURES. Time is of the essence in this Agreement and
the Credit Documents. All payment hereunder shall be made in Dollars. The
Borrower shall make each payment under this Agreement and under the Notes not
later than 12:00 noon (local time at the Applicable Lending Office of the Agent)
on the day when due to the Agent at the Agent's Applicable Lending Office in
immediately available funds. All payments by the Borrower hereunder shall be
made without any offset, abatement, withholding, or reduction. Upon receipt of
payment from the Borrower of any principal, interest, or fees due
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to the Banks, the Agent shall promptly after receipt thereof distribute to the
Banks their ratable share of such payments for the account of their respective
Applicable Lending Offices. If and to the extent that the Agent shall not have
so distributed to any Bank its ratable share of such payments, the Agent agrees
that it shall pay interest on such amount for each day after the day when such
amount is made available to the Agent by the Borrower until the date such amount
is paid to such Bank by the Agent at the Federal Funds Rate in effect from time
to time, provided that if such amount is not paid by the Agent by the end of the
third day after the Borrower makes such amount available to the Agent, the
interest rates specified above shall be increased by a per annum amount equal to
2.00% on the fourth day and shall remain at such increased rate thereafter.
Interest on such amount shall be due and payable by the Agent upon demand by
such Bank. Upon receipt of other amounts due solely to the Agent, the Issuing
Bank, the Swing Line Lender, or a specific Bank, the Agent shall distribute such
amounts to the appropriate party to be applied in accordance with the terms of
this Agreement.
(b) AGENT RELIANCE. Unless the Agent shall have received written
notice from the Borrower prior to any date on which any payment is due to the
Banks that the Borrower shall not make such payment in full, the Agent may
assume that the Borrower has made such payment in full to the Agent on such date
and the Agent may, in reliance upon such assumption, cause to be distributed to
each Bank on such date an amount equal to the amount then due such Bank. If and
to the extent the Borrower shall not have so made such payment in full to the
Agent, each Bank shall repay to the Agent forthwith on demand such amount
distributed to such Bank, together with interest thereon from the date such
amount is distributed to such Bank until the date such Bank repays such amount
to the Agent, at an interest rate equal to, the Federal Funds Rate in effect
from time to time, provided that with respect to such Bank, if such amount is
not repaid by such Bank by the end of the second day after the date of the
Agent's demand, the interest rates specified above shall be increased by a per
annum amount equal to 2.00% on the third day after the date of the Agent's
demand and shall remain at such increased rate thereafter.
(c) SHARING OF PAYMENTS. Each Bank 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 Credit Documents, or
otherwise) in respect of any obligation of the Borrower to pay principal,
interest, fees, or any other obligation incurred under the Credit 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 Bank bears to the
total amount of
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principal, interest, fees, or other obligation then owed and due by the Borrower
to all of the Banks immediately prior to such receipt, then such Bank receiving
such excess payment shall purchase for cash without recourse from the other
Banks an interest in the obligations of the Borrower to such Banks in such
amount as shall result in a participation by all of the Banks, in proportion
with the Banks' 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 Banks; provided that if all or any portion of
such excess payment is thereafter recovered from such Bank, such purchase shall
be rescinded and the purchase price restored to the extent of such recovery, in
proportion with the Banks' respective pro rata shares, but without interest.
(d) AUTHORITY TO CHARGE ACCOUNTS. The Agent, if and to the extent
payment owed to the Agent or any Bank is not made when due, may charge from time
to time against any account of the Borrower with the Agent any amount so due.
The Agent agrees promptly to notify the Borrower after any such charge and
application made by the Agent provided that the failure to give such notice
shall not affect the validity of such charge and application.
(e) INTEREST AND FEES. Unless expressly provided for in this
Agreement, (i) all computations of interest based on the Prime Rate (including
the Adjusted Prime Rate, when applicable) shall be made on the basis of a
365/366 day year, as the case may be, (ii) all computations of interest based on
the Federal Funds Rate (including the Adjusted Prime Rate, when applicable)
shall be made on the basis of a 360 day year, (iii) all computations of interest
based upon the LIBOR shall be made on the basis of a 360 day year, and (iv) all
computations of fees shall be made on the basis of a 360 day year, in each case
for the actual number of days (including the first day, but excluding the last
day) occurring in the period for which such interest or fees are payable. Each
determination by the Agent of an interest rate or fee shall be conclusive and
binding for all purposes, absent manifest error.
(f) PAYMENT DATES. 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 or fees, as the case may be.
If the time for payment for an amount payable is not specified in this Agreement
or in any other Credit Document, the payment shall be due and payable on demand
by the Agent or the applicable Bank.
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2.11 TAXES.
(a) NO DEDUCTION FOR CERTAIN TAXES. Any and all payments by the
Borrower 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, other than taxes imposed on the income
and franchise taxes imposed on the Agent, any Bank, or the Applicable Lending
Office thereof by any jurisdiction in which any such entity 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 the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable to the Agent, any Bank,
or the Applicable Lending Office thereof, (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 2.11), such
Person receives an amount equal to the sum it would have received had no such
deductions been made; (ii) the Borrower shall make such deductions; and (iii)
the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) OTHER TAXES. The Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges, or
similar levies which arise from any payment made or from the execution,
delivery, or registration of, or otherwise with respect to, this Agreement or
the other Credit Documents (other than those which become due as a result of any
Bank joining this Agreement as a result of any Assignment and Acceptance, which
shall be paid by the Bank which becomes a Bank hereunder as a result of such
Assignment and Acceptance).
(c) FOREIGN BANK WITHHOLDING EXEMPTION. Each Bank and Issuing Bank
that is not incorporated under the laws of the United States of America or a
state thereof agrees that it shall deliver to the Borrower and the Agent (i) two
duly completed copies of United States Internal Revenue Service Form 1001 or
4224 or successor applicable form, as the case may be, certifying in each case
that such Bank is entitled to receive payments under this Agreement and the
Notes payable to it, without deduction or withholding of any United States
federal income taxes, (ii) if applicable, an Internal Revenue Service Form W-8
or W-9 or successor applicable form, as the case may be, to establish an
exemption from United States backup withholding tax, and (iii) any other
governmental forms which are necessary or required under an applicable tax
treaty or otherwise by law to reduce or eliminate any withholding tax, which
have been reasonably requested by the Borrower. Each Bank which
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delivers to the Borrower and the Agent a Form 1001 or 4224 and Form W-8 or W-9
pursuant to the next preceding sentence further undertakes to deliver to the
Borrower and the Agent two further copies of the said letter and Form 1001 or
4224 and Form W-8 or W-9, or successor applicable forms, or other manner of
certification, as the case may be, on or before the date that any such letter or
form expires or becomes obsolete or after the occurrence of any event requiring
a change in the most recent letter and form previously delivered by it to the
Borrower and the Agent, and such extensions or renewals thereof as may
reasonably be requested by the Borrower and the Agent certifying in the case of
a Form 1001 or 4224 that such Bank is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes. If an event (including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any delivery required by the
preceding sentence would otherwise be required which renders all such forms
inapplicable or which would prevent any Bank from duly completing and delivering
any such letter or form with respect to it and such Bank advises the Borrower
and the Agent that it is not capable of receiving payments without any deduction
or withholding of United States federal income tax, and in the case of a Form
W-8 or W-9, establishing an exemption from United States backup withholding tax,
such Bank shall not be required to deliver such letter or forms. The Borrower
shall withhold tax at the rate and in the manner required by the laws of the
United States with respect to payments made to a Bank failing to provide the
requisite Internal Revenue Service forms in a timely manner. Each Bank which
fails to provide to the Borrower in a timely manner such forms shall reimburse
the Borrower upon demand for any penalties paid by the Borrower as a result of
any failure of the Borrower to withhold the required amounts that are caused by
such Bank's failure to provide the required forms in a timely manner.
ARTICLE 3. CONDITIONS PRECEDENT.
3.1 CONDITIONS PRECEDENT TO INITIAL EXTENSIONS OF CREDIT. The obligation
of each Bank to make the initial extension of credit under this Agreement,
including the making of any Advances, and the issuance of any Letters of Credit,
shall be subject to the condition precedent that the Borrower shall have
delivered or shall have caused to be delivered the documents and other items
listed on EXHIBIT F, together with any other documents requested by the Agent to
document the agreements and intent of the Credit Documents, each in form and
with substance satisfactory to the Agent.
3.2 CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. The obligation of
each Bank to make any extension of credit under this Agreement, including the
making of any
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Advances, and the issuance, increase, or extension of any Letters of Credit,
shall be subject to the further conditions precedent that on the date of such
extension of credit:
(a) REPRESENTATIONS AND WARRANTIES. As of the date of the making of
any extension of credit hereunder, the representations and warranties contained
in each Credit Document shall be true and correct in all material respects as of
such date (and the Borrower's request for the making of any extension of credit
hereunder shall be deemed to be a restatement, representation, and additional
warranty of the representations and warranties contained in each Credit Document
as of such date);
(b) DEFAULT. As of the date of the making of any extension of credit
hereunder, there shall exist no Default or Event of Default, and the making of
the extension of credit would not cause or be reasonably expected to cause a
Default or Event of Default; and
(c) MATERIAL ADVERSE CHANGE. There shall not have occurred any
Material Adverse Change since the date of the Interim Financial Statements.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
to the Agent and each Bank, and with each request for any extension of credit
hereunder, including the making of any Advances, and the issuance, increase, or
extension of any Letters of Credit, again represents and warrants to the Agent
and each Bank, as follows:
4.1 ORGANIZATION. As of the date of this Agreement, each Restricted Entity
(a) is duly organized, validly existing, and in good standing under the laws of
such Person's respective jurisdiction of organization and (b) is duly licensed,
qualified to do business, and in good standing in each jurisdiction in which
such Person is organized, owns property, or conducts operations to the extent
that any failure to be so licensed, qualified, or in good standing could
reasonably be expected to cause a Material Adverse Change.
