<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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: 001-14003
OMEGA PROTEIN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
STATE OF NEVADA 76-0562134
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1717 ST. JAMES PLACE, SUITE 550
HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 623-0060
_________________
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 .
--- ---
NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK, PAR VALUE
$0.01 PER SHARE, ON AUGUST 14, 1998: 24,276,000
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OMEGA PROTEIN CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Balance Sheet as of June 30, 1998 and
September 30, 1997.................................................. 3
Unaudited Condensed Consolidated Statement of Operations for the
three months and nine months ended June 30, 1998 and 1997.......... 4
Unaudited Condensed Consolidated Statement of Cash Flows for the
nine months ended June 30, 1998 and 1997............................ 5
Notes to Unaudited Condensed Consolidated Financial Statements........ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION............................................... 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.................................................. 20
ITEM 2. CHANGES IN SECURITIES.............................................. 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY INVESTORS.............. 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................... 21
SIGNATURES................................................................. 22
EXHIBIT INDEX.............................................................. 23
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND NOTES
OMEGA PROTEIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT FOR SHARES)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 41,860 $ 5,504
Receivables, net 13,682 9,936
Inventories 43,497 38,448
Prepaid expenses and other current assets 872 746
--------- ---------
Total current assets 99,911 54,634
--------- ---------
OTHER ASSETS 5,663 4,917
--------- ---------
PROPERTY AND EQUIPMENT, NET 78,333 40,889
--------- ---------
Total assets $ 183,907 $ 100,440
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,232 $ 1,034
Accounts payable 2,954 1,622
Accrued liabilities 14,233 15,423
Amounts due to (from) parent--current (145) 5,159
--------- ---------
Total current liabilities 18,274 23,238
--------- ---------
LONG-TERM DEBT 11,588 11,294
--------- ---------
DEFERRED INCOME TAXES 2,725 1,180
--------- ---------
OTHER LIABILITIES 374 374
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; authorized 10,000,000 shares; none
issued -- --
Common stock, $0.01 par value; authorized 80,000,000 shares;
24,276,000 shares and 19,676,000 shares issued and outstanding,
respectively 243 197
Capital in excess of par value 111,722 43,731
Reinvested earnings, from October 1, 1990 38,981 20,426
--------- ---------
Total stockholders' equity 150,946 64,354
--------- ---------
Total liabilities and stockholders' equity $ 183,907 $ 100,440
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
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OMEGA PROTEIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ---------------------
1998 1997 1998 1997
---------- --------- --------- --------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues $ 31,488 $ 31,025 $ 91,032 $ 79,612
Cost of Sales 19,217 22,833 55,951 61,895
---------- --------- --------- --------
Gross profit 12,271 8,192 35,081 17,717
Selling, general and administrative 1,909 1,741 4,510 3,971
---------- --------- --------- --------
Operating income 10,362 6,451 30,571 13,746
Interest income (expense), net 430 (108) (553) (498)
Other income (expense), net (51) 32 (130) 15
---------- --------- --------- --------
Income before income taxes 10,741 6,375 29,888 13,263
Provision for income taxes 4,072 2,662 11,333 5,140
---------- --------- --------- --------
Net income $ 6,669 $ 3,713 $ 18,555 $ 8,123
========== ========= ========= ========
Earnings per share (basic) $ 0.28 $ 0.19 $ 0.88 $ 0.41
========== ========= ========= ========
Average common shares outstanding 23,951 19,676 21,101 19,676
========== ========= ========= ========
Earnings per share (diluted) $ 0.27 $ 0.19 $ 0.87 $ 0.41
========== ========= ========= ========
Average common shares and common share
equivalents outstanding 24,429 19,676 21,260 19,676
========== ========= ========= ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statement.
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OMEGA PROTEIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
--------------------------
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $ 18,555 $ 8,123
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on disposal of assets, net (173) (69)
Depreciation and amortization 5,231 3,467
Deferred taxes 1,545 4,395
Changes in assets and liabilities:
Receivables (3,746) 1,472
Inventories (5,049) (4,409)
Prepaid expenses and other current assets (126) 487
Accounts payable and accrued liabilities 142 (3,769)
Amounts due to parent (5,304) (2,145)
Other, net (1,734) (1,095)
---------- ----------
Total adjustments (9,214) (1,666)
---------- ----------
Net cash provided by operating activities 9,341 6,457
---------- ----------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Proceeds from sale of assets, net 963 70
Capital expenditures (14,362) (6,875)
Acquisitions (28,116) --
---------- ----------
Net cash used in investing activities (41,515) (6,805)
---------- ----------
CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from issuance of common stock 68,037 --
Proceeds from borrowings - Bank debt 3,477 1,849
Proceeds from borrowings - Parent 28,116 --
Repayments on borrowings - Parent (28,116) --
Principal payments of debt obligations (2,984) (259)
---------- ----------
Net cash provided by financing activities 68,530 1,590
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 36,356 1,242
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,504 2,899
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 41,860 $ 4,141
========== ==========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
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OMEGA PROTEIN CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
SUMMARY OF OPERATIONS AND BASIS OF PRESENTATION
Omega Protein Corporation ("Omega" or the "Company"), produces and markets
a variety of products produced from menhaden (a fish found in commercial
quantities), including regular grade and value added specialty fish meals, crude
and refined fish oils and fish solubles. The Company's fish meal products are
used as nutritional feed additives by animal feed manufacturers and by
commercial livestock and poultry farmers. The Company's crude fish oil is sold
to food producers in Europe, and its refined fish oil products are used in
aquaculture feeds and certain industrial applications. Fish solubles are sold as
protein additives for animal feed and as organic fertilizers.
On January 26, 1998, Marine Genetics Corporation ("Marine Genetics") merged
into Omega, a Nevada corporation wholly-owned by Zapata Corporation ("Zapata"),
with Omega Protein Corporation being the surviving entity. The common control
merger was accounted for at historical cost in a manner similar to that in a
pooling of interests accounting. In connection with the merger, Marine Genetics
outstanding common stock was converted into Omega common stock at the rate of
one share for 19,676 shares of Omega common stock and Omega's pre-merger
outstanding common stock was canceled and treated as treasury stock. As a
result, the Company's capitalization at September 30, 1997, is as follows:
authorized capital stock of 80,000,000 shares common stock, par value $0.01 per
share; 10,000,000 shares of preferred stock, par value of $0.01 per share; and
19,676,000 shares of issued and outstanding common stock.
On April 8, 1998, the Company completed an initial public offering of
8,500,000 of its common stock at a gross price of $16.00 per share. On May 7,
1998, the Underwriters exercised their option to acquire 1,275,000 additional
shares at the same gross price. Of the 9,775,000 total shares sold in the
offering, the Company issued and sold 4,600,000 shares, and Zapata sold
5,175,000 shares. Zapata now owns approximately 59.7% of the shares of the
Company's outstanding common stock. As a result of the Company's completed
public offering, the Company's capitalization at June 30, 1998 is as follows:
authorized capital stock of 80,000,000 shares common stock, par value $0.01 per
share; 10,000,000 shares of preferred stock, par value $0.01 per share; and
24,276,000 shares of issued and outstanding common stock.
The unaudited condensed consolidated financial statements included herein
have been prepared by Omega, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
reflect all adjustments that are, in the opinion of management, necessary to
fairly present such information. All such adjustments are of a normal recurring
nature. The condensed consolidated balance sheet at September 30, 1997 has been
derived from the audited financial statements at that date. Although Omega
believes that the disclosures are adequate to make the information presented not
misleading, certain information and footnote disclosures, including a
description of significant accounting policies, normally included in financial
6
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statements prepared in accordance with generally accepted accounting principles,
have been condensed or omitted pursuant to such rules and regulations. These
condensed consolidated financial statements should be read in conjunction with
the financial statements and the notes thereto included in Omega's Registration
Statement on Form S-1 (Reg. No.333-44967) filed with the Securities and Exchange
Commission on January 27, 1998, as amended through and declared effective on
April 2, 1998. The results of operations for the three months and nine months
ended June 30, 1998 are not necessarily indicative of the results to be expected
for any subsequent quarter or the entire fiscal year ending September 30, 1998.
New Accounting Pronouncements
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128"), which established
standards for computing and presenting earnings per share. The Company adopted
the statement on October 1, 1997. Basic earnings per share was computed by
dividing income by the weighted average number of common shares outstanding.
Diluted earnings per share was computed by dividing income by the sum of the
weighted average number of common shares outstanding and the effect of any
dilutive stock options.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which is effective for
fiscal years beginning after December 15, 1997. SFAS 130 establishes standards
for reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. It requires (a) classification of items of other comprehensive
income by their nature in a financial statement, and (b) display of the
accumulated balance of other comprehensive income separate from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. The Company will adopt the provisions of the statement in
fiscal 1999. The Company anticipates that implementing the provisions of SFAS
130 will not have a significant impact on the Company's existing operations.
In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, "Disclosure About Segments of an Enterprise and Related
Information" ("SFAS 131"), which is effective for periods beginning after
December 15, 1997. The statement need not be applied to interim financial
statements in the initial year of its application. SFAS 131 establishes
standards for reporting information about operating segments in annual financial
statements and requires selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. This Statement supersedes SFAS 14, "Financial Reporting for Segments
of a Business Enterprise," but retains the requirement to report information
about major customers. The Company will adopt the provisions of the statement
in fiscal 1999. The Company anticipates that implementing the provisions of SFAS
131 will not have a significant impact on the Company's existing operations.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, "Employers' Disclosures About Pensions and Other
Postretirement Benefits" ("SFAS 132"), which is effective for fiscal years
beginning after December 15, 1997. SFAS 132 significantly changes
7
<PAGE>
current financial statement disclosure requirements from those that were
required under SFAS 87, "Employers' Accounting for Pensions"; SFAS 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits"; and SFAS 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." SFAS 132 does not
change the existing measurement or recognition provisions of FASB Statement Nos.
87, 88 or 106. It requires that additional information be disclosed regarding
changes in benefit obligation and fair values of plan assets, standardizes the
disclosure requirements for pensions and other postretirement benefits and
presents them in one footnote, and eliminates certain disclosures that are no
longer considered useful. The Company will adopt the provisions of the statement
in fiscal 1999.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS
133), which is effective for fiscal years beginning after June 15, 1999. SFAS
133 establishes standards requiring all derivatives to be recognized in the
statement of financial position as either assets or liabilities and measured at
fair value. The Company will adopt the provisions of the statement in fiscal
year 2000. The Company anticipates that implementing the provisions of SFAS 133
will not have a significant impact on the Company's existing operations.
2. ASSET ACQUISITIONS
On November 3, 1997, the Company acquired the fishing and processing
assets of American Protein, Inc. ("American Protein"), which operated ten
steamers and a menhaden processing plant in the Chesapeake Bay area, for $14.5
million in cash (the "American Protein Acquisition"). American Protein's
facilities were located in close proximity to the Company's Reedville, Virginia
facility. Shortly after completing this transaction, the Company closed the
American Protein processing plant and began integrating its assets into the
Company's existing operations.