4.2 AUTHORIZATION. The execution, delivery, and performance by each Credit
Party of the Credit Documents to which such Credit Party is a party and the
consummation of the transactions contemplated thereby (a) do not contravene the
organizational documents of such Credit Party, (b) have been duly authorized by
all necessary corporate action of each Credit Party, and (c) are within each
Credit Party's corporate powers.
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4.3 ENFORCEABILITY. Each Credit Document to which any Credit Party is a
party has been duly executed and delivered by each Credit Party which is a party
to such Credit Document and constitutes the legal, valid, and binding obligation
of each such Credit Party, enforceable against each such Credit Party in
accordance with such Credit Document's terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws at the time
in effect affecting the rights of creditors generally and subject to the
availability of equitable remedies.
4.4 ABSENCE OF CONFLICTS AND APPROVALS. The execution, delivery, and
performance by each Credit Party of the Credit Documents to which such Credit
Party is a party and the consummation of the transactions contemplated thereby,
(a) do not result in any violation or breach of any provisions of, or constitute
a default under, any note, indenture, credit agreement, security agreement,
credit support agreement, or other similar agreement to which such Credit Party
is a party or any other material contract or agreement to which such Credit
Party is a party, (b) do not violate any law or regulation binding on or
affecting such Credit Party, (c) do not require any authorization, approval, or
other action by, or any notice to or filing with, any governmental authority,
and (d) do not result in or require the creation or imposition of any Lien
prohibited by this Agreement.
4.5 INVESTMENT COMPANIES. No Restricted Entity or Affiliate thereof is an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
4.6 PUBLIC UTILITIES. No Restricted Entity or Affiliate thereof is a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended. No Restricted Entity or Affiliate thereof is a regulated public
utility.
4.7 FINANCIAL CONDITION.
(a) The Borrower has delivered to the Agent the Financial
Statements, and the Financial Statements are accurate and complete in all
material respects and present fairly the financial condition of Borrower as of
their date and for their period in accordance with generally accepted accounting
principles. The Borrower has delivered to the Agent the Interim Financial
Statements, and the Interim Financial Statements are accurate and complete in
all material respects and present fairly the financial condition of Borrower as
of their date
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and for their period in accordance with generally accepted accounting
principles, as applicable to interim financial reports.
(b) As of the date of the Financial Statements and Interim Financial
Statements, there were no material contingent obligations, liabilities for
taxes, unusual forward or long-term commitments, or unrealized or anticipated
losses of the Borrower or any of the Borrower's Subsidiaries, except as
disclosed therein and adequate reserves for such items have been made in
accordance with generally accepted accounting principles. No Material Adverse
Change has occurred since the date of the Interim Financial Statements.
No Default exists.
4.8 CONDITION OF ASSETS. Each Restricted Entity has good and indefeasible
title to substantially all of its owned property and valid leasehold rights in
all of its leased property, as reflected in the financial statements most
recently provided to the Agent free and clear of all Liens except Permitted
Liens. Each Restricted Entity possesses and has properly approved, recorded, and
filed, where applicable, all permits, licenses, patents, patent rights or
licenses, trademarks, trademark rights, trade names rights, and copyrights which
are useful in the conduct of its business and which the failure to possess could
reasonably be expected to cause a Material Adverse Change. The material
properties used or to be used in the continuing operations of each Restricted
Entity are in good repair, working order, and condition, normal wear and tear
excepted. The properties of each Restricted Entity have not been adversely
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 a
governmental authority, riot, activities of armed forces, or acts of God or of
any public enemy in any manner which (after giving effect to any insurance
proceeds) could reasonably be expected to cause a Material Adverse Change.
4.9 LITIGATION. There are no actions, suits, or proceedings pending or, to
the knowledge of any Restricted Entity, threatened against any Restricted Entity
at law, in equity, or in admiralty, or by or before any governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign, or
any arbitrator which could reasonably be expected to cause a Material Adverse
Change.
4.10 SUBSIDIARIES. As of the date of this Agreement, the Borrower has no
Subsidiaries except as disclosed in SCHEDULE II. The Borrower has no
Subsidiaries which have not been disclosed in writing to the Agent.
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4.11 LAWS AND REGULATIONS. Each Restricted Entity has been and is in
compliance with all federal, state, and local laws and regulations which are
applicable to the operations and property of such Person and which the failure
to comply with could reasonably be expected to cause a Material Adverse Change.
4.12 ENVIRONMENTAL COMPLIANCE. Each Restricted Entity has been and is in
compliance with all Environmental Laws and has obtained and is in compliance
with all related permits necessary for the ownership and operation of any such
Person's properties which the failure to be in compliance with could reasonably
be expected to cause a Material Adverse Change. Each Restricted Entity has not
received notice of and has not been investigated for any violation or alleged
violation of any Environmental Law in connection with any such Person's
presently or previously owned properties which currently threaten action or
suggest liabilities which could reasonably be expected to cause a Material
Adverse Change. Each Restricted Entity does not and has not created, handled,
transported, used, or disposed of any Hazardous Materials on or about any such
Person's properties (nor has any such Person's properties been used for those
purposes); has never been responsible for the release of any Hazardous Materials
into the environment in connection with any such Person's operations and have
not contaminated any properties with Hazardous Materials; and does not and has
not owned any properties contaminated by any Hazardous Materials, in each case
in violation of Environmental Laws and related permits in any manner which could
reasonably be expected to cause a Material Adverse Change. For the purposes of
this Section 4.12, any losses covered by the Borrower's accrual for liabilities
included on its most recent consolidated balance sheet that the Borrower has
designated for environmental liabilities shall be excluded in determining
whether any Material Adverse Change has occurred.
4.13 ERISA. Each Restricted Entity and each of their respective Commonly
Controlled Entities are in compliance with all provisions of ERISA to the extent
that the failure to be in compliance could reasonably be expected to cause a
Material Adverse Change. No Restricted Entity nor any of their respective
Commonly Controlled Entities participates in or during the past five years has
participated in any employee pension benefit plan covered by Title IV of ERISA
or any multiemployer plan under Section 4001(a)(3) of ERISA. With respect to the
Plans of the Restricted Entities, no Material Reportable Event or Prohibited
Transaction has occurred and exists that could reasonably be expected to cause a
Material Adverse Change.
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4.14 TAXES. Each Restricted Entity has filed all United States federal,
state, and local income tax returns and all other domestic and foreign tax
returns which are required to be filed by such Person and has paid, or provided
for the payment before the same became delinquent of, all taxes due pursuant to
such returns or pursuant to any assessment received by the such Person except
for tax payments being contested in good faith for which adequate reserves have
been made and reported in accordance with general accepted accounting principals
and which could not reasonably be expected to cause a Material Adverse Change.
The charges, accruals, and reserves on the books of the Restricted Entities in
respect of taxes are adequate in accordance with generally accepted accounting
principles.
4.15 TRUE AND COMPLETE DISCLOSURE. All factual information furnished by or
on behalf of any Credit Party in writing to the Agent or any Bank in connection
with the Credit Documents and the transactions contemplated thereby is true and
accurate in all material respects on the date as of which such information was
dated or certified and does not contain any untrue statement of material fact or
omit to state any material fact necessary to make the statements contained
therein not misleading. All projections, estimates, and pro forma financial
information furnished by any Credit Party were prepared on the basis of
assumptions, data, information, tests, or conditions believed to be reasonable
at the time such projections, estimates, and pro forma financial information
were furnished.
ARTICLE 5. COVENANTS. Until the Agent and the Banks receive irrevocable payment
of the Credit Obligations and have terminated this Agreement and each other
Credit Document, the Borrower shall comply with and cause compliance with the
following covenants:
5.1 ORGANIZATION. The Borrower shall cause each Restricted Entity to (a)
maintain itself as an entity duly organized, validly existing, and in good
standing under the laws of each such Person's respective jurisdiction of
organization and (b) duly licensed, qualified to do business, and in good
standing in each jurisdiction in which such Person is organized, owns property,
or conducts operations and which requires such licensing or qualification and
where failure to be so licensed, qualified, or in good standing could reasonably
be expected to cause a Material Adverse Change.
5.2 REPORTING. The Borrower shall furnish to the Agent all of the
following:
(a) ANNUAL FINANCIAL REPORTS. As soon as available and in any event
not later than 90 days after the end of each fiscal year of the Borrower, (i) a
copy of the annual
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audit report for such fiscal year for the Borrower, including therein the
consolidated balance sheets of the Borrower as of the end of such fiscal year
and the consolidated statements of income, stockholders' equity, and cash flows
for the Borrower for such fiscal year, setting forth the consolidated financial
position and results of the Borrower for such fiscal year and certified, without
any qualification or limit of the scope of the examination of matters relevant
to the financial statements, by a nationally recognized certified public
accounting firm and (ii) a completed Compliance Certificate duly certified by a
Responsible Officer of the Borrower;
(b) QUARTERLY FINANCIAL REPORTS. As soon as available and in any
event not later than 45 days after the end of each fiscal quarter, (i) a copy of
the internally prepared consolidated financial statements of the Borrower for
such fiscal quarter and for the fiscal year to date period ending on the last
day of such fiscal quarter, including therein the consolidated balance sheets of
the Borrower as of the end of such fiscal quarter and the consolidated
statements of income, and cash flows for such fiscal quarter and for such fiscal
year to date period, setting forth the consolidated financial position and
results of the Borrower for such fiscal quarter and fiscal year to date period,
all in reasonable detail and duly certified by a Responsible Officer of the
Borrower as having been prepared in accordance with generally accepted
accounting principles, including those applicable to interim financial reports
which permit normal year end adjustments and do not require complete financial
notes and (ii) a completed Compliance Certificate duly certified by a
Responsible Officer of the Borrower;
(c) ACQUISITION INFORMATION. As soon as available prior to the
closing of any Acquisition but in any event 10 Business Days prior to the
closing of the Acquisition, a completed Acquisition Certificate duly certified
by a Responsible Officer of the Borrower, which the Agent shall forward to the
Banks for any Acquisition in which the consideration paid or incurred by the
Restricted Entities exceeds $7,500,000 or if the Borrower discloses that there
are any material litigation, environmental, or other liabilities associated
therewith (and prior to the consummation of the Acquisition, the Borrower shall
make available at its offices in Houston, Texas, the acquisition documents
regarding the acquired assets, including schedules reflecting litigation
liabilities, environmental liabilities, and other assumed liabilities, and any
other information regarding the acquired assets as the Agent may reasonably
request);
(d) SEC FILINGS. As soon as available and in any event not
later than thirty days after the filing or delivery thereof, copies of all
financial statements, reports, and
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proxy statements which the Borrower shall have sent to its stockholders
generally and copies of all regular and periodic reports, if any, which any
Restricted Entity shall have filed with the Securities and Exchange Commission;
(e) DEFAULTS. Promptly, but in any event within five Business Days
after the discovery thereof, a notice of any facts known to any Restricted
Entity which constitute a Default, together with a statement of a Responsible
Officer of the Borrower setting forth the details of such facts and the actions
which the Borrower has taken and proposes to take with respect thereto (and the
Agent shall, promptly upon receipt from the Borrower of a notice pursuant to
this Section 5.2(e), forward a copy of such notice to each Bank);
(f) LITIGATION; MATERIAL CONTINGENT LIABILITIES; MATERIAL AGREEMENT
DEFAULT. The Borrower shall provide to the Agent:
(i) promptly, but in any event within ten Business Days after
the commencement thereof, notice of all actions, suits, and proceedings before
any court or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting any Restricted Entity which, if
determined adversely, could reasonably be expected to cause a Material Adverse
Change;
(ii) promptly, but in any event within ten Business Days
after acquiring knowledge thereof, notice of any material contingent
liabilities; and
(iii) promptly, but in any event within ten Business Days
after obtaining knowledge thereof, notice of any breach by any Restricted Entity
of any contract or agreement which breach could reasonably be expected to cause
a Material Adverse Change;
(g) MATERIAL CHANGES. Prompt written notice of any condition or
event of which any Restricted Entity has knowledge, which condition or event has
resulted or could reasonably be expected to cause a Material Adverse Change; and
(h) OTHER INFORMATION. Such other information respecting the
business operations or property of any Restricted Entity, financial or
otherwise, as the Agent or the Majority Banks may from time to time reasonably
request.
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5.3 INSPECTION. The Borrower shall cause each Restricted Entity to permit
the Agent and the Banks to visit and inspect any of the properties of such
Restricted Entity, to examine all of such Person's books of account, records,
reports, and other papers, to make copies and extracts therefrom, and to discuss
their respective affairs, finances, and accounts with their respective officers,
employees, and independent public accountants all at such reasonable times and
as often as may be reasonably requested provided that the Borrower is given at
least one Business Day advance notice thereof and reasonable opportunity to be
present when independent public accountants or other third parties are
contacted.
5.4 USE OF PROCEEDS. The proceeds of the Revolving Loan Borrowings shall
be used by the Borrower for Acquisitions, working capital needs, refinancing
existing indebtedness, Capital Expenditures, and for other lawful corporate
purposes. The Borrower shall not, directly or indirectly, use any part of such
proceeds for any purpose which violates, or is inconsistent with, Regulations G,
T, U, or X of the Board of Governors of the Federal Reserve System.
5.5 FINANCIAL COVENANTS. The Agent shall determine compliance with the
following financial covenants based upon the most recent financial statements
dated as of the end of a fiscal quarter delivered to the Agent pursuant to
Section 5.2(b) (subject to revisions on subsequent testing dates based upon
audited financial statements delivered pursuant to Section 5.2(a)) or, if any
Acquisitions have occurred that are not reflected in such financial statements
and the inclusion of the financial effects of such Acquisitions are expressly
stated to be included in the financial covenants below, based upon historical
proforma financial statements for the Borrower and its Subsidiaries as of such
date and for the appropriate period that are prepared by the Borrower in
accordance with Section 1.3(c) and presented to the Agent in accordance with
Section 5.2(c).
(a) NET WORTH. The Borrower shall not permit the consolidated Net
Worth of the Borrower as of the last day of each fiscal quarter to be less than
the sum of (i) the greater of 90% of the consolidated Net Worth of the Borrower
as reflected in the Interim Financial Statements, or $65,000,000, plus (ii) 75%
of the cumulative quarterly consolidated net earnings of the Borrower for each
fiscal quarter ending after the date of this Agreement during which the Borrower
has positive consolidated net earnings (provided that in calculating the
foregoing, the financial results and balance sheet effects of any Acquisitions
shall be included in such calculations on a proforma basis for the full period);
plus (iii) 100% of the net proceeds resulting from any sale or issuance of any
stock of the Borrower or its Subsidiaries since the date of the Interim
Financial Statements.
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(b) SENIOR FUNDED DEBT TO EBITDA RATIO. As of the last day of each
fiscal quarter of the Borrower, the Borrower shall not permit the ratio of (i)
the consolidated Funded Debt of the Borrower less the consolidated Subordinated
Debt of the Borrower as of end of the fiscal quarter then ended to (ii) the
consolidated EBITDA of the Borrower for the preceding four fiscal quarters then
ended, to be greater than the amounts set forth in the table below during the
corresponding periods set forth in the table below (provided that in calculating
the foregoing, the financial results and balance sheet effects of any
Acquisitions shall be included in such calculations on a proforma basis for the
full period and on the relevant dates):
PERIOD MAXIMUM RATIO
Before June 30, 1999 2.50 to 1.00
June 30, 1999, and thereafter 2.25 to 1.00
(c) FUNDED DEBT TO EBITDA RATIO. As of the last day of each fiscal
quarter of the Borrower, the Borrower shall not permit the ratio of (i) the
consolidated Funded Debt of the Borrower as of end of the fiscal quarter then
ended to (ii) the consolidated EBITDA of the Borrower for the preceding four
fiscal quarters then ended, to be greater than the amounts set forth in the
table below during the corresponding periods set forth in the table below
(provided that in calculating the foregoing, the financial results and balance
sheet effects of any Acquisitions shall be included in such calculations on a
proforma basis the full period and on the relevant dates):
PERIOD MAXIMUM RATIO
Before June 30, 1999 4.00 to 1.00
June 30, 1999, and thereafter 3.50 to 1.00
(d) FIXED CHARGE COVERAGE RATIO. As of the last day of each fiscal
quarter, the Borrower shall not permit the ratio of (i) the consolidated EBIT of
the Borrower for the preceding four fiscal quarters then ended less consolidated
cash taxes paid by the Borrower during the preceding four fiscal quarters then
ended to (ii) the consolidated interest expense of the Borrower for the
preceding four fiscal quarters then ended plus the consolidated scheduled
principal payments on long-term debt of the Borrower during such period, to be
less than 1.25 to 1.00 (provided that in calculating the foregoing, the
financial results and balance sheet effects of any Acquisitions shall be
included in such calculations on a proforma basis for the full period and on the
relevant dates).
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(e) CAPITAL EXPENDITURES. The Borrower shall not permit the
consolidated Restricted Capital Expenditures of the Borrower during any four
quarter period to exceed the greater of $30,000,000 or the percentage of the
Consolidated Net Worth of the Borrower set forth in the table below as of the
end of the applicable four quarter period.
FOUR QUARTER PERIOD ENDING % OF CONSOLIDATED NET WORTH
September 30, 1997 45%
December 31, 1997 45%
March 31, 1998 40%
June 30, 1998 40%
Thereafter 30%
5.6 DEBT.
(a) The Borrower shall not permit any Restricted Entity to create,
assume, incur, suffer to exist, or in any manner become liable, directly,
indirectly, or contingently in respect of, any Debt other than Permitted Debt.
(b) The Borrower shall not permit any Restricted Entity to make any
payment on or with respect to, or purchase, redeem, defease, or otherwise
acquire or retire for value any amount of any Subordinated Debt prior to the
stated due dates or maturities thereof. This prohibition specifically prohibits
optional redemptions, change of control redemptions, and asset sale redemptions
under the Senior Subordinated Notes. The Borrower shall not amend, supplement,
or otherwise modify any of the terms or conditions of any Subordinated Debt
(other than any such amendment, supplement, or modification which would extend
the maturities of or reduce the amounts of any payments of principal, interest,
fees, or other amounts, any modification which would render the terms of such
Subordinated Debt less restrictive, or any non-material administrative amendment
which imposes no new restrictions, but in no event any modification in the
subordination provisions thereof).