On November 25, 1997, the Company purchased the fishing and processing
assets of Gulf Protein, Inc. ("Gulf Protein"), which included six steamers, five
spotter planes and the processing equipment located at the Gulf Protein plant
near Morgan City, Louisiana for $13.6 million in cash and the assumption of
$883,000 in liabilities (the "Gulf Protein Acquisition"). The Company accounted
for this acquisition as a purchase; thus, the results of operations began being
included in the Company's Statement of Operations beginning November 25, 1997.
In connection with the Gulf Protein Acquisition, the Company also entered into a
five-year lease for the Gulf Protein plant at a $220,000 annual rental rate.
The Company is currently upgrading this plant's processing capabilities so that
it can manufacture specialty meals. The Company began operations at the Morgan
City, Louisiana plant at the start of the 1998 fishing season.
These acquisitions were financed by a $28.1 million intercompany loan from
Zapata. The interest rate on this loan was 8.5 % and was repayable in quarterly
installments beginning May 1, 1998. The loan, which was to mature on August 1,
2002, was prepaid in May 1998 with a portion of the proceeds from the Company's
initial public offering described in Note 1.
8
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3. INVENTORIES
Fish product inventories are stated at the lower of cost or market.
Materials, parts and supplies are stated at average cost.
The Company's fishing season runs from mid-April to the end of October in
the Gulf Coast and from the beginning of May to the end of December in the
Atlantic Coast. Government regulations preclude the Company from fishing during
the off-seasons. During the off-seasons, the Company incurs costs (i.e., plant
and vessel related labor, utilities, rent and depreciation) that are directly
related to the Company's infrastructure that will be used in the upcoming
fishing season. Costs that are incurred subsequent to a fish catch are deferred
until the next season and are included with inventory.
The Company's inventory cost system considers all costs, both variable and
fixed, associated with an annual fish catch and its processing. The Company's
costing system allocates cost to inventory quantities on a per unit basis as
calculated by a formula that considers total estimated inventoriable costs for a
fishing season (including off-season costs) to total estimated fish catch. The
inventory is relieved at average cost as the product is sold. The Company
adjusts the cost of sales, off-season costs and inventory balances at the end of
each quarter based on revised estimates of total inventoriable costs and fish
catch.
Inventory as of June 30, 1998 and September 30, 1997 is summarized as follows:
JUNE 30, SEPTEMBER 30,
1998 1997
------- ---------
(IN THOUSANDS)
Fish meal.................... $ 9,575 $19,048
Crude fish oil............... 3,391 11,188
Other fish oil............... 622 1,558
Fish solubles................ 285 983
Off-season costs............. 24,817 2,420
Materials and supplies....... 4,834 3,353
Other........................ 75 -
------- -------
43,599 38,550
Less oil inventory reserve... (102) (102)
------- -------
$43,497 $38,448
======= =======
9
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4. NOTES PAYABLE AND LONG-TERM DEBT
At June 30, 1998 and September 30, 1997, the Company's long-term debt
consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1998 1997
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
U.S. government guaranteed obligations collateralized
by a first lien on certain vessels and certain plant assets:
Amounts due in installments through 2013, interest
from 6.63% to 7.20% $11,428 $ 8,678
Amounts due in installments through 2014, interest at
Eurodollar rates plus .45%; 6.17% and 6.08% at
June 30, 1998 and September 30, 1997, respectively 1,290 1,350
Term note due 2002, interest prime or Eurodollar rates
plus 1.75%; 8.5% at September 30, 1997,
collateralized by certain assets of the Company - 2,175
Other debt at 4% and 5.6% at June 30, 1998 and
September 30, 1997, respectively 102 125
------- -------
Total debt 12,820 12,328
Less current maturities 1,232 1,034
------- -------
Long-term debt $11,588 $11,294
======= =======
</TABLE>
On May 12, 1998, the Company closed on its fiscal 1998 Title XI application and
received $2.6 million of additional Title XI borrowings for qualified Title XI
projects. The Company is currently authorized to receive up to $20.6 million in
loans under the Title XI program. To date the Company has used $15.0 million of
the authorized Title XI funds.
The Company utilized proceeds from the initial public offering as described
in footnote 1 to prepay the bank term note.
5. STOCK OPTION PLANS
1998 Long-Term Incentive Plan
On January 26, 1998, the 1998 Long-Term Incentive Plan of the Company (the
"1998 Incentive Plan") was approved by the Company's Board of Directors and the
Company's then sole stockholder, Zapata. The 1998 Incentive Plan provides for
the grant of any or all of the following types of awards: stock options, stock
appreciation rights, stock awards and cash awards. The Board granted 1,657,360
stock options under the 1998 Incentive Plan at $12.75 per share on January 26,
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1998. These granted options vest ratably over three years from the date of
grant and expire ten years from the date of grant.
Non-Management Director Stock Option Plan
On January 26, 1998, the Non-Management Director Stock Option Plan (the
"Directors Plan") was approved by the Board of Directors and the Company's then
sole stockholder, Zapata. The Directors Plan provides that the initial Chairman
of the Board be granted options to purchase 568,200 shares of common stock and
each other initial non-employee director of the Company will be granted options
to purchase 14,200 shares of common stock at a price determined by the Board.
The Board granted 582,400 stock options under the Directors Plan at $12.75 per
share on January 26, 1998, of which 568,200 were granted to the Chairman of the
Board and 14,200 were granted to the other Board member. During May 1998 two
additional members were elected to the Board and were each granted 14,200
options at the market price on the date of grant. These granted options vest
ratably over the three years from the date of grant and expire ten years from
the date of grant.
6. CERTAIN TRANSACTIONS AND ARRANGEMENTS BETWEEN THE COMPANY AND ZAPATA
Upon completion of the Company's initial public offering in April 1998, the
Company and Zapata entered into certain agreements that include the Separation,
Sublease, Registration Rights, Tax Indemnity and Administrative Services
Agreements. The Separation Agreement required the Company to repay $33.3 million
of indebtedness owed by the Company to Zapata contemporaneously with the
consummation of the Company's initial public offering and also prohibits Zapata
from competing with the Company for a period of five years. The Sublease
Agreement provides for the Company to lease its principal corporate offices in
Houston, Texas from Zapata and provides for the Company to utilize certain
shared office equipment for no additional charge. The Registration Rights
Agreement sets forth the rights and responsibilities of each party concerning
certain registration filings and provides for the sharing of fees and expenses
related to such filings. The Tax Indemnity Agreement requires the Company to be
responsible for federal, state and local income taxes from its operations and
the Administrative Services Agreement allows the Company to provide certain
administrative services to Zapata at the Company's estimated cost.
7. INVESTMENT IN VENTURE MILLING COMPANY
On September 16, 1997, the Company's wholly-owned subsidiary, Venture
Milling Company, a Delaware corporation ("Venture Milling"), sold substantially
all of its assets to an unrelated third party (the "Venture Milling
Disposition"). Venture Milling was primarily in the business of blending
different animal protein products (i.e., fish meal, blood meal and feather meal)
for sale to producers of feed for broilers and other animals with low
nutritional requirements. Venture Milling had revenues and operating income of
$10.4 million and $71,532, respectively, for the quarter ended June 30, 1997,
and $25.3 million and $201,377, respectively, for the nine months ended June 30,
1997. The Venture Milling Disposition resulted in a $531,000 pre-tax loss to the
Company in the fourth quarter of fiscal 1997 and did not have a material impact
on the Company's balance sheet since Venture Milling leased most of the assets
employed in its operations.
11
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8. LITIGATION
The Company is defending various claims and litigation arising from its
operations. In the opinion of management, any losses resulting from these
matters will not have a material adverse affect on the Company's results of
operations, cash flows or financial position.
9. SUBSEQUENT EVENT
Revolving Line of Credit
On August 11, 1998, the Company entered into a $20.0 million revolving
credit agreement with SunTrust Bank, South Florida, N.A. fulfilling the December
30, 1997 Commitment letter. Under the Credit Facility the Company may make
borrowings in a principal amount not to exceed $20.0 million at any time.
Borrowings under this facility may be used for working capital and capital
expenditures. Interest accrues on borrowings that will be outstanding under the
Credit Facility at the Company's election, either (i) the bank's prime rate less
75 basis points, or (ii) LIBOR plus a margin based on the Company's financial
performance. The Credit Facility is collateralized by all of the Company's trade
receivables, inventory and specific computer equipment. The Company and its
subsidiaries are required to comply with certain financial covenants, including
maintenance of a minimum tangible net worth, debt to tangible net worth ratio,
funded debt to cash flow ratio and fixed charges ratio, and certain other
covenants.
12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-looking statements in this Form 10-Q, future filings by the Company
with the Securities and Exchange Commission, the Company's press releases and
oral statements by authorized officers of the Company are intended to be subject
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that all forward-looking statements involve risks
and uncertainty identified from time to time by the Company in press releases,
other communications with shareholders and the Company's filings with the
Securities and Exchange Commission, including, without limitation, under the
caption "Risk Factors" in the Company's Registration Statement on Form S-1 (Reg.
No. 333-44967) filed with the Commission on January 27, 1998, as amended through
and declared effective on April 2, 1998. The Company believes that forward-
looking statements made by it are based on reasonable expectations. However, no
assurances can be given that actual results will not differ materially from
those contained in such forward-looking statements. The words "estimate,"
"project," "anticipate," "expect," "predict," "believe" and similar expressions
are intended to identify forward-looking statements. The Company assumes no
obligation to update forward-looking statements to reflect events or
circumstances after the date on which such statements are made. All references
to a fiscal year refer to the 12 month period ended September 30th of such
calendar year.
GENERAL
Omega Protein Corporation ("Omega" or the "Company") and its predecessors
have been a wholly-owned subsidiary of Zapata Corporation ("Zapata"), a publicly
traded company which has shares listed on the New York Stock Exchange, since
1973 when Zapata acquired the Company's operations. The Company is the largest
U.S. producer of protein-rich meal and oil derived from marine sources. The
Company's products are produced from menhaden (a fish found in commercial
quantities), including regular grade and value added specialty fish meals, crude
and refined fish oils and fish solubles. The Company's fish meal products are
used as nutritional feed additives by animal feed manufacturers and by
commercial livestock and poultry farmers. The Company's crude fish oil is sold
to food producers in Europe and its refined fish oil products are used in
aquaculture feeds and certain industrial applications. Fish solubles are sold as
protein additives for animal feed and as organic fertilizers.
On September 16, 1997, the Company's wholly-owned subsidiary, Venture
Milling Company, a Delaware corporation ("Venture Milling"), sold substantially
all of its assets to an unrelated third party (the "Venture Milling
Disposition"). Venture Milling was primarily in the business of blending
different animal protein products (i.e., fish meal, blood meal and feather meal)
for sale to producers of feed for broilers and other animals with low
nutritional requirements. Venture Milling had revenues and operating income of
$10.4 million and $71,532, respectively, for the quarter ended June 30, 1997,
and $25.3 million and $201,377, respectively, for the nine months ended June 30,
1997. The Venture Milling Disposition resulted in a $531,000 pre-tax loss to the
Company in the fourth quarter of fiscal 1997 and did not have a material impact
on the Company's balance sheet since Venture Milling leased most of the assets
employed in its operations.
13
<PAGE>
On November 3, 1997, Omega acquired the fishing and processing assets of
American Protein, Inc. ("American Protein"), which operated ten steamers and a
menhaden processing plant in the Chesapeake Bay area, for $14.5 million in cash
(the "American Protein Acquisition"). American Protein's facilities were located
in close proximity to the Company's Reedville, Virginia facility. Shortly after
completing this transaction, Omega closed the American Protein processing plant
and began integrating its assets into the Company's existing operations.
On November 25, 1997, the Company purchased the fishing and processing
assets of Gulf Protein, Inc. ("Gulf Protein"), which included six steamers, five
spotter planes and the processing equipment located at the Gulf Protein plant
near Morgan City, Louisiana for $13.6 million in cash and the assumption of
$883,000 in Title XI debt (the "Gulf Protein Acquisition," and together with the
American Protein Acquisition, the "Recent Acquisitions"). In connection with the
Gulf Protein Acquisition, Omega also entered into a five-year lease for the Gulf
Protein plant at a $220,000 annual rental rate. Omega began operations at the
Morgan City, Louisiana plant at the start of the 1998 fishing season.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources have been
cash flows from operations, borrowings from Zapata, bank credit facilities and
term loans from various lenders provided pursuant to the Title XI of the Marine
Act of 1936 ("Title XI"). These sources of cash flows have been offset by cash
used for capital expenditures (including acquisitions) and payment of long-term
debt. During fiscal 1997, Zapata contributed to the Company as equity $41.9
million of intercompany debt owed to Zapata. As a result, the historical
liquidity and capital resources of the Company may not be indicative of the
Company's future liquidity and capital resources.
Omega's unrestricted cash balance totaled $41.9 million at June 30, 1998,
up $36.4 million from September 30, 1997 and up $37.7 million from June 30,
1997. This increase was due primarily to the completion of the April 8, 1998
initial public offering of 8,500,000 of the Company's common stock at a gross
price of $16.00 per share and the May 7, 1998 Underwriters exercise of their
option to acquire 1,275,000 additional shares at the same gross price. Of the
9,775,000 total shares sold in the Offering, the Company sold and issued
4,600,000 shares, and Zapata sold 5,175,000 shares.
Reflecting the Recent Acquisitions, investing activities used $41.5 million
through the third quarter of fiscal 1998 while using $6.8 million during the
corresponding fiscal 1997 period. Excluding the Recent Acquisitions, the Company
anticipates making approximately $18.0 million of capital expenditures in fiscal
1998, a significant portion of which will be used to refurbish vessels, plant
assets and to acquire certain equipment, including a new evaporation unit for
the Reedville, Virginia plant.
Net financing activities provided $68.5 million during the nine month
period ending June 30, 1998, due primarily to the Company's completed initial
public offering which provided $68.0 million in cash. Financing activities also
provided $2.6 million pursuant to the Title XI guaranteed program. The Company
also assumed $883,000 of Title XI debt in connection with the recent acquisition
of the
14
<PAGE>
Gulf Protein Plant.
As previously described in Note 1, the Company completed its initial public
offering on April 8, 1998. Subsequent to the Offering, the underwriters elected
to purchase over-allotment options. These issuances generated net proceeds of
approximately $68.0 million (after deducting underwriting discounts and
commissions and offering expenses). Of these proceeds, the Company used
approximately $33.3 million to repay indebtedness to Zapata and $2.1 million to
repay bank indebtedness. Of the $33.3 million indebtedness owed to Zapata, $28.1
million was incurred to fund the cash portion of the purchase price for the
Recent Acquisitions and the balance was primarily incurred to pay the Company's
federal income taxes. The Company has invested the remaining net proceeds in
short-term government securities and interest bearing cash equivalents pending
their use. The Company intends to use these proceeds to fund possible
acquisitions and other capital expenditures as well as for general corporate
purposes.
On August 11, 1998 the Company entered into a $20.0 million revolving
credit agreement with SunTrust Bank, South Florida, N.A.(the "Credit Facility")
fulfilling the commitment letter dated December 30, 1997. Under the Credit
Facility the Company may make borrowings in a principal amount not to exceed
$20.0 million at any time. Borrowings under this facility may be used for
working capital and capital expenditures. Interest accrues on borrowings that
will be outstanding under the Credit Facility at the Company's election, either
(i) the bank's prime rate less 75 basis points, or (ii) LIBOR plus a margin
based on the Company's financial performance. The Credit Facility is
collateralized by all of the Company's trade receivables, inventory and specific
computer equipment. The Company and its subsidiaries are required to comply with
certain financial covenants, including maintenance of a minimum tangible net
worth, debt to tangible net worth ratio, funded debt to cash flow ratio and
fixed charges ratio, and certain other covenants. As of August 14, 1998, the
Company had no borrowings outstanding under the Credit Facility.
The Company believes that the net proceeds from the Offering, together with
existing cash, cash equivalents, short-term investments and funds available
through its Credit Facility will be sufficient to meet its working capital and
capital expenditure requirements through at least the end of 1999.
15
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth as a percentage of revenues, certain items
of the Company's operations for each of the indicated periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------
1998 1997 1998 1997
--------- -------- ------- --------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of Sales 61.0% 73.6% 61.5% 77.7%
----- ----- ----- -----
Gross Profit 39.0% 26.4% 38.5% 22.3%
Selling, general and administrative 6.1% 5.6% 4.9% 5.0%
----- ----- ----- -----
Operating income 32.9% 20.8% 33.6% 17.3%
Interest income (expense), net 1.4% (0.3%) (0.6%) (0.6%)
Other income (expense) (0.2%) 0.0% 0.0% 0.0%
----- ----- ----- -----
Income before income taxes 34.1% 20.5% 32.8% 16.7%
Provision for income taxes 12.9% 8.6% 12.4% 6.5%
----- ----- ----- -----
Net income 21.2% 11.9% 20.4% 10.2%
===== ===== ===== =====
</TABLE>
INTERIM RESULTS FOR THE THIRD QUARTER ENDED JUNE 30, 1998 AND 1997
REVENUES. Third quarter fiscal 1998 revenues increased $0.5 million from
$31.0 million in third quarter fiscal 1997 to $31.5 million in the current
quarter. Excluding $10.4 million of revenues attributable to the Venture Milling
operations during the quarter ended June 30, 1997, the comparative quarterly
increase in revenues for June 1998, would be approximately $10.9 or a 53%
increase in revenues. This growth resulted primarily from a 54.4% increase in
the tons of regular grade meal and a 27.5% increase in the tons of specialty
grade meal shipped, coupled with a 22.3% increase in tons of oil shipped
compared to third quarter fiscal 1997. Additionally, the average selling price
of all the Company's product lines increased 12.2%. The increase in sales
volumes for fish meal and fish oil reflect higher levels of inventory carried
over into fiscal 1998 from the fiscal 1997 fishing season as compared to the
levels of inventory the Company carried over into fiscal 1997 from the fiscal
1996 fishing season and increased demand for the Company's products.
16
<PAGE>
COST OF SALES. Cost of sales, including depreciation and amortization, for
third quarter fiscal 1998 was $19.2 million, a 15.8% decrease from the $22.8
million in the third quarter fiscal 1997. As a percent of revenues, cost of
sales was 61.0% in third quarter 1998 as compared to 73.6% in third quarter
fiscal 1997. Exclusive of the Venture Milling results from third quarter fiscal
1997, the Company's cost of sales as a percentage of revenues for the third
quarter of fiscal 1998 increased 0.3%. Per ton cost of sales were slightly
higher in fiscal 1998 compared to fiscal 1997, due mainly to an increase in
maintenance and vessel related labor costs. Adjusted for the Venture Milling
Disposition, cost of sales as a percentage of net sales for the third quarter
fiscal 1997 would have been 60.7%.
GROSS PROFIT. Gross Profit increased $4.1 million or 50.0% from $8.2
million in the third quarter fiscal 1997 to $12.3 million in the third quarter
fiscal 1998. As a percentage of revenues, the Company's gross profit margin
increased from 26.4% in the third quarter fiscal 1997 to 39.0% in the third
quarter fiscal 1998. The improvement in gross profit margin in the third quarter
fiscal 1998 was the result of a 27.5% overall increase in sales volume of the
Company's higher margin specialty products combined with higher prices received
for the Company's crude oil, refined oil, and the elimination of lower gross
margin sales resulting from the Venture Milling Disposition.
SELLING, GENERAL AND ADMINISTRATIVE PRODUCTS. Selling, general and
administrative expenses increased $168,000 or 9.6%, from $1.7 million in third
quarter fiscal 1997 to $1.9 million in third quarter fiscal 1998 and increased
as a percentage of revenues from 5.6% in the third quarter fiscal 1997 to 6.1%
in the third quarter fiscal 1998. The comparative quarterly increase in fiscal
1998 over fiscal 1997 was due largely to increased employee related costs.
OPERATING INCOME. As a result of the factors discussed above, the Company's
operating income of $10.4 million for the three months ended June 30, 1998 was
$3.9 million or 60.1%, greater than the three months ended June 30, 1997.
Operating income as a percent of sales rose to 32.9% for the three months ended
June 30, 1998, as compared to 20.8% for the three month period ended June 31,
1997.
INTEREST INCOME (EXPENSE), NET. Interest expense decreased by $538,000,
from $108,000 of interest expense net for the three months ended June 30, 1997
to $430,000 of interest income net for the three months ended June 30,1998. The
decrease in fiscal 1998 net interest expense is due to the Company's investment
of the proceeds from the sale of common stock in the aggregate amount of $40.0
million for the third quarter ended June 30, 1998.
OTHER INCOME (EXPENSE), NET. Other income (expense) decreased by $83,000
from $32,000 of other income net, in the third quarter fiscal 1997 to $51,000 of
other expense in the third quarter fiscal 1998. This is primarily due to the
writedown of an investment in a joint venture.
PROVISION FOR INCOME TAXES. The Company recorded a $2.7 million provision
for income tax for the third quarter fiscal 1997, for a 42.2% effective tax
rate, in comparison to a $4.1 million provision for the third quarter fiscal
1998 resulting in a 38.3% effective tax rate. The effective tax rates
approximate the applicable combined state and federal statutory tax rates for
the respective
17
<PAGE>
periods.