5.7 LIENS. The Borrower shall not permit any Restricted Entity to create,
assume, incur, or suffer to exist any Lien on any of its real or personal
property whether now owned or hereafter acquired, or assign any right to receive
its income, except for Permitted Liens.
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5.8 OTHER OBLIGATIONS.
(a) The Borrower shall not permit any Restricted Entity to create,
incur, assume, or suffer to exist any obligations in respect of unfunded vested
benefits under any pension Plan or deferred compensation agreement.
(b) The Borrower shall not permit any Restricted Entity to create,
incur, assume, or suffer to exist any obligations in respect of Derivatives,
other than Derivatives used by any Restricted Entity in such Restricted Entity's
respective business operations in aggregate notional quantities not to exceed
the reasonably anticipated consumption of such Restricted Entity of the
underlying commodity for the relevant period, but no Derivatives which are
speculative in nature.
5.9 CORPORATE TRANSACTIONS. The Borrower shall not permit any Restricted
Entity to (a) merge, consolidate, or amalgamate with another Person, or
liquidate, wind up, or dissolve itself (or take any action towards any of the
foregoing), (b) make any Acquisition, or (c) convey, sell, lease, assign,
transfer, or otherwise dispose of any of its property, businesses, or other
assets outside of the ordinary course of business except that:
(i) Any Subsidiary of the Borrower may merge, consolidate, or
amalgamate into any wholly owned Subsidiary of the Borrower or convey,
sell, lease, assign, transfer, or otherwise dispose of any of its assets
to any wholly-owned Subsidiary of the Borrower (and if such disposition
transfers all or substantially all of the assets of transferring
Subsidiary, such subsidiary may then liquidate, wind up, or dissolve
itself); provided that the wholly-owned Subsidiary is the surviving or
acquiring Subsidiary;
(ii) Any Subsidiary of the Borrower may make any Acquisition (by
purchase or merger) provided that (A) the Subsidiary of the Borrower is
the acquiring or surviving entity, (B) the aggregate consideration paid or
incurred by the Restricted Entities (in either case including cash,
indebtedness, assumed indebtedness, transaction related contractual
payments, including amounts payable under noncompete, consulting, and
similar agreements, preferred stock, and stock of Subsidiaries, but
excluding common stock of the Borrower and excluding Subordinated Debt of
the Borrower) in connection with any Acquisition does not exceed
$30,000,000, (C) the aggregate of such consideration paid or incurred by
the Restricted Entities in connection with all Acquisitions during any
twelve months
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does not exceed the greater of $60,000,000 or 15% of the consolidated
assets of the Borrower at the end of such twelve month period, (D) no
Default or Event of Default exists and the Acquisition would not
reasonably be expected to cause a Default or Event of Default (including
any default under Section 5.5 with respect to historical and future
proforma financial status and results), (E) the acquired assets are in
substantially the same business as the Borrower or any of its
Subsidiaries, and (F) the transaction is not hostile, as reasonably
determined by the Agent; and
(iii) Any Subsidiary of the Borrower may merge, consolidate, or
amalgamate with another Person with the other Person as the surviving
entity or convey, sell, lease, assign, transfer, or otherwise dispose of
any of its assets to another Person (and if such disposition transfers all
or substantially all of the assets of transferring Subsidiary, such
Subsidiary may then liquidate, wind up, or dissolve itself) provided that
the result of such transaction would not cause the net book value of the
assets of the Restricted Entities so merged out of the Subsidiaries of the
Borrower or disposed of during any fiscal year of the Borrower to exceed
10% of the consolidated book value, net of depreciation, of the
transportation equipment of the Borrower as of the end of the prior fiscal
year of the Borrower.
In connection with any mergers or dispositions described in paragraph (iii)
above, and provided that no Default or Event of Default exists or would be
caused thereby, upon reasonable advance written notice from the Borrower of the
intent to so merge or dispose of assets, the Agent shall release at the
Borrower's expense any obligations under the Guaranty of any Subsidiary so
merged and the Lien of the Agent in any assets so disposed of and shall execute
and deliver in favor of such Subsidiary any releases reasonably requested by the
Borrower to evidence such release.
5.10 DISTRIBUTIONS. The Borrower shall not (a) declare or pay any
dividends; (b) purchase, redeem, retire, or otherwise acquire for value any of
its capital stock now or hereafter outstanding; or make any distribution of
assets to its stockholders as such, whether in cash, assets, or in obligations
of it; (c) allocate or otherwise set apart any sum for the payment of any
dividend or distribution on, or for the purchase, redemption, or retirement of,
any shares of its capital stock; or (d) make any other distribution by reduction
of capital or otherwise in respect of any shares of its capital stock.
5.11 TRANSACTIONS WITH AFFILIATES. The Borrower shall not permit any
Restricted Entity to enter into any transaction directly or indirectly with or
for the benefit of an Affiliate
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except transactions with an Affiliate for the leasing of property, the rendering
or receipt of services, or the purchase or sale of inventory or other assets in
the ordinary course of business if the monetary or business consideration
arising from such a transaction would be substantially as advantageous to such
Restricted Entity as the monetary or business consideration which such
Restricted Entity would obtain in a comparable arm's length transaction.
5.12 INSURANCE.
(a) The Borrower shall cause each Restricted Entity to maintain
insurance with responsible and reputable insurance companies or associations
reasonably acceptable to the Agent in such amounts and covering such risks as
are usually carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which such Persons operate.
Without limiting the foregoing, the Borrower shall maintain insurance coverage
for the Restricted Entities equal to or better than, on an item by item basis
for each item, the coverage for the Restricted Entities existing on the date of
this Agreement. The Borrower shall deliver to the Agent certificates evidencing
such policies or copies of such policies at the Agent's request following a
reasonable period to obtain such certificates taking into account the
jurisdiction where the insurance is maintained.
(b) All policies of the Restricted Entities representing property
insurance shall name the Agent as mortgagee or loss payee and have standard
lender rights in a form satisfactory to the Agent. All policies representing
liability insurance of the Restricted Entities shall name the Agent and the
Banks as additional named insureds in a form satisfactory to the Agent. All
proceeds of any such property insurance shall be paid directly to the Agent. If
no Event of Default exists, the Agent shall dispose of such proceeds in
accordance with the instructions of the Borrower, otherwise such proceeds shall
be applied to the Credit Obligations in accordance with Section 6.9. All
proceeds of such liability insurance coverage for the Agent and the Banks shall
be paid as directed by the Agent to indemnify the Agent or the applicable Bank
for the liability covered. In the event that the proceeds are paid to any
Restricted Entity in violation of the foregoing, the Restricted Entity shall
hold the proceeds in trust for the Agent, segregate the proceeds from the other
funds of such Restricted Entity, and promptly pay the proceeds to the Agent with
any necessary endorsement. The Agent shall have the right, but not the
obligation, during the existence of an Event of Default, to make proof of loss
under, settle and adjust any claim under, and receive the proceeds under the
insurance, and the reasonable expenses incurred by the Agent in the adjustment
and collection of such proceeds shall be paid by the Borrower. The
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Borrower irrevocably appoints the Agent as its attorney in fact to take such
actions in its name. If the Agent does not take such actions, the Borrower may
take such actions subject to the approval of any final action by the Agent. The
Agent shall not be liable or responsible for failure to collect or exercise
diligence in the collection of any proceeds.
5.13 INVESTMENTS. The Borrower shall not permit any Restricted Entity to
make or hold any direct or indirect investment in any Person, 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, except for Permitted Investments and normal and reasonable advances
in the ordinary course of business to officers and employees.
5.14 LINES OF BUSINESS. The Borrower shall not permit the Restricted
Entities to change the character of their business as conducted on the date of
this Agreement, or engage in any type of business not reasonably related to such
business as presently and normally conducted; provided that nothing contained in
the foregoing shall prohibit any Restricted Entity from (a) expanding its
business into any of the other types of businesses of any of the other
Restricted Entities as of the date of this Agreement or (b) entering into and
expanding into business in the taxicab industry.
5.15 COMPLIANCE WITH LAWS. The Borrower shall cause each Restricted Entity
to comply with all federal, state, and local laws and regulations which are
applicable to the operations and property of such Persons and which the failure
to comply with could reasonably be expected to cause a Material Adverse Change.
5.16 ENVIRONMENTAL COMPLIANCE. The Borrower shall cause each Restricted
Entity to comply with all Environmental Laws and obtain and comply with all
related permits necessary for the ownership and operation of any such Person's
properties which the failure to comply with could reasonably be expected to
cause a Material Adverse Change. The Borrower shall cause each Restricted Entity
to promptly disclose to the Agent any notice to or investigation of such Persons
for any violation or alleged violation of any Environmental Law in connection
with any such Person's presently or previously owned properties which represent
liabilities which could reasonably be expected to cause a Material Adverse
Change. The Borrower shall not permit any Restricted Entity to create, handle,
transport, use, or dispose of any Hazardous Materials on or about any such
Person's properties; release any Hazardous Materials into the environment in
connection with any such Person's operations or contaminate any properties with
Hazardous Materials; or own properties contaminated by
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any Hazardous Materials, in each case except in compliance with all
Environmental Laws and related permits such that such actions could not
reasonably be expected to cause a Material Adverse Change. For the purposes of
this Section 5.16, any losses covered by the Borrower's reserve for
environmental losses set forth on its most recent consolidated balance sheet
shall be excluded in determining whether any Material Adverse Change has
occurred.