INTERIM RESULTS FOR THE NINE MONTHS ENDED JUNE 30, 1998 AND 1997
REVENUES. Revenues increased $11.4 million or 14.3%, in the first nine
months of fiscal 1998 from $79.6 million in 1997 to $91.0 million in fiscal
1998. The improvement was attributed to a 32.6% increase in the tons of fish
meal shipped and a 72.3% increase in the tons of fish oil shipped, coupled with
an 18.6% increase in the overall average selling price of the Company's product
lines. Sales volumes for the Company's fish meal and fish oil products were
significantly higher in the first nine months of fiscal 1998 versus sales
volumes during the first nine months of fiscal 1997 due primarily to higher
levels of inventory carried into fiscal 1998 and increased demand for the
Company's products. Excluding Venture Milling revenues, the Company had
revenues of $54.3 million for the first nine months of fiscal 1997.
COST OF SALES. Cost of sales, including depreciation and amortization, for
the first nine months of fiscal 1998, was $55.9 million, a 9.6% decrease from
the $61.9 million for the same period in fiscal 1997. As a percent of revenue,
cost of sales was 61.5% in fiscal 1998 as compared to 77.7% in fiscal 1997.
Exclusive of the Venture Milling Disposition, the Company's cost of sales for
fiscal 1998 as a percentage of revenue decreased 6.3%. However per ton cost of
sales were slightly higher in fiscal 1998 production compared to fiscal 1997,
due mainly to an increase in maintenance and vessel related labor costs.
Adjusted for the Venture Milling Disposition, cost of sales as a percentage of
revenue for fiscal 1997 would have been 67.8%.
GROSS PROFIT. Gross profit increased $17.4 million or 98.3%, from $17.7
million in fiscal 1997 to $35.1 million in fiscal 1998. As a percentage of
revenues, gross profit increased from 22.3% through the third quarter fiscal
1997 to 38.5% through the third quarter fiscal 1998. The gross profit
performance was primarily a result of an 18.6% increase in the overall selling
prices of the Company's products and the elimination of lower gross margin sales
resulting from the Venture Milling Disposition.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $539,000 or 13.6%, from $4.0 million in
fiscal 1997 to $4.5 million in fiscal 1998. The increases in 1998 were due
primarily to increased employee related costs and consulting fees.
OPERATING INCOME. As a result of the factors discussed above, the Company's
operating income increased to $30.6 million in fiscal 1998, from $13.7 million
in fiscal 1997. As a percentage of revenues, operating income increased to 33.6%
in 1998, from 17.3% in fiscal 1997.
INTEREST INCOME (EXPENSE), NET. Interest expense increased $55,000 or
11.0%, from $498,000 in fiscal 1997 to $553,000 in fiscal 1998. The increase in
fiscal 1998 net interest expense is due to a $28.1 million intercompany
acquisition loan from Zapata. The interest rate on this loan was 8.5%. This loan
was prepaid in full with a portion of the net proceeds from the Company's
initial public offering.
18
<PAGE>
OTHER INCOME (EXPENSE), NET. Other expense increased $145,000 in 1998. This
is primarily due to the writedown in the investment in a joint venture.
PROVISION FOR INCOME TAXES. The Company recorded an $11.3 million provision
for income taxes in fiscal 1998. This represents an effective tax rate of 37.7%
in comparison to a $5.1 million tax provision in fiscal 1997, representing an
effective tax rate of 38.3%. The effective tax rates approximate the applicable
combined state and federal statutory tax rates for the respective periods.
Seasonal and Quarterly Results
The Company's menhaden harvesting and processing business is seasonal in
nature. The Company generally has higher sales during the menhaden harvesting
season (which includes the third and fourth quarter of each fiscal year) due to
increased product availability, but prices during the fishing season tend to be
lower than during the off-season. As a result, the Company's quarterly operating
results have fluctuated in the past and may fluctuate in the future. In
addition, from time to time the Company defers sales of inventory based on
worldwide prices for competing products that affect prices for the Company's
products which may affect comparable period comparisons.
Year 2000
The Company has converted most of its computer information systems enabling
proper processing of transactions related to the year 2000 and beyond. The cost
of conversion was immaterial and has been expensed. The Company continues to
evaluate its systems and expects that all of its systems will be compliant prior
to the year 2000.
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various claims and disputes arising in the
normal course of business, including claims made by employees under the Jones
Act which generally are covered by the Company's insurance. The Company believes
that it has adequate insurance coverage for all existing matters and that the
outcome of all pending proceedings, individually and in the aggregate, will not
have a material adverse effect upon the Company's business, results of
operations, cash flows or financial position.
ITEM 2. CHANGES IN SECURITIES
In April and May, 1998, the Company sold 4,600,000 shares of its common
stock for an aggregate offering priced of $73.6 million. Also pursuant to the
Registration Statement, Zapata, as a selling stockholder, sold 5,175,000 shares
of common stock of the Company for an aggregate offering price of $82.8 million.
The net Offering proceeds to the Company and Zapata, as selling stockholder,
after underwriting discounts and commissions expenses was $68.0 million and
$77.2 million, respectively. All disbursements from the aggregate proceeds of
the Offering (including expenses) were direct or indirect payments to non-
related parties.
On April 8, 1998, the Company used approximately $33.3 million of its net
proceeds from the Offering to repay an acquisition loan and certain other
indebtedness owed Zapata and approximately $2.1 million to repay a bank loan.
The Company anticipates using the balance of the net proceeds for capital
expenditures (including possible acquisitions), working capital and general
corporate purposes. All unused net proceeds have been invested in cash, cash
equivalents and short-term investments. The use of the proceeds from the
Offering to date does not represent a material change in the use of the proceeds
described in the prospectus included in the Registration Statement. As
represented below, on August 11, 1998 the Company entered into a Revolving
Credit Agreement with SunTrust Bank of South Florida, N.A. The Revolving Credit
Facility Agreement prohibits the Company from paying or declaring dividends in
excess of 50% of its consolidated net income (as defined therein).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company was formed on January 26, 1998 to effect the reincorporation of
Marine Genetics Corporation ("Marine Genetics") from a Delaware corporation to a
Nevada corporation and to change its name to Omega Protein Corporation. In
January 1998, the Company's sole stockholder, Zapata, provided its written
consent with respect to various matters, including the following actions: (1)
the election of Joseph L. von Rosenberg III, Avram Glazer and Malcolm Glazer as
the Company's directors; (2) the merger of the Company with Marine Genetics
Corporation; (3) the approval of the Company's 1998 Long-Term Incentive Plan;
and (4) the approval of the Company's 1998 Non-Employee Directors' Stock Option
Plan.
20
<PAGE>
ITEM 5. OTHER INFORMATION
On May 15, 1998, pursuant to authority granted under the Company's By-Laws, the
Board of Directors elected William Lands and Gary Allee as directors to serve on
the Company's Board. Each of these directors were elected to serve for a term of
one year each, expiring upon the Company's annual meeting of stockholders to be
held in 1999. Each of these directors were also elected to serve on the
Company's Audit and Compensation Committees.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 -- Form of United States Guaranteed Promissory Note dated May 12,
1998, in favor of Hibernia National Bank.
10.2 -- Form of Promissory Note dated May 12, 1998, to the United States
of America pursuant to the provisions of Title XI of the Marine
Act of 1936 in favor of Coastal Securities.
10.3 -- Form of Guaranty Agreement dated May 12, 1998, in favor of the
United States of America.
10.4 -- Form of 1998 Certification and Indemnification Agreement
Regarding Environmental Matters, dated May 12, 1998, in favor of
the United States of America.
10.5 -- Form of Title XI Financial Agreement dated May 12, 1998, with the
United States of America.
10.6 -- Form of Security Agreement dated May 12, 1998, in favor of the
United States of America.
10.7 -- Form of First Preferred Ship Mortgage dated May 12, 1998, to the
United States of America.
10.8 -- Deed of Trust dated May 12, 1998, for the benefit of the United
States of America.
10.9 -- Revolving Credit Agreement dated August 11, 1998, with SunTrust
Bank, South Florida, National Association, Lender and Omega
Protein Corporation and Omega Protein, Inc., Borrowers.
10.10 -- Security Agreement dated August 11, 1998, in favor of SunTrust
Bank, South Florida, National Association.
10.11 -- Revolving Credit Note dated August 11, 1998, in favor of SunTrust
Bank, South Florida, National Association.
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K:
None.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OMEGA PROTEIN CORPORATION
(Registrant)
August 14, 1998 By: /s/ ERIC T. FUREY
----------------------------------
(Vice President, General Counsel and
Corporate Secretary)
August 14, 1998 By: /s/ ROBERT W. STOCKTON
----------------------------------
(Executive Vice President and Chief
Financial Officer)
22
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
10.1 -- Form of United States Guaranteed Promissory Note dated
May 12, 1998, in favor of Hibernia National Bank.
10.2 -- Form of Promissory Note dated May 12, 1998, to the United
States of America pursuant to the provisions of Title XI of
the Marine Act of 1936 in favor of Coastal Securities.
10.3 -- Form of Guaranty Agreement dated May 12, 1998, in favor of
the United States of America.
10.4 -- Form of 1998, Certification and Indemnification Agreement
Regarding Environmental Matters, dated May 12, 1998, in
favor of the United States of America.
10.5 -- Form of Title XI Financial Agreement dated May 12, 1998,
with the United States of America.
10.6 -- Form of Security Agreement dated May 12, 1998, in favor of
the United States of America.
10.7 -- Form of First Preferred Ship Mortgage dated May 12, 1998,
to the United States of America.
10.8 -- Deed of Trust dated May 12, 1998, for the benefit of the
United States of America.
10.9 -- Revolving Credit Agreement dated August 11, 1998, with
SunTrust Bank, South Florida, National Association, Lender
and Omega Protein Corporation and Omega Protein, Inc.,
Borrowers.
10.10 -- Security Agreement dated August 11, 1998, in favor of
SunTrust Bank, South Florida, National Association.
10.11 -- Revolving Credit Note dated August 11, 1998, in favor of
SunTrust Bank, South Florida, National Association.
27.1 -- Financial Data Schedule
23
<PAGE>
EXHIBIT 10.1
UNITED STATES GUARANTEED PROMISSORY NOTE
<TABLE>
<CAPTION>
<S> <C>
City and State St. Petersburg, Florida No. B-9728
Date May 12, 1998 Case No. OG-G-867
THIS IS A PROMISSORY NOTE GUARANTEED BY THE UNITED STATES OF AMERICA (THE "NOTE").
THIS NOTE WILL BE PAID BY Omega Protein, Inc., 1514 Martens Drive, Hammond, Louisiana 70401 (THE "PAYOR").
----------------------------------------------------------------------------------
THIS NOTE WILL BE PAID TO Hibernia National Bank at 313 Carondeler Street, New Orleans, Louisiana 70401 (THE "PAYEE").