5.17 ERISA COMPLIANCE. The Borrower shall cause each Restricted Entity to
(i) comply in all material respects with all applicable provisions of ERISA and
prevent the occurrence of any Reportable Event or Prohibited Transaction with
respect to, or the termination of, any of their respective Plans where the
failure to do so could reasonably be expected to cause a Material Adverse Change
and (ii) not create or participate in any employee pension benefit plan covered
by Title IV of ERISA or any multiemployer plan under Section 4001(a)(3) of
ERISA.
5.18 PAYMENT OF CERTAIN CLAIMS. The Borrower shall cause each Restricted
Entity to pay and discharge, before the same shall become delinquent, (a) all
taxes, assessments, levies, and like charges imposed upon any such Person or
upon any such Person's income, profits, or property by authorities having
competent jurisdiction prior to the date on which penalties attach thereto
except for tax payments being contested in good faith for which adequate
reserves have been made and reported in accordance with generally accepted
accounting principals and which could not reasonably be expected to cause a
Material Adverse Change, (b) all lawful claims which are secured by or which, if
unpaid, would by law become secured by a Lien upon any such Person's property,
and (c) all trade payables and current operating liabilities, unless the same
are less than 90 days past due or are being contested in good faith, have
adequate reserves established and reported in accordance with general accepted
accounting principals, and could not reasonably be expected to cause a Material
Adverse Change.
5.19 SUBSIDIARIES. (a) Upon the formation or acquisition of any new
Subsidiary or when required under paragraph (b) below with respect to any
Subsidiary, the Borrower shall and shall cause such Subsidiary to (i) promptly,
but in any event within 45 days after the formation or acquisition of such new
Subsidiary, execute and deliver to the Agent such guaranties, security
agreements, amendment agreements, and other documents and agreements as the
Agent requests so that such Subsidiary guarantees and secures the Credit
Obligations on the same terms as the existing Subsidiaries of the Borrower
(including the execution and delivery of a Joinder Agreement in substantially
the form of EXHIBIT G for the purpose of joining such Subsidiary as a party to
the Guaranty and the Security Agreement
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or the execution of such new guaranties and security agreements as the Agent
determines are necessary to have the same effect in different jurisdictions),
(ii) promptly, but in any event within the time period required under this
Agreement after the formation or acquisition of such new Subsidiary, arrange for
and obtain the repayment of any indebtedness necessary for the Restricted
Entities' continued compliance with the restrictions on Debt described in clause
(f) of the definition of Permitted Debt, and (iii) promptly, but in any event
within the time period required under this Agreement after the formation or
acquisition of such new Subsidiary, arrange for and obtain the release of any
Liens necessary for the Restricted Entities' continued compliance with the
restrictions on Liens described in clause (c) of the definition of Permitted
Liens. In connection therewith and within 45 days after the formation or
acquisition of such new Subsidiary, the Borrower shall provide corporate
documentation and opinion letters reasonably satisfactory to the Agent
reflecting the corporate status of such new Subsidiary of the Borrower and the
enforceability of such agreements.
(b) The Borrower may exempt from the requirements of paragraph (a)
above any Insurance Subsidiaries and any Subsidiaries of the Borrower that are
business entities formed and existing under the laws of Canada provided that
such exempt Subsidiaries of the Borrower (the "Exempt Canadian Subsidiaries")
meet the following requirements: (i) the Exempt Canadian Subsidiaries own and
operate only assets domiciled in Canada, (ii) the aggregate outstanding amount
of cash investments and loans made by the Borrower and its Subsidiaries that are
not Exempt Canadian Subsidiaries to the Exempt Canadian Subsidiaries does not
exceed $3,500,000 until the stock pledges related to the Exempt Canadian
Subsidiaries existing on the date of this Agreement have been completed as
contemplated in clause (vi) below and $10,000,000 thereafter, (iii) the
consolidated assets of the Exempt Canadian Subsidiaries do not exceed 20% of the
consolidated assets of the Borrower, (iv) the consolidated revenues of the
Exempt Canadian Subsidiaries for any fiscal quarter of the Borrower do not
exceed 20% of the consolidated revenues of the Borrower for such fiscal quarter
(provided that for both (iii) and (iv) above, the financial results and balance
sheet effects of any Acquisitions shall be included in such calculations for the
full period and on the relevant dates), (v) no Exempt Canadian Subsidiary shall
have executed any guaranty of, or shall otherwise have any repayment obligations
with respect to, any other Debt of the Borrower or any other Credit Party, and
(vi) 65% of the stock of each Exempt Canadian Subsidiary has been pledged to the
Agent under a Canadian Pledge Agreement within 90 days after the date of this
Agreement, with respect to Exempt Canadian Subsidiaries existing on the date of
this Agreement, and within 45 days after formation or acquisition, with respect
to Exempt Canadian Subsidiaries formed or acquired after the date of this
Agreement (and in connection therewith the Borrower shall provide corporate
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documentation and opinion letters reasonably satisfactory to the Agent
reflecting the corporate status of such new Subsidiary of the Borrower and the
enforceability of such agreements). The Agent shall have no obligation to
release any stock pledged under this paragraph (b) once pledged, whether or not
any Subsidiary remains an Exempt Canadian Subsidiary. At any time any of the
foregoing requirements set forth in clauses (i), (ii), (iii), (iv), (v), or (vi)
above are no longer satisfied, then the Borrower shall cause some or all of the
Exempt Canadian Subsidiaries to promptly comply with the requirements of
paragraph (a) to the extent necessary to maintain the requirements for exemption
for the remaining Exempt Canadian Subsidiaries.
ARTICLE 6. DEFAULT AND REMEDIES.
6.1 EVENTS OF DEFAULT. Each of the following shall be an "Event of
Default" for the purposes of this Agreement and for each of the Credit
Documents:
(a) PAYMENT FAILURE. The Borrower (i) fails to pay when due any
principal amounts due under this Agreement or any other Credit Document or (ii)
fails to pay when due any interest, fees, reimbursements, indemnifications, or
other amounts due under this Agreement or any other Credit Document and such
failure has not been cured within five Business Days;
(b) FALSE REPRESENTATION. Any written representation or warranty
made by any Credit Party or any Responsible Officer thereof in this Agreement or
in any other Credit Document proves to have been false or erroneous in any
material respect at the time it was made or deemed made;
(c) BREACH OF COVENANT. (i) Any breach by the Borrower of any of the
covenants contained in Sections 5.1(a) (with respect to the Borrower), 5.2, 5.3,
5.4, 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.13, or 5.19 or (ii) any breach by the
Borrower of any other covenants contained in this Agreement, or any other Credit
Document and such breach is not cured within 30 days following the earlier of
knowledge of such breach by the Borrower or the receipt of written notice
thereof from the Agent;
(d) SECURITY DOCUMENTS. 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, or cease to be
in full force and effect, or shall be contested by any party thereto;
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(e) GUARANTY. (i) the Guaranty shall at any time and for any reason
cease to be in full force and effect with respect to any Guarantor (except as
permitted under Section 5.9 hereof) or shall be contested by any Guarantor, or
any Guarantor shall deny it has any further liability or obligation thereunder,
(ii) any breach by any Guarantor of any of the covenants contained in Sections
1.1 or 1.2 of the Guaranty, or (iii) or any breach by any Guarantor of any other
covenants contained in the Guaranty or any other Credit Document and such breach
is not cured within 10 days following the earlier of knowledge of such breach by
such Guarantor or the receipt of written notice thereof from the Agent;
(f) MATERIAL DEBT DEFAULT. (i) Any principal, interest, fees, or
other amounts due on any Debt of any Restricted Entity (other than the Credit
Obligations) is not paid when due, whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise, and such failure is not cured
within the applicable grace period, if any, and the aggregate amount of all Debt
of such Persons so in default exceeds $1,000,000; (ii) any other event shall
occur or condition shall exist under any agreement or instrument relating to any
Debt of any such Person (other than the Credit Obligations) the effect of which
is to accelerate or to permit the acceleration of the maturity of any such Debt,
whether or not any such Debt is actually accelerated, and such event or
condition shall not be cured within the applicable grace period, if any, and the
aggregate amount of all Debt of such Persons so in default exceeds $1,000,000;
(iii) any Debt of any such Person shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled prepayment) prior to
the stated maturity thereof, and the aggregate amount of all Debt of such
Persons so accelerated exceeds $1,000,000; or (iv) any default or event of
default, however denominated, occurs under the Swing Line Note;
(g) BANKRUPTCY AND INSOLVENCY. (i) there shall have been filed
against any Restricted Entity or any such Person's properties, without such
Person's consent, any petition or other request for relief seeking an
arrangement, receivership, reorganization, liquidation, or similar relief under
bankruptcy or other laws for the relief of debtors and such request for relief
(A) remains in effect for 60 or more days, whether or not consecutive, or (B) is
approved by a final nonappealable order, or (ii) any such Person consents to or
files any petition or other request for relief of the type described in clause
(i) above seeking relief from creditors, makes any assignment for the benefit of
creditors or other arrangement with creditors, or admits in writing such
Person's inability to pay such Person's debts as they become due;
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(h) ADVERSE JUDGMENT. The aggregate outstanding amount of judgments
against the Restricted Parties not discharged or stayed pending appeal or other
court action within 30 days following entry is greater than $1,000,000; or
(i) CHANGE OF CONTROL. There shall occur any Change of Control.
6.2 TERMINATION OF COMMITMENTS. Upon the occurrence of any Event of
Default under Section 6.1(g), all of the commitments of the Agent and the Banks
hereunder shall terminate. During the existence of any Event of Default other
than an Event of Default under Section 6.1(g), the Agent shall at the request of
the Majority Banks declare by written notice to the Borrower all of the
commitments of the Agent and the Banks hereunder terminated, whereupon the same
shall immediately terminate.
6.3 ACCELERATION OF CREDIT OBLIGATIONS. Upon the occurrence of any Event
of Default under Section 6.1(g), the aggregate outstanding principal amount of
all loans made hereunder, all accrued interest thereon, and all other Credit
Obligations shall immediately and automatically become due and payable. During
the existence of any Event of Default other than an Event of Default under
Section 6.1(g), the Agent shall at the request of the Majority Banks declare by
written notice to the Borrower the aggregate outstanding principal amount of all
loans made hereunder, all accrued interest thereon, and all other Credit
Obligations to be immediately due and payable, whereupon the same shall
immediately become due and payable. In connection with 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.
6.4 CASH COLLATERALIZATION OF LETTERS OF CREDIT. Upon the occurrence of
any Event of Default under Section 6.1(g), the Borrower shall pay to the Agent
an amount equal to the Letter of Credit Exposure allocable to the Letters of
Credit requested by the Borrower to be held in the Letter of Credit Collateral
Account for disposition in accordance with Section 2.2(g). During the existence
of any Event of Default other than an Event of Default under Section 6.1(g), the
Agent shall at the request of the Majority Banks require by written notice to
the Borrower that the Borrower pay to the Agent an amount equal to the Letter of
Credit Exposure allocable to the Letters of Credit requested by the Borrower to
be held in the Letter of Credit Collateral Account for disposition in accordance
with Section 2.2(g), whereupon the Borrower shall pay to the Agent such amount
for such purpose.
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6.5 DEFAULT INTEREST. If any Event of Default exists, the Agent shall at
the request of the Majority Banks declare by written notice to the Borrower that
the Credit Obligations specified in such notice shall bear interest beginning on
the date specified in such notice until paid in full at the applicable Default
Rate for such Credit Obligations, whereupon the Borrower shall pay such interest
to the Agent for the benefit of the Agent and the Banks, as applicable, upon
demand by the Agent.
6.6 RIGHT OF SETOFF. During the existence of an Event of Default, the
Agent and each Bank is hereby authorized at any time, to the fullest extent
permitted by law, to set off and apply any indebtedness owed by the Agent or
such Bank to the Borrower against any and all of the obligations of the Borrower
under this Agreement and the Credit Documents, irrespective of whether or not
the Agent or such Bank shall have made any demand under this Agreement or the
Credit Documents and although such obligations may be contingent and unmatured.
The Agent and each Bank, as the case may be, agrees promptly to notify the
Borrower after any such setoff and application made by such party provided that
the failure to give such notice shall not affect the validity of such setoff and
application.
6.7 ACTIONS UNDER CREDIT DOCUMENTS. Following an Event of Default, the
Agent shall at the request of the Majority Banks take any and all actions
permitted under the other Credit Documents, including the Guaranty and the
Security Documents.
6.8 REMEDIES CUMULATIVE. No right, power, or remedy conferred to the Agent
or the Banks in this Agreement and the Credit Documents, 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 Agent or the Banks in this Agreement and the Credit Documents,
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.
6.9 APPLICATION OF PAYMENTS. Prior to an Event of Default, all payments
made hereunder shall be applied to the Credit Obligations as directed by the
Borrower, subject to the rules regarding the application of payments to certain
Credit Obligations provided for hereunder and in the Credit Documents. During
the existence of an Event of Default, all payments and collections shall be
applied to the Credit Obligations in the following order:
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First, to the payment of the costs, expenses, reimbursements (other
than reimbursement obligations with respect to draws under Letters
of Credit), and indemnifications of the Agent that are due and
payable under the Credit Documents;
Then, ratably to the payment of the costs, expenses, reimbursements
(other than reimbursement obligations with respect to draws under
Letters of Credit), and indemnifications of the Banks that are due
and payable under the Credit Documents;
Then, ratably to the payment of all accrued but unpaid interest and
fees and obligations under Interest Hedge Agreements due and payable
under the Credit Documents;
Then, ratably to the payment of all outstanding principal and
reimbursement obligations for draws under Letters of Credit due and
payable under the Credit Documents;
Then, ratably to the payment of any other amounts due and owing with
respect to the Credit Obligations; and
Finally, any surplus held by the Agent and remaining after payment
in full of all the Credit Obligations and reserve for Credit
Obligations not yet due and payable shall be promptly paid over to
the Borrower or to whomever may be lawfully entitled to receive such
surplus. All applications shall be distributed in accordance with
Section 2.10(a).
ARTICLE 7. THE AGENT AND THE ISSUING BANK
7.1 AUTHORIZATION AND ACTION. Each Bank hereby appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to the Agent by the terms hereof and of
the other Credit Documents, together with such powers as are reasonably
incidental thereto. Statements under the Credit Documents that the Agent may
take certain actions, without further qualification, means that the Agent may
take such actions with or without the consent of the Banks or the Majority
Banks, but where the Credit Documents expressly require the determination of the
Banks or the Majority Banks, the Agent shall not take any such action
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without the prior written consent thereof. As to any matters not expressly
provided for by this Agreement or any other Credit Document (including, without
limitation, enforcement or collection of the Notes), the 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 written instructions of the Majority Banks, and
such instructions shall be binding upon all Banks and all holders of Notes;
provided, however, that the Agent shall not be required to take any action which
exposes the Agent to personal liability or which is contrary to this Agreement,
any other Credit Document, or applicable law.
7.2 RELIANCE, ETC. Neither the Agent, the Issuing Bank, nor any of their
respective Related Parties (for the purposes of this Section 7.2, collectively,
the "Indemnified Parties") shall be liable for any action taken or omitted to be
taken by any Indemnified Party under or in connection with this Agreement or the
other Credit Documents, INCLUDING ANY INDEMNIFIED PARTY'S OWN NEGLIGENCE, except
for any Indemnified Party's gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent and the Issuing Bank:
(a) may treat the payee of any Note as the holder thereof until the Agent
receives written notice of the assignment or transfer thereof signed by such
payee and in form satisfactory to the 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 Bank and
shall not be responsible to any Bank for any statements, warranties, or
representations made in or in connection with this Agreement or the other Credit
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
Agreement or any other Credit Document on the part of the Credit Parties or to
inspect the property (including the books and records) of the Credit Parties;
(e) shall not be responsible to any Bank for the due execution, legality,
validity, enforceability, genuineness, sufficiency, or value of this Agreement
or any other Credit Document; and (f) shall incur no liability under or in
respect of this Agreement or any other Credit Document by acting upon any
notice, consent, certificate, or other instrument or writing (which may be by
telecopier or telex) reasonably believed by it to be genuine and signed or sent
by the proper party or parties.
7.3 AFFILIATES. With respect to its Commitments, the Advances made by it,
its interests in the Letters of Credit, and the Notes issued to it, the Agent
and the Issuing Bank shall have the same rights and powers under this Agreement
as any other Bank and may
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exercise the same as though it were not the Agent. The term "Bank" or "Banks"
shall, unless otherwise expressly indicated, include the Agent and the Issuing
Bank in their individual capacity. The Agent, the Issuing Bank, and their
respective Affiliates may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with, any
Credit Party, and any Person who may do business with or own securities of any
Credit Party, all as if the Agent were not an agent hereunder and the Issuing
Bank were not the issuer of Letters of Credit hereunder and without any duty to
account therefor to the Banks.
7.4 BANK CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based on
the Financial Statements and the Interim Financial Statements and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
that it shall, independently and without reliance upon the Agent or any other
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under this Agreement.
7.5 EXPENSES. To the extent not paid by the Borrower, each Bank severally
agrees to pay to the Agent and the Issuing Bank on demand such Bank's ratable
share of the following: (a) all reasonable out-of-pocket costs and expenses of
the Agent and the Issuing Bank in connection with the preparation, execution,
delivery, administration, modification, and amendment of this Agreement and the
other Credit Documents, including the reasonable fees and expenses of outside
counsel for the Agent and the Issuing Bank with respect to advising the Agent
and the Issuing Bank as to their respective rights and responsibilities under
this Agreement and the Credit Documents, and (b) all out-of-pocket costs and
expenses of the Agent and the Issuing Bank in connection with the preservation
or enforcement of the rights of the Agent, the Issuing Bank, and the Banks under
this Agreement and the other Credit Documents, whether through negotiations,
legal proceedings, or otherwise, including fees and expenses of counsel for the
Agent and the Issuing Bank. The provisions of this paragraph shall survive the
repayment and termination of the credit provided for under this Agreement and
any purported termination of this Agreement which does not expressly refer to
this paragraph.