----------------------------------------------------------------------------------
THIS NOTE'S PRINCIPAL AMOUNT IS Six Hundred Sixty-Eight Thousand Three Hundred Ninety-Nine dollars ($ 668,399.00)(THE "PRINCIPAL").
----------------------------------------------------------------------------------
THIS NOTE'S INTEREST RATE IS 7.2%
---------------------------------------------------------------------------------(THE "INTEREST RATE).
THIS NOTE'S PAYMENT PROVISIONS ARE Eighteen Thousand Three Hundred Nine Dollars ($18,309.00), including principal and interest
quarterly. Payments will be due on August 12, November 12, February 12 and May 12 each year, with the final payment for all
remaining principal and interest due on May 12, 2013. The first quarterly payment shall be due three (3) months from the date of
this Note (THE "PAYMENT PROVISIONS).
THIS NOTE MAY BE PREPAID at any time without penalty.
PAYEE HEREBY LENDS THE PRINCIPAL TO PAYOR. PAYOR HEREBY ACKNOWLEDGED RECEIPT OF THE PRINCIPAL FROM PAYEE. FOR VALUE RECEIVED,
PAYOR PROMISES TO PAY THE PRINCIPAL TO THE ORDER OF PAYEE WITH INTEREST AT THE INTEREST RATE AND IN ACCORDANCE WITH THE PAYMENT
PROVISIONS. PAYMENT SHALL BE AT PAYEE'S ADDRESS ABOVE UNLESS PAYEE DESIGNATES IN WRITING A DIFFERENT ADDRESS.
INTEREST SHALL APPLY TO ALL UNPAID PRINCIPAL FROM THE DATE OF THIS NOTE. INTEREST IS SIMPLE INTEREST. INTEREST SHALL ACCRUE ON THE
BASIS OF 30-DAY MONTHS AND 360-DAY YEARS.
ALL PAYMENT ON THIS NOTE SHALL FIRST BE APPLIED TO ACCRUED INTEREST. ANY REMAINDER SHALL BE APPLIED TO THE PRINCIPAL.
PAYEE MAY DECLARE THE FULL UNPAID AMOUNT OF THIS NOTE IMMEDIATELY DUE AND PAYABLE AT ANY TIME PAYOR FAILS TO KEEP HIS PROMISE. THE
PAYOR'S PROMISE IS UNCONDITIONAL. PAYOR'S OBLIGATION UNDER THIS NOTE SHALL NOT BE IMPAIRED BY PAYEE'S INDULGENCE. THIS NOTE IS THE
ENTIRE CONTRACT BETWEEN PAYOR AND PAYEE. PAYOR'S OBLIGATION IS JOINT AND SEVERAL IF MORE THAN ONE PARTY IS INVOLVED.
THIS IS THE NOTE REFERRED TO IN THE GUARANTEE APPEARING AT THE BOTTOM OF THIS DOCUMENT.
Attest: Omega Protein, Inc.
-------------------------- -------------------------------
By: By:
------------------------------ ------------------------------
Secretary President and Controller
- --------------------------------- ---------------------------------
=============================================================================================
GUARANTEE OF THE UNITED STATES OF AMERICA
THIS IS A GUARANTEE OF THE NOTE APPEARING AT THE TOP OF THIS DOCUMENT (THE "GUARANTEE").
THE GUARANTOR IS THE UNITED STATES OF AMERICA, ACTING BY AND THROUGH THE SECRETARY OF COMMERCE (THE "GUARANTOR").
THE PAYEE IS THE SAME AS IN THE NOTE.
GUARANTOR HEREBY PLEDGES ITS FULL FAITH AND CREDIT TO PAYMENT IN FULL OF THE NOTE. ALL UNPAID PRINCIPAL AND INTEREST (INCLUDING
INTEREST THROUGH THE DATE OF GUARANTOR'S PAYMENT) IS HEREBY GUARANTEED. THE VALIDITY OF THIS GUARANTEE IS INCONTESTABLE AS TO ANY
LAWFUL HOLDER OF THE NOTE.
THIS GUARANTEE IS SUBJECT TO THE CONDITIONS APPEARING ON THE BACK OF THIS DOCUMENT.
THE DATE OF THIS GUARANTEE IS THE SAME AS IN THE NOTE.
UNITED STATES OF AMERICA
SECRETARY OF COMMERCE
NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION
_________________________________________
CHIEF, FINANCIAL SERVICES BRANCH
SOUTHEAST REGION
_________________________________________
NATIONAL MARINE FISHERIES SERVICE
=============================================================================================
</TABLE>
<PAGE>
EXHIBIT 10.2
Case No. OG-G-867
PROMISSORY NOTE TO THE UNITED STATES OF AMERICA
City and State: St. Petersburg, Florida
Date: , 1998
FOR VALUE RECEIVED, the undersigned (the "Payor") promises to pay to the
order of the UNITED STATES OF AMERICA, acting by and through the Secretary of
Commerce (the "Payee"), at the office of the Financial Services Division,
National Marine Fisheries Service, National Oceanic and Atmospheric
Administration, Silver Spring, Maryland, or at the Payee's option, at such other
place as may be designated from time to time by Payee, the principal amount of
SIX HUNDRED SIXTY-EIGHT THOUSAND, THREE HUNDRED NINETY-NINE DOLLARS
($668,399.00) with interest on the unpaid principal computed from the date
hereof at the rate of seven and two tenths percent (7.2%) per year, payment to
be made in installments as follows:
EIGHTEEN THOUSAND, THREE HUNDRED NINE DOLLARS ($18,309.00), including
principal and interest quarterly, with the balance of principal and
interest due by May 12, 2013. The first quarterly payment shall be due
three months from the date of this Note and each quarterly payment
thereafter shall be due on the date of the month that the first quarterly
payment is due hereunder.
This Note is given (1) in consideration of, pursuant to the provisions of
Title XI of the Merchant Marine Act, 1936, as amended, the guaranteeing payment
of the unpaid interest on and the unpaid balance of the principal of a certain
promissory note (the "Guaranteed Note") issued by the Payor to Hibernia National
Bank on the date hereof relating to the Payor's vessel, GRAND CALLIOU, Official
Number 509018, (the "Vessel") and to secure payment by the Payor to the Payee of
any amount that the Payee may be required to pay to the holder of the Guaranteed
Note.
This Note is also issued pursuant to the provisions of a certain first
preferred ship mortgage (the "Mortgage") dated the date hereof, from the Payor
to the Payee relating to the vessel.
This Note has been negotiated and received by the Payee subject to and
secured by the terms the Mortgage and is also secured by a Deed of Trust and
Security Agreement (hereinafter the "Deed of Trust and
<PAGE>
Security Agreement") covering certain property in Northcumberland County,
Commonwealth of Virginia, and by UCC Security Interests.
The condition of this Note is such that so long as the Guaranteed Note is
outstanding and until the Guarantee contained within the Guaranteed Note shall
have been terminated pursuant to the provisions of the Mortgage, Deed of Trust
and Security Agreement and UCC Security Interests and the agreement governing
such Guarantee (the "Guarantee Agreement"), the principal of, and the interest
on this Note in respect of the Guaranteed Note shall be payable as follows:
(1) by payment of the interest on such Guaranteed Note and by amortization
of the principal of the Guaranteed Note according to the terms of the Guaranteed
Note;
(2) when such Guaranteed Note has been retired or paid other than by
payment of the Guarantee; and the aforesaid payments shall constitute payment of
the principal of, and the interest on this Note as of the date on which and to
the extent such payment is made, and this Note shall be discharged to the extent
of such payment of principal.
The principal of this Note and the interest thereon may be declared or may
become due and payable by the declaration of the Payee without demand,
presentment, opportunity to cure, or notice of intent to accelerate, at any time
after, (l) the holder of the Guaranteed Note shall have demanded payment of the
Guarantee pursuant to the provisions of the Guarantee Agreement, subject to such
demand for payment of the Guarantee and its consequences being annulled under
certain circumstances, or (2) the Payee has notified the holder of the
Guaranteed Note by the issuance of the Payee's notice of the occurrence of an
Event of Default pursuant to the provisions of the Deed of Trust and Security
Agreement, UCC Security Interests, and Guarantee Agreement and said holder has
demanded payment of the Guarantee. Thereupon, the principal of and the interest
on this Note shall become immediately due and payable together with interest and
at the accelerated rate of eighteen (18) percent per annum.
This Note is not negotiable, assignable, or transferable without the
written consent of the Payee. This Note shall be cancelled by the Payee and
surrendered to the Payor if all outstanding obligations accruing hereunder,
under the Guaranteed Note, the Deed of Trust and Security Agreement, UCC
Security Interests, or any other documents associated with this transaction are
paid.
The undersigned shall pay all expenses of any nature, whether incurred in
or out of court, and whether incurred before or after this Note shall become due
at its maturity date or otherwise, including but not limited to
<PAGE>
reasonable attorney's fees and costs, which Payee may deem necessary or proper
in connection with the satisfaction of the Note or the administration,
supervision, preservation, protection (including, but not limited to, the
maintenance of adequate insurance) of any and all Collateral that secures this
transaction. The Payee is authorized to pay, at any time and from time to time,
any or all of such expenses, add the amount of such payment to the principal
amount of the Note, Mortgage and Deed of Trust and Security Agreement, and
charge interest thereon at the rate specified herein with respect to interest on
the principal amount of this Note, and upon acceleration of sums due hereunder,
at the accelerated rate.
The term "Collateral" as used in this Note shall mean any funds,
guaranties, or other property or rights therein of any nature whatsoever or the
proceeds thereof which may have been, are, or hereafter may be hypothecated,
directly or indirectly by the undersigned or others, in connection with, or as
security for, this Note or any part hereof.
The obligation of the undersigned hereunder shall not be impaired by the
Payee's indulgence, including, but not limited to (a) any renewal, extension, or
modification which the Payee may grant with respect to the Note or any part
hereof, (b) any surrender, compromise, release, renewal, extension, exchange, or
substitution, which the Payee may grant in respect of the said Mortgage, Deed of
Trust and Security Agreement, UCC Security Interests, as amended, or other
Collateral, or (c) any indulgence granted in respect of any endorser, grantor,
or insurer.
When applicable, the obligation of the undersigned hereunder shall be joint
and several.
Omega Protein, Inc.
-------------------
Payor
(SEAL)
Attest: By:
---------------------------------
- ---------------------------- ------------------------------------
Secretary Title:
NOTE: Corporate Payors must execute Note in corporate name by duly authorized
officer and seal must be affixed and duly attested.
<PAGE>
EXHIBIT 10.3
Case No. OG-G-867
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, is made and entered into by Omega Protein
Corporation, formerly Marine Genetics Corporation, (the "Guarantor"), and the
UNITED STATES OF AMERICA, acting by and through the Secretary of Commerce (the
"Government").
Heretofore the Government has made, entered into, and delivered a
certain Commitment to Guarantee Note (the "Commitment"), dated January 28, 1988,
as amended on November 15, 1988, the Commitment to Guarantee Note executed on
November 22, 1988, and further amended by an Approval Letter dated January 22,
1998, and such Commitment has been accepted by Omega Protein, Inc., formerly
Zapata Protein (USA), Inc., (the "Payor"). The Guarantor is advised that the
Commitment contemplates the issuance of an obligation in the amount of
$668,399.00 by the Payor to Hibernia National Bank (the "Payee") which will be
guaranteed by the Government (the "Guaranteed Note"). The consideration for the
Guaranteed Note is a loan from the Payee to the Payor. The Commitment also
contemplates the issuance of a promissory note by the Payor (the "Note") which
will be secured by a Deed of Trust and Security Agreement (the "Deed of Trust
and Security Agreement"), a First Preferred Ship Mortgage on the fishing vessel
GRAND CALLIOU, Official Number 509018 (the "Ship Mortgage"), and UCC Security
Interests from the Payor to the Government to be executed and delivered by the
Payor to the Government. The consideration for the Note, Deed of Trust and
Security Agreement, Ship Mortgage and UCC Security Interests is the Government's
guarantee contained in the Guaranteed Note.
The Guarantor understands that the Government is unwilling to enter into
the aforementioned transaction unless payment pursuant to the Note, Deed of
Trust and Security Agreement and Ship Mortgage shall be guaranteed
unconditionally by the Guarantor. This Guaranty Agreement is executed and
delivered by the Guarantor in order to induce the Government to enter into the
aforementioned transaction with the Payor and Payee.
NOW, THEREFORE, in consideration of the premises and the mutual promises
of the Guarantor, the Guarantor (jointly, severally and in solido, if the
Guarantor consists of more than one person or entity) agrees with and
unconditionally guarantees to the Government the following:
1. The Guarantor unconditionally guarantees that all sums stated in
either the Note, Deed of Trust and Security Agreement or the ship Mortgage to be
payable to the Government, and all other indebtedness of the Payor to the
Government presently existing or which may in any manner or means hereafter be
incurred, including any further loans and advances made to Payor by the
Government under the provisions hereof, shall be promptly paid in full when due,
in United States currency, in accordance with the provisions governing such
payment. This Guaranty is unconditional and absolute and if for any reason such
sums, or any part thereof, shall not be paid promptly when due, the Guarantor
will immediately pay the same to the Government pursuant to the provisions
governing such payment, regardless of any defenses or rights of setoff or
counterclaims which the Payor may have or assert, and regardless of whether the
Payee or the Government shall have taken any steps to enforce any rights against
the Payor or any other person to collect such sums, or any part thereof, and
regardless of any other condition or contingency. The Guarantor also agrees to
pay the Government the costs and expenses of collecting such sums, or any part
thereof, or of enforcing this Guaranty Agreement, including attorneys' fees.
<PAGE>
2. The Guarantor unconditionally guarantees that the Payor will
promptly and punctually pay all other sums payable under either the Note, Deed
of Trust and Security Agreement or the Ship Mortgage, and will duly perform and
observe each and every agreement, covenant, term, and condition in such Note,
Deed of Trust and Security Agreement and Ship Mortgage to be performed or
observed by the Payor, and upon the Payor's failure to do so, the Guarantor will
promptly pay such sums and duly perform and observe each such agreement,
covenant, term and condition, or cause the same promptly to be performed and
observed.
3. The obligations, covenants, agreements and duties of the Guarantor
under this Guaranty Agreement shall in no way be affected or impaired by reason
of the happening from time to time of any of the following with respect to the
Note, Deed of Trust and Security Agreement or the Ship Mortgage, although
without notice to or the further consent of the Guarantor:
(a) The waiver by the Payee or the Government, or the successors or
assigns of either of them, of the performance or observance by the Payor or the
Guarantor of any of the agreements, covenants, terms or conditions contained in
either of such instruments;
(b) The extension, in whole or in part, of the time for payment by
the Payor or the Guarantor of any sums owing or payable under either of such
instruments, or of the time for performance by the Payor or the Guarantor of any
other obligations under or arising out of or on account of either of such
instruments;
(c) The modification or amendment (whether material or otherwise)
of any of the obligations of the Payor or any of the Guarantor as set forth in
either of such instruments;
(d) The doing or the omission of any of the acts referred to in
either of such instruments;
(e) Any failure, omission, or delay of the Payee or the Government
to enforce, assert, or exercise any right, power or remedy conferred on the
Payee or the Government in each of such instruments, or any action on the part
of the Payee or the Government granting indulgence or extension in any form
whatsoever;
(f) The voluntary or involuntary liquidation, dissolution or sale
of all or substantially all of the assets, the marshalling of assets and
liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition, or readjustment of, or
other similar proceeding affecting the Payor or any of its assets; and
(g) The release of the Payor or the Guarantor or any of them from
the performance or observance of any of the agreements, covenants, terms or
conditions contained in either of such instruments by the operation of the law.
(h) Any Order or Judgment entered by a Bankruptcy Court which
diminishes, discharges or declares any of the obligations or amounts owed under
the Note, Deed of Trust and Security Agreement and Ship Mortgage to be paid or
satisfied. The undersigned hereby waive any defense based upon any Bankruptcy
Court order or judgment with respect to any action based upon this Guaranty
Agreement, which is brought against the undersigned in Federal District Court,
or any other court of competent jurisdiction.
(i) The assumption and/or refinancing of the underlying
indebtedness by a third party.
2
<PAGE>
4. Notice of acceptance of this Guaranty Agreement and notice of any
obligations or liabilities contracted or incurred by the Payor are hereby waived
by the Guarantor.
5. This Guaranty Agreement may not be modified or amended except by a
written agreement executed by the Guarantor with the consent in writing of the
Government.
6. This Guaranty Agreement may be assigned to any holder of the Note,
Deed of Trust and Security Agreement and the Ship Mortgage.
7. All agreements, covenants, terms and conditions in this Guaranty
Agreement shall inure to the benefit of the Government and his successors and
assigns, and, without limitation of the generality of the foregoing, shall in
particular inure to the benefit of any holder of the Note, Deed of Trust and
Security Agreement and Ship Mortgage.
8. The signature of the Guarantor hereto is, in addition to and not in
limitation of the foregoing, intended as and to have the effect of an
endorsement of the Note by the Guarantor, who hereby waives presentment, demand
of payment, opportunity to cure, notice of intent to accelerate, protest and
notice of nonpayment or dishonor, and of protest of the Note and any and all
other notices and demands whatsoever.
9. The terms of this Guaranty Agreement shall apply to the Note, the
Deed of Trust and Security Agreement and to the Ship Mortgage, and shall bind
the Guarantor to the same extent as though each of them executed and delivered a
separate instrument of guaranty with respect to each of such instruments and
annexed the same thereto.
10. This Guaranty shall be binding upon the Guarantor and the
Guarantor's heirs, executors, administrators, successors, assigns and other
legal representatives.
11. Prior written consent must be granted by the Government, consent of
which will not be unnecessarily withheld, before the Guarantor shall split-up,
split-off, spin-off, merge, consolidate, or transfer or allow transfer of its
shares and/or assets as to effect a change in its controlling interest,
management, and financial conditions.
12. If the Guarantor is a corporation, this Guaranty Agreement shall be
binding upon its parent corporation and its subsidiaries.
13. SEVERABILITY: The unenforceability or invalidity of any provision(s)
of this Guaranty Agreement shall not render any other provisions(s) herein
unenforceable or invalid.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Guaranty Agreement.
Date: May 12, 1998
ATTEST: GUARANTOR: Omega Protein Corporation
By: By:
----------------------------- --------------------------------
Secretary
(SEAL)
4
<PAGE>
ACKNOWLEDGMENT
STATE OF FLORIDA )
) ss
COUNTY OF PINELLAS )
On the ____ day of ______________ , 1998, before me appeared
______________ personally known to me or who has produced __________________ as
identification, who being by me duly sworn, did depose and say that he is the
_______________________________of Omega Protein Corporation, the corporation
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is the seal of
said corporation; that said seal was so affixed by order of the Board of
Directors of said corporation, and that he signed his name to said instrument by
like order, and the said ________________________ acknowledged to me that he
executed said instrument as the ________________ of said corporation; that the
same is the free and voluntary act and deed of said corporation and of himself
as such _________________________, for the uses and purposes therein expressed.
_______________________________
Notary Public
UNITED STATES OF AMERICA
Secretary of Commerce
National Oceanic and Atmospheric Administration
_____________________________________________
Chief, Financial Services Branch
Southeast Region
National Marine Fisheries Service
5
<PAGE>
EXHIBIT 10.4
Case No. OG-G-867
1998 CERTIFICATION AND INDEMNIFICATION AGREEMENT
REGARDING ENVIRONMENTAL MATTERS
THIS INDEMNITY AGREEMENT is entered into this 12th day of May, 1998, between
Omega Protein, Inc., formerly Zapata Protein (USA), Inc., 1514 Martens Drive,
Hammond, Louisiana 70401, (hereinafter called the "Borrower"), Omega Protein
Corporation, formerly Marine Genetics Corporation, 1717 James Place, Suite 550,
Houston, Texas 77056, (hereinafter called the "Guarantor") and the United States
of America, acting by and through the Secretary of Commerce, National Oceanic
and Atmospheric Administration, National Marine Fisheries Service, Office of
Financial Services, Southeast Region, 9721 Executive Center Drive North, St.
Petersburg, Florida 33702, (herein after called the "Government"); and
RECITALS:
1. The Borrower is the owner of certain real property, (the "Premises"),
located in the Commonwealth of Virginia, which is more particularly
described in Exhibit A, attached hereto and incorporated herein by this
reference, and defined below.
2. The Government has guaranteed certain obligations of the Borrower (the
"Guarantees") in consideration for which the Borrower has executed and
delivered to the Government certain promissory notes to the United States
of America, as amended, payable to the Government (the "Notes"), which
Notes are secured by, among other things, certain mortgages and/or deeds of
trust, as amended, and certain mortgages and security agreements and/or
deeds of trust and security agreements, respecting the Premises (the
"Mortgage"). These mortgages and/or deeds of trust are more particularly
described in Exhibits B and C, attached hereto and incorporated herein by
this reference.
3. As a condition to providing the Guarantees, the Government requires the
Borrower and Guarantor to provide certain indemnities concerning Hazardous
Materials or Contamination (both as hereinafter defined) affecting the
Premises.
DEFINITIONS:
The following definitions shall apply for purposes of this Agreement:
1. "PREMISES" shall mean all real property, along with all improvements
thereon, now or hereafter owned, leased or possessed by The Borrower and
which is now or hereafter subject to a mortgage in favor of the Government.
2. "LOAN DOCUMENTS" shall mean this agreement and any other loan documents,
instruments or agreements now or hereafter existing between the Borrower,
and/or the Guarantor and the Government, including, but not limited to,
Mortgages, Deeds of Trust,
<PAGE>
Mortgage and Security Agreement, Deed of Trust and Security Agreement,
Financial Agreement and Approval Letter.
3. "THIS TRANSACTION" shall mean all transactions between the Government and
Zapata Haynie, Inc., and/or its successors, Zapata Protein (USA), Inc.,
Marine Genetics Corporation, Omega Protein Corporation. Omega Protein,
Inc., and/or any other successors.
4. "CONTAMINATION" shall mean the presence of any Hazardous Materials on,
about or beneath the Premises or arising from the Premises which may
require clean-up, or other costs, or which may be in violation of any of
the Environmental Laws.
5. "ENVIRONMENTAL LAWS" shall mean any and all Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements of any Governmental Authority regulating, relating
to or imposing liability or standards of conduct concerning environmental
protection matters, including without limitation, Hazardous Materials, as
now or may at any time hereafter be in effect.
6. "GOVERNMENTAL AUTHORITIES" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, but only to the extent that any such Governmental
Authority shall exercise jurisdiction over the Borrower and the Guarantor
or the Government, as the case may be.
7. "HAZARDOUS MATERIALS" shall mean any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction), defined or regulated as such in or
under any Environmental law; or any substance or conditions that may
require clean-up or other costs.
IN CONSIDERATION OF the issuance of certain Guarantees pursuant to Title XI of
the Merchant Marine Act, 1936, as amended, found at 46 USC (S)1271-80 and Part
253 of Title 50 of the Code of Federal Regulations, as amended on May 1, 1996,
found at 50 CFR 253, known as the Fisheries Obligation Guarantee Program,
Borrower hereby represents, warrants, covenants, acknowledges and agrees in
favor of the Government, on a continuing basis, as follows:
BORROWER'S REPRESENTATIONS AND WARRANTIES:
The Borrower hereby represents and warrants, to the best of its knowledge, in
favor of the Government, as follows:
I. Except as shown in the report, dated January 15, 1996, of the Phase 1
Environmental Assessment performed by ENPRO on the Reedville, Virginia facility:
1. The Premises, and its existing and prior uses, comply, and have at all
times complied with, and neither the Borrower or any other individual or
entity is in violation of, nor has violated, in connection with the
ownership, use, maintenance or operation of the Premises or the conduct of
the business related thereto (including manufacturing,
<PAGE>
importing, processing, using, distribution, discharging, storing, treating
and disposing of any substance) any applicable federal, state, county or
local statute, law, regulation, rule, ordinance, code, license and permit
of any and all governmental authorities relating to environmental matters,
including, but not limited to, the Clean Air Act, the Federal Water
Pollution Control Act of 1972, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Solid Waste Disposal Act, the
Resource Conservation and Recovery Act and the Toxic Substances Control
Act, and any amendments or extensions of the foregoing statutes, and all
other applicable environmental requirements.
2. The Borrower and/or any other individual or entity have operated the
Premises and have at all times received, handled, used, stored, treated,
shipped and disposed of all hazardous materials, substances, petroleum
products and waste in strict compliance with all applicable environmental,
health or safety statutes, ordinances, orders, rules, regulations or
requirements, and have removed in compliance with all applicable
environmental requirements from and off the Premises all hazardous
materials, substances, petroleum products and waste.
3. There are no statutes, orders, rules, regulations or agreements relating
to environmental matters requiring any work, repairs, feasibility studies,
remedial investigations, clean up costs, construction or capital
expenditures, or any other response costs with respect to the Premises, nor
have the Borrower or any other individual or entity received any notice of
any of the same.
4. No hazardous or toxic materials, substances, pollutants, contaminants or
wastes have been released, spilled, leaked, poured, dumped, deposited,
discharged or disposed of into the air, land or water at, on or from the
Premises, nor have the Premises been used at any time by any person or
entity as a landfill or a waste disposal site.
5. No notices of any violation of any of the matters referred to in the
preceding sections, above, relating to the Premises or its use have been
received by the Borrower and the Guarantor and/or any other individual or
entity, and there are no writs, injunctions, decrees, rulings, orders or
judgments outstanding, no law suits, claims, proceedings, investigations,
remedial investigations, feasibility studies, clean up costs or other
response costs pending or threatened, relating to the ownership, use,
maintenance or operations of the Premises, nor is there any basis for such
law suits, claims, proceedings or investigations being instituted or filed.
II Notwithstanding any matter shown in ENPRO's January 15, 1996, Phase 1
Environmental Assessment Report:
1. The Borrower and/or any other individual or entity will operate the
Premises and shall at all times receive, handle, use, store, treat, ship
and dispose of all hazardous materials, substances, petroleum products and
waste in strict compliance with all applicable environmental, health or
safety statutes, ordinances, orders, rules, regulations or requirements,
and will remove in compliance with all applicable environmental
<PAGE>
requirements from and off the Premises all hazardous materials, substances,
petroleum products and waste.
2. The Borrower further covenants that it will promptly notify the
Government of any fact or event which affects, alters or limits the
representations and warranties made in the preceding sections, above, and
that it will provide the Government upon demand with information or access
to information relating to the Borrower's compliance with this Agreement.
The foregoing representations and warranties shall survive the execution of this
Agreement and any closing occurring under any of the Loan Documents (defined
hereafter) and shall be of continuing effect.
The Borrower and Guarantor acknowledge that they have read and understand the
Phase 1 Environmental Assessment Report dated January 15, 1996, and hereby
assume responsibility and liability for all matters shown therein and further
agree that the absolute indemnification of the Borrower and the Guarantor,
covers all matters contained in said report and the Government shall be held
harmless by the Borrower and the Guarantor from any liability arising from any
matter contained in said report.
INDEMNITY:
To the maximum extent permitted by law, the Borrower and the Guarantor hereby
agree to defend and indemnify the Government against and hold it harmless from
any and all losses, claims, liabilities, judgments, damages (including
exemplary, actual, compensatory and punitive), penalties, expenditures, costs
and legal or other expenses which the Government may suffer or incur as a direct
or indirect consequence of any of the following:
1. The execution or performance of this Agreement or other loan documents,
instruments or agreements now or hereafter existing between the Borrower
and the Guarantor and the Government (together, the "Loan Documents");
2. The exercise, enforcement, release, defense or forbearance by the
Government of any of its rights, remedies, liens, interest or discretion
under this Agreement or any of the other Loan Documents, against the
Borrower and the Guarantor or any other person or entity, or in or to any
property now or hereafter constituting collateral for or on account of any
loans or obligations of the Borrower and the Guarantor;
3. The fact that any representation, warranty, acknowledgment or other
statement of fact by the Borrower and the Guarantor or any of the
undersigned was untrue or incomplete at any time;
4. The existence, for whatever reasons, of any contamination, including,
without limitation, the presence of any hazardous or toxic waste, substance
or material existing on, above, or under any of the Premises; or the fact
that the Borrower and the Guarantor or any other individual or entity is or
was responsible for the improper or unlawful production,
<PAGE>
handling, storage, transportation or disposition of any hazardous or toxic
waste, substance or material;
5. Any investigation, feasibility studies, monitoring, clean up, removal,
restoration, remedial response or remedial work undertaken on or with
respect to any of the Premises at any time hereafter, voluntarily or
involuntarily, by the Government;
6. The imposition or attachment of any statutory lien, including any arising
under any environmental or land use matters.
The Government's equitable and implied rights of indemnity against the Borrower
and the Guarantor shall not be limited or impaired in any way by reason of the
explicit indemnities set forth in this Agreement. The Government's rights of
indemnity shall not be directly or indirectly limited, prejudiced, impaired or
eliminated in any way:
i. by any finding or allegation that the Government is directly or
indirectly responsible under any theory of any kind for any act or
omission of the Borrower and the Guarantor or any other individual or
entity; or
ii. by any finding or allegation that the Government is or was an "owner"
or "operator" of the Premises; or
iii. by the kind, character or nature of any act or omission of the
Government; except that the Borrower and the Guarantor shall not be
obligated to pay any judgment which any court of competent
jurisdiction may render against the Government upon an express finding
that the Government personally and directly committed an intentional
tort against the Plaintiff.
COVENANTS:
The Borrower shall, with respect to the Premises:
1. Comply with, and require all tenants and subtenants, if any, to comply
with, all Environmental Laws and obtain, comply with, and maintain, and
require that all such tenants and subtenants obtain, comply with, and
maintain, any and all licenses, approvals, registrations or permits
required by Environmental Laws.
2. Conduct and complete all investigations, studies, sampling and testing, all
remedial, removal and other actions required under Environmental Laws and
promptly comply with all lawful orders and directives of all Governmental
Authorities respecting Environmental Laws.
3. Defend, indemnify and hold harmless the Government, from and against any
claims, demands, penalties, fines, clean-up expenses, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known
or unknown, contingent or otherwise, arising out of, or in any way relating
to the violation or noncompliance by the Borrower or any predecessor or
successor of or with any Environmental Laws applicable to the Premises,
<PAGE>
or any orders, requirements or demands of Governmental Authorities related
thereto, including, without limitation, attorney's and consultant's fees,
investigation and laboratory fees, removal, remedial, and response costs,
court costs and litigation expenses.
UNCONDITIONAL OBLIGATIONS:
The Borrower and the Guarantor hereby agree that their obligations, covenants
and agreements under this Agreement shall be irrevocable, absolute and
unconditional, and shall not be affected or impaired, notwithstanding, among
other things, any of the following, any defense on account of which is hereby
expressly waived by the Borrower and the Guarantor:
1. The waiver, compromise, settlement, termination or other release of the
performance or observance by the Borrower and the Guarantor, of any or all
of the agreements, covenants, terms or conditions in favor of the
Government contained herein or in any of the Loan Documents;
2. The granting of one or more extensions of time renewals or other
indulgence(s) to the Borrower, or by the Government heretofore, now or
hereafter acquiring, releasing or in any way modifying any guaranty from
any other person or persons or any security in whatever form for any or all
of the Borrower's obligations to the Government, whether or not notice
thereof shall have been or be given to the Borrower;
3. Any failure, omission, delay or lack on the part of the Government to
enforce, assert or exercise any right, power, remedy or claim conferred on
the Government herein or in any of the Loan Documents or by applicable law,
or the inability of the Government to enforce any provision of this
Agreement or any of the Loan Documents for any reason, or any other act or
omission on the part of the Government, including without limitation any
failure to obtain, perfect or realize upon any security, rights,
endorsements or guaranties which the Government may now or hereafter hold
or be offered with respect to any of the Borrower's obligations to the
Government;
4. Any change in ownership of any corporation which has executed this
agreement;
5. The voluntary or involuntary liquidation, dissolution, sale of all or
substantially all of the assets, marshalling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization or other similar proceeding affecting the
Borrower, or any of its assets;
6. Any fraudulent, illegal, improper or invalid acts heretofore or hereafter
undertaken by the Borrower, or because of any failure of the Government to
discover any such acts or irregularities;
7. The invalidity or unenforceability of any of the Borrower's obligations to
the Government;
8. The modification or amendment (whether material or otherwise) of any term
or condition of any of the Loan Documents heretofore or hereafter
undertaken;
<PAGE>
The Borrower and the Guarantor acknowledge and agree that the Government shall
have absolutely no responsibility to monitor the Borrower's compliance with
applicable laws, including without limitation environmental laws and
regulations, or to insure such compliance.
ADDITIONAL PROVISIONS:
1. RELATIONSHIP OF THE PARTIES: The Government is not (and shall not be
construed as) a partner, joint venturer, alter ego, manager, controlling
person or other business associate or participant of any kind of the
Borrower, nor an "owner" or "operator" for the Premises, nor a "facility"
(as such terms are defined by applicable state and federal statutes) and
the Government does not intend to assume any such status; and the
Government is not and shall not be deemed responsible for (or a participant
in) any acts, omissions or decisions of the Borrower.
2. NOTICES AND REQUESTS: Any and all notices, elections, demands, or requests
permitted or required to be made under this Agreement shall be in writing,
signed by the party giving such notice, election, demand or request, and
shall be delivered personally or sent by registered, certified, or Express
United States mail, postage prepaid, or Federal Express or any similar
service requiring a receipt, to the other party at the following address:
Omega Protein, Inc.
1514 Martens Drive
Hammond, LA 70401
U.S. Department of Commerce
National Oceanic and Atmospheric Administration
National Marine Fisheries
Financial Services Branch, Southeast Region
9721 Executive Center Drive North
St. Petersburg, FL 33702
3. GOVERNING LAW: This Agreement has been delivered to the Government of
State or other appropriate filing authority in all states where the
Premises are located, and shall be construed in all respects in accordance
with and governed by the laws of the State in which the Premises are
located.
4. AMENDMENTS: No provision of this Agreement may be changed, waived,
discharged or terminated orally, by telephone or by any other means except
by an instrument in writing signed by the Government.
5. SEVERABILITY: Wherever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by,
unenforceable or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition, un-enforceability or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
<PAGE>
6. CONSTRUCTION: The singular form of any word used herein shall include the
plural, and vice versa. The use herein of a word of any gender shall
include each of the masculine, feminine, and neuter genders. The headings
or titles of the several sections and paragraphs of this Agreement shall be
solely for convenience of reference and shall not affect the meaning,
construction or effect of the provisions hereof.
7. BINDING EFFECT: Except as herein provided, this Agreement shall be binding
upon the Borrower and the Guarantor, their successors and permitted
assigns, and shall inure to the benefit of the Government, and its
successor and assigns. Notwithstanding the foregoing, the Borrower,
without the prior written consent of the Government in each instance, may
not assign, transfer or set over to another, in whole or in part, all or
any part of its benefits, rights, duties and obligations hereunder,
including, but not limited to, performance of and compliance with the
conditions hereof. Any reference to the Borrower shall include the
Borrower's successors and assigns.
8. SURVIVAL: The obligations set forth herein shall survive the payment of
any other obligations of the Borrower to the Government and shall not
terminate until this Agreement has been expressly canceled and terminated
by the Government in writing.
9. This agreement, supplements and reaffirms the Indemnity Agreement Regarding
Hazardous Materials executed by some of the parties on March 31, 1993.
Where a provision in this agreement conflicts with a provision of said 1993
agreement, the provisions of this agreement shall prevail.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly
executed and delivered to the Government on the 12th day of May, 1998.
ATTEST: BORROWER: Omega Protein, Inc.
By: By:
------------------------ -----------------------------
Title: Secretary Title:
--------------------- --------------------------
Date: , 1998 Date: , 1998
---------------------- ---------------------------
(SEAL)
ATTEST: GUARANTOR: Omega Protein Corporation
By: By:
------------------------- -------------------------------
<PAGE>
Title: Secretary Title:
---------------------- -----------------------------
Date: , 1998 Date: , 1998
----------------------- ------------------------------
(SEAL)
<PAGE>
EXHIBIT 10.5
Case No. OG-G-867
TITLE XI FINANCIAL AGREEMENT
THIS TITLE XI FINANCIAL AGREEMENT (hereinafter, the "Financial Agreement")
dated May 12, 1998, is made and entered into by Omega Protein, Inc., formerly
Zapata Protein (USA), Inc., 1514 Martens Drive, Hammond, Louisiana 70401
(hereinafter, the "Borrower"), Omega Protein Corporation, formerly Marine
Genetics Corporation, 1717 St. James Place, Suite 550, Houston, Texas 77056,
(hereinafter, the "Guarantor"), and the UNITED STATES OF AMERICA, acting by and
through the Secretary of Commerce, (hereinafter, the "Government"),
WHEREAS, heretofore, the Government, pursuant to the Fisheries Obligation
Guarantee Program, as provided in 46 USC (S)1271, et. seq., (hereinafter "FOG"),
made, entered into, and delivered certain agreements and covenants, as contained
in the Commitment to Guarantee Note dated January 28, 1988, as amended on
November 15, 1988, and the Commitment to Guarantee Note executed on November 22,
1988, and further amended by an Approval Letter dated January 22, 1998,
(hereinafter, the "Commitment"), and any other commitment to guarantee note
executed by Zapata Haynie Corporation, Zapata Protein, Inc., Marine Genetics
Corporation, now called Omega Protein Corporation, or Zapata Protein (USA),
Inc., now called Omega Protein, Inc. This Financial Agreement proposes a
partial release of the Commitment and contemplates a loan from Hibernia National
Bank (hereinafter, the "Bank")/1/ to Borrower, in the amount of $668,399.00, the
repayment of which is guaranteed by the Government. This transaction will be
evidenced by the issuance of a United States Guaranteed Promissory Note in the
amount of $668,399.00 by the Borrower to the Bank (hereinafter, the "Guaranteed
Note"). The consideration for the Guaranteed Note is a loan from the Bank to
the Borrower; and the issuance of a Promissory Note to the United States of
America by the Borrower (hereinafter, the "Promissory Note") secured by the
property listed in ARTICLES II and III, below; and
WHEREAS, the consideration for the Promissory Note, Ship Mortgage, Deed of Trust
and Security Agreement, UCC Security Interests, and other related documents
executed by Borrower and the Guarantor is the Government's guarantee contained
in the Guaranteed Note, as may be amended or substituted from time to time, and
the Borrower and the Guarantor understand that the Government is unwilling to
enter into the aforementioned transaction unless this Financial Agreement and
related documents are executed by the Borrower and the Guarantor. For that
reason, the Borrower and the Guarantor have agreed to execute and deliver this
Financial Agreement.
NOW THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
Borrower and the Guarantor hereby agree to the following:
ARTICLE I: DEFINITIONS
As used herein, the following terms will be construed to have the meanings set
out below:
___________________________
/1/ In this agreement, use of the singular includes the plural and vice versa.
<PAGE>
1. All of the terms defined in the preceding paragraphs will have the
definitions set out in said paragraphs.
2. Collateral includes all of the items set out in ARTICLES II and III of
this Financial Agreement.
3. Default is defined in ARTICLE IX of this Financial Agreement.
4. FOG Debt: The outstanding balance of the loan from Bank to Borrower which
is guaranteed by the Government, including original or additional or
supplemental principal and/or interest, and any fees, costs or expenses, of any
nature, which are owed by Borrower to the Government, and, additionally, any
amount owed to a third party which arose from this loan and/or collateral
associated with this loan, and all other indebtedness of the Borrower to the
Government presently existing or which may in any manner or means hereafter be
incurred, including any further loans and advances made to Borrower by the
Government under the provisions hereof.
5. The Guarantor: Refers to the parent corporation and is defined as set out
in ARTICLE II, Paragraph 3, below.
6. Affiliate: Includes all wholly owned subsidiaries and stockholders of the
Borrower and the Guarantor of this debt.
7. Security documents: Includes all documents executed by any individual or
entity in connection with this transaction. This includes, but is not limited
to, the Note, Guaranteed Note, Ship Mortgage, Deed of Trust and Security
Agreement, UCC Security Interests, Title XI Financial Agreement, and Guaranty
Agreement.
ARTICLE II: COLLATERAL
The Collateral which the Borrower is giving to the Government in order to obtain
its guarantee of Borrower's loan from the Bank includes all of the items listed
below:
1. THE EQUIPMENT: The Borrower will provide to the Government security
interests, evidenced by UCC filings, in the full amount of the Guaranteed Note,
on all of the property described below (hereinafter, the "Equipment");
All fisheries unloading, processing, holding, and distribution equipment of
whatsoever nature, now or at any time in the future, together with all
accessories, improvements, replacements, substitutions, or additions thereto,
used for the Borrower's fisheries operations on the properties which secure
the Promissory Note and any other debt to the Government, or on any other
premises at any other site at which the Borrower now conducts, or in the
future may conduct its fisheries operations and regardless of the Equipment's
actual location at any given time. The Equipment shall include, but not be
limited to: all forklifts, bobcats, cranes, pallet trucks, lift trucks, and
other product or material movement equipment; all trailers, tanks, trucks, or
other rolling stock; all fish unloading, transfer, and conveying equipment,
all fish
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processing and fish weighing equipment; all cooling, refrigerating, freezing,
and other fish holding equipment (blast freezers, plate freezers, coolers, or
other refrigeration equipment); all fish packaging equipment; all fish
baskets, totes, tanks, tubs, and other fish holding equipment; all ice makers;
all hand and power tools; and all office equipment, all together with all
associated equipment, machinery, parts, tools, purse boats, or other items of
whatsoever nature and whether fixed or unfixed to the aforementioned property
securing the Promissory Note.
THIS EXCLUDES ONLY SUCH FIRST UCC SECURITY INTERESTS TO THIRD PARTIES as may
be necessary and appropriate to secure credit from such parties for the specific
purpose of purchasing specific equipment (hereinafter "Purchase-Money
Equipment"). In such cases, the Borrower agrees to the following:
(a) To give to the Government UCC security interests on the Purchase-
Money Equipment second only to the first interests pledged to the lenders of the
purchase-money (hereinafter the "Purchase-Money UCC security interests"); and
(b) That the amount secured by the Purchase-Money UCC security interests
shall not exceed the specific purchase cost of said equipment; and
(c) The term of the credit secured to buy the Purchase-Money Equipment
(and likewise, the duration of the Purchase-Money UCC security interests) shall
not exceed an ordinarily prudent commercial term; and
(d) No other Equipment or rights shall be secured by the Purchase-Money
UCC security interests; and
(e) Upon full repayment of the amounts secured by the Purchase-Money
Equipment, as