7.6 INDEMNIFICATION. To the extent not reimbursed by the Borrower, each
Bank severally agrees to protect, defend, indemnify, and hold harmless the
Agent, the Issuing Bank, and each of their respective Related Parties (for the
purposes of this Section 7.6,
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collectively, the "Indemnified Parties"), from and against all demands, claims,
actions, suits, damages, judgments, fines, penalties, liabilities, and
out-of-pocket costs and expenses, including reasonable costs of attorneys and
related costs of experts such as accountants (collectively, the "Indemnified
Liabilities"), actually incurred by any Indemnified Party which are related to
any litigation or proceeding relating to this Agreement, the Credit Documents,
or the transactions contemplated thereunder, INCLUDING ANY INDEMNIFIED
LIABILITIES CAUSED BY ANY INDEMNIFIED PARTY'S OWN NEGLIGENCE, but not
Indemnified Liabilities which are a result of any Indemnified Party's gross
negligence or willful misconduct. The provisions of this paragraph shall survive
the repayment and termination of the credit provided for under this Agreement
and any purported termination of this Agreement which does not expressly refer
to this paragraph.
7.7 SUCCESSOR AGENT AND ISSUING BANK. The Agent or the Issuing Bank may
resign at any time by giving written notice thereof to the Banks and the
Borrower and may be removed at any time with or without cause by the Majority
Banks upon receipt of written notice from the Majority Banks to such effect.
Upon receipt of notice of any such resignation or removal, the Majority Banks
shall have the right to appoint a successor Agent or Issuing Bank with the
consent of the Borrower, which consent shall not be unreasonably withheld. If no
successor Agent or Issuing Bank shall have been so appointed by the Majority
Banks with the consent of the Borrower, and shall have accepted such
appointment, within 30 days after the retiring Agent's or Issuing Bank's giving
of notice of resignation or the Majority Banks' removal of the retiring Agent or
Issuing Bank, then the retiring Agent or Issuing Bank may, on behalf of the
Banks and the Borrower, appoint a successor Agent or Issuing Bank, which shall
be, in the case of a successor agent, a commercial bank organized under the laws
of the United States of America or of any State thereof and having a combined
capital and surplus of at least $500,000,000 and, in the case of the Issuing
Bank, a Bank. Upon the acceptance of any appointment as Agent or Issuing Bank by
a successor Agent or Issuing Bank, such successor Agent or Issuing Bank shall
thereupon succeed to and become vested with all the rights, powers, privileges,
and duties of the retiring Agent or Issuing Bank, and the retiring Agent or
Issuing Bank shall be discharged from any duties and obligations under this
Agreement and the other Credit Documents after such acceptance, except that the
retiring Issuing Bank shall remain the Issuing Bank with respect to any Letters
of Credit outstanding on the effective date of its resignation or removal and
the provisions affecting the Issuing Bank with respect to such Letters of Credit
shall inure to the benefit of the retiring Issuing Bank until the termination of
all such Letters of Credit. After any Agent's or Issuing Bank's resignation or
removal hereunder as Agent or Issuing Bank,
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the provisions of this Article 7 shall inure to such Person's benefit as to any
actions taken or omitted to be taken by such Person while such Person was Agent
or Issuing Bank under this Agreement and the other Credit Documents.
ARTICLE 8. MISCELLANEOUS.
8.1 EXPENSES. The Borrower shall pay on demand of the applicable party
specified herein (a) all reasonable out-of-pocket costs and expenses of the
Agent and the Issuing Bank in connection with the preparation, execution,
delivery, administration, modification, and amendment of this Agreement and the
other Credit Documents, including the reasonable fees and expenses of outside
counsel for the Agent and the Issuing Bank, and (b) all out-of-pocket costs and
expenses of the Agent, the Issuing Bank, and each Bank in connection with the
preservation or enforcement of their respective rights under this Agreement and
the other Credit Documents, whether through negotiations, legal proceedings, or
otherwise, including fees and expenses of counsel for the Agent, the Issuing
Bank, and each Bank. The provisions of this paragraph shall survive the
repayment and termination of the credit provided for under this Agreement and
any purported termination of this Agreement which does not expressly refer to
this paragraph.
8.2 INDEMNIFICATION. The Borrower agrees to protect, defend, indemnify,
and hold harmless the Agent, the Issuing Bank, each Bank, and each of their
respective Related Parties (for the purposes of this Section 8.2, collectively,
the "Indemnified Parties"), from and against all demands, claims, actions,
suits, damages, judgments, fines, penalties, liabilities, and out-of-pocket
costs and expenses, including reasonable costs of attorneys and related costs of
experts such as accountants (collectively, the "Indemnified Liabilities"),
actually incurred by any Indemnified Party which are related to any litigation
or proceeding relating to this Agreement, the Credit Documents, or the
transactions contemplated thereunder, INCLUDING ANY INDEMNIFIED LIABILITIES
CAUSED BY ANY INDEMNIFIED PARTY'S OWN NEGLIGENCE, but not Indemnified
Liabilities which are a result of any Indemnified Party's gross negligence or
willful misconduct. The provisions of this paragraph shall survive the repayment
and termination of the credit provided for under this Agreement and any
purported termination of this Agreement which does not expressly refer to this
paragraph.
8.3 MODIFICATIONS, WAIVERS, AND CONSENTS. No modification or waiver of any
provision of this Agreement or the Notes, nor any consent required under this
Agreement or the Notes, shall be effective unless the same shall be in writing
and signed by the Agent and
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Majority Banks 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 Agent, all the Banks, and the
Borrower do any of the following: (a) waive any of the conditions specified in
Section 3.1 or 3.2, (b) increase the Commitments of the Banks, (c) forgive or
reduce the amount or rate of any principal, interest, or fees payable under the
Credit Documents, or postpone or extend the time for payment thereof, (d)
release any Guaranty or any material collateral securing the Credit Obligations
(except as otherwise permitted or required herein), or (e) change the percentage
of Banks required to take any action under this Agreement, the Notes, or the
Security Agreement, including any amendment of the definition of "Majority
Banks" or this Section 8.3. No modification, waiver, or consent shall, unless in
writing and signed by the Agent or the Issuing Bank affect the rights or
obligations of the Agent or the Issuing Bank, as the case may be, under the
Credit Documents. The Agent shall not modify or waive or grant any consent under
any other Credit Document of such action would be prohibited under this Section
8.3 with respect to the Credit Agreement or the Notes.
8.4 SURVIVAL OF AGREEMENTS. All representations, warranties, and covenants
of the Borrower in this Agreement and the Credit Documents shall survive the
execution of this Agreement and the Credit Documents and any other document or
agreement.
8.5 ASSIGNMENT AND PARTICIPATION. This Agreement and the Credit Documents
shall bind and inure to the benefit of the Borrower and their respective
successors and assigns and the Agent and the Banks and their respective
successors and assigns. The Borrower may not assign its rights or delegate its
duties under this Agreement or any Credit Document.
(a) ASSIGNMENTS. Any Bank may assign to one or more banks or other
entities all or any portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitments, the
Advances owing to it, the Notes held by it, and the participation interest in
the Letters of Credit owned by it); provided, however, that (i) each such
assignment shall be of a constant, and not a varying, percentage of all of such
Bank's rights and obligations under this Agreement, (ii) assignments of
Commitments shall be made in minimum amounts of $5,000,000 and be made in
integral multiples of $1,000,000 and the assigning Bank, if it retains any
Commitments, shall maintain at least $10,000,000 in Commitments, (iii) each such
assignment shall be to an Eligible Assignee, (iv) the parties to each such
assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance,
-65-
<PAGE>
together with the Notes subject to such assignment, and (v) each Eligible
Assignee (other than the Eligible Assignee of the Agent) shall pay to the Agent
a $3,000 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 Bank hereunder and (B) such Bank thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of such Bank's rights and
obligations under this Agreement, such Bank shall cease to be a party hereto).
(b) TERM OF ASSIGNMENTS. By executing and delivering an Assignment
and Acceptance, the Bank thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency of
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such Bank makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Credit Party or
the performance or observance by any Credit Party of any of its obligations
under this Agreement or any other instrument or document furnished pursuant
hereto; (iii) such assignee confirms that it has received a copy of this
Agreement, together with copies of the Financial Statements and Interim
Financial Statements and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee shall, independently and without
reliance upon the Agent, such Bank or any other Bank and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement; (v)
such assignee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vi) such assignee agrees that it shall perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Bank.
-66-
<PAGE>
(c) THE REGISTER. The Agent shall maintain at its address referred
to in Section 8.6 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 Banks and the Commitments of each Bank from time to time (the "Register").
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the Agent, the Issuing Bank, and the
Banks may treat each Person whose name is recorded in the Register as a Bank
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower or any Bank at any reasonable time and from time
to time upon reasonable prior notice.
(d) PROCEDURES. Upon its receipt of an Assignment and Acceptance
executed by a Bank and an Eligible Assignee, together with the Notes subject to
such assignment, the 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 Agent in
exchange for the surrendered Notes a new Note to the order of such Eligible
Assignee in an amount equal to the Commitment assumed by it pursuant to such
Assignment and Acceptance and, if such Bank has retained any Commitment
hereunder, a new Note to the order of such Bank in an amount equal to the
Commitment retained by it hereunder. Such new Notes shall be dated the effective
date of such Assignment and Acceptance and shall be in the appropriate form.
(e) PARTICIPATION. Each Bank may sell participation to one or more
banks or other entities in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitments, the Advances owing to it, its participation interest in the Letters
of Credit, and the Notes held by it); provided, however, that (i) such Bank's
obligations under this Agreement (including, without limitation, its Commitments
to the Borrower hereunder) shall remain unchanged, (ii) such Bank shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Bank shall remain the holder of any such Notes for all
purposes of this Agreement, (iv) the Borrower, the Agent, and the Issuing Bank
and the other Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement, and (v)
such Bank shall not require the participant's consent to any matter under this
Agreement, except for change in the principal amount of the Notes, reductions in
fees or interest, extending the applicable maturity date, or releasing any
collateral or guarantor (except to the extent otherwise permitted herein or in
any of the other
-67-
<PAGE>
Credit Documents). The Borrower hereby agrees that participants shall have the
same rights under Sections 2.5, 2.6, 2.7, 2.8, 2.10, and 8.2 as a Bank to the
extent of their respective participation.
(f) ASSIGNMENTS OR PLEDGES TO FEDERAL RESERVE BANKS. In addition to the
foregoing rights of assignment and participation, any Bank may assign or pledge
any portion of its rights under this Agreement (including the Revolving Loan
Advances owed to such Bank) to any Federal Reserve Bank in accordance with
applicable law without notice to or the consent of the Borrower or the Agent,
provided that (i) such Bank shall not be relieved of its obligations under this
Agreement as a result thereof and (ii) in no event shall the Federal Reserve
Bank be entitled to direct the actions of the pledging or assigning Bank under
this Agreement.
8.6 NOTICE. All notices and other communications under this Agreement and
the Notes shall be in writing and mailed by certified mail (return receipt
requested), telecopied, telexed, hand delivered, or delivered by a nationally
recognized overnight courier, to the address for the appropriate party specified
in SCHEDULE I or at such other address as shall be designated by such party in a
written notice to the other parties. Mailed notices shall be effective when
received. Telecopied or telexed notices shall be effective when transmission is
completed or confirmed by telex answerback. Delivered notices shall be effective
when delivered by messenger or courier. Notwithstanding the foregoing, notices
and communications to the Agent pursuant to Article 2 or 7 shall not be
effective until received by the Agent.
8.7 CHOICE OF LAW. This Agreement and the Notes have been prepared, are
being executed and delivered, and are intended to be performed in the State of
Texas, and the substantive laws of the State of Texas and the applicable federal
laws of the United States shall govern the validity, construction, enforcement,
and interpretation of this Agreement and the Notes; provided however, Chapter 15
of the Texas Credit Code does not apply to this Agreement or the Notes. Each
Letter of Credit shall be governed by the Uniform Customs and Practice for
Documentary Credits, International Chamber of Commerce Publication No.
500 (1993 version).
8.8 FORUM SELECTION. THE BORROWER IRREVOCABLY CONSENTS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF ANY
FEDERAL COURT LOCATED IN SUCH STATE IN CONNECTION WITH ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE CREDIT
-68-
<PAGE>
DOCUMENTS OR ANY TRANSACTIONS RELATED THERETO. THE BORROWER AGREES AND SHALL NOT
CONTEST THAT PROPER FORUM AND VENUE FOR ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE CREDIT DOCUMENTS OR ANY TRANSACTIONS RELATING THERETO ARE IN
THE COURTS OF THE STATE OF TEXAS IN HARRIS COUNTY, TEXAS, AND THE FEDERAL COURTS
LOCATED IN HARRIS COUNTY, TEXAS. THE BORROWER IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE FOREGOING BASED UPON CLAIMS THAT THE
FOREGOING COURTS ARE AN INCONVENIENT FORUM.
8.9 SERVICE OF PROCESS. IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THE CREDIT DOCUMENTS OR ANY TRANSACTIONS RELATING THERETO, THE
BORROWER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT, OR OTHER PROCESS OR
NOTICE AND AGREES THAT SERVICE BY FIRST CLASS MAIL, RETURN RECEIPT REQUESTED, TO
THE BORROWER AT ITS ADDRESS FOR NOTICES HEREUNDER, OR ANY OTHER FORM OF SERVICE
PROVIDED FOR IN THE TEXAS CIVIL PRACTICE LAW AND RULES THEN IN EFFECT SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE UPON THE BORROWER.
8.10 WAIVER OF JURY TRIAL. THE BORROWER IRREVOCABLY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE CREDIT
DOCUMENTS OR ANY TRANSACTIONS RELATING THERETO.
8.11 AMENDMENT AND RESTATEMENT. This Agreement represents a full and
complete amendment and restatement of the Credit Agreement dated as of August
14, 1996, among the Borrower, the Agent, and the Banks named therein, and that
prior version is deemed replaced hereby as of the effectiveness of this
Agreement. The indebtedness under such prior version of this Agreement continues
under this Agreement (as reallocated among the Banks in connection with the
effectiveness of this Agreement) and the execution of this Agreement does not
indicate a payment, satisfaction, novation, or discharge thereof. All security
and support for the indebtedness under the prior version of this Agreement
continues to secure and support the indebtedness hereunder. Upon the
effectiveness of this Agreement, all outstanding Revolving Loan Advances shall
be reallocated among the Banks ratably in accordance with their Commitments.
Amounts payable under the prior version of this Agreement shall accrue
thereunder until the effectiveness of this Agreement and the Agent shall arrange
with the Borrower and the Banks to prorate and ratably distribute to the Agent
and the Banks all amounts payable under the prior version of this Agreement for
the periods prior to the effectiveness of this Agreement.
8.12 COUNTERPARTS. This Agreement may be executed in multiple counterparts
which together shall constitute one and the same instrument.
-69-
<PAGE>
8.13 NO FURTHER AGREEMENTS. THIS WRITTEN AGREEMENT AND THE CREDIT
DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first above written.
BORROWER:
COACH USA, INC.
By:
Raymond K. Turner
Treasurer
AGENT:
NATIONSBANK OF TEXAS, N.A., as Agent
By:
James D. Recer
Vice President
-70-
<PAGE>
BANKS:
NATIONSBANK OF TEXAS, N.A.
By:
James D. Recer
Vice President
Revolving Loan Commitment: $37,500,000
-71-
<PAGE>
BANK ONE TEXAS, N.A.
By:
Name:
Title:
Revolving Loan Commitment: $30,000,000
-72-
<PAGE>
FIRST UNION NATIONAL BANK
By:
Name:
Title:
Revolving Loan Commitment: $30,000,000
-73-
<PAGE>
WELLS FARGO BANK, NATIONAL
ASSOCIATION
By:
Name:
Title:
Revolving Loan Commitment: $30,000,000
-74-
<PAGE>
SUMMIT BANK
By:
Name:
Title:
Revolving Loan Commitmen$22,500,000
-75-
<PAGE>
FLEET BANK, N.A.
By:
Name:
Title:
Revolving Loan Commitment: $17,500,000
-76-
<PAGE>
THE SUMITOMO BANK, LIMITED
By:
Name:
Title:
By:
Name:
Title:
Revolving Loan Commitment: $15,000,000
-77-
<PAGE>
COMERICA BANK
By:
Name:
Title:
Revolving Loan Commitment: $15,000,000
-78-
<PAGE>
NATIONAL CITY BANK KENTUCKY
By:
Name:
Title:
Revolving Loan Commitment: $15,000,000
-79-
<PAGE>
BANQUE PARIBAS
By:
Name:
Title:
By:
Name:
Title:
Revolving Loan Commitment: $12,500,000
-80-
<PAGE>
NATEXIS BANQUE
BFCE
By:
Name:
Title:
By:
Name:
Title:
Revolving Loan Commitment:$10,000,000
-81-
<PAGE>
THE BANK OF NEW YORK
By:
Name:
Title:
Revolving Loan Commitment: $10,000,000
-82-
<PAGE>
THE BANK OF NOVA SCOTIA
By:
Name:
Title:
Revolving Loan Commitment: $10,000,000
-83-
<PAGE>
THE FUJI BANK, LIMITED, HOUSTON AGENCY
By:
Name:
Title:
Revolving Loan Commitment: $10,000,000
-84-
<PAGE>
GUARANTY FEDERAL BANK F.S.B.
By:
Name:
Title:
Revolving Loan Commitment: $10,000,000
-85-
<PAGE>
HIBERNIA NATIONAL BANK
By:
Name:
Title:
Revolving Loan Commitment: $10,000,000
-86-
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, LTD.
By:
Name:
Title:
Revolving Loan Commitment: $7,500,000
-87-
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By:
Name:
Title:
Revolving Loan Commitment: $7,500,000
-88-
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,512
<SECURITIES> 0
<RECEIVABLES> 35,763
<ALLOWANCES> 2,997
<INVENTORY> 13,080
<CURRENT-ASSETS> 71,195
<PP&E> 422,796
<DEPRECIATION> (76,694)
<TOTAL-ASSETS> 538,791
<CURRENT-LIABILITIES> 125,383
<BONDS> 247,090
0
0
<COMMON> 194
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<TOTAL-LIABILITY-AND-EQUITY> 538,791
<SALES> 199,329
<TOTAL-REVENUES> 199,329
<CGS> 150,893
<TOTAL-COSTS> 150,893
<OTHER-EXPENSES> 23,818
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<INCOME-TAX> 7,208
<INCOME-CONTINUING> 10,087
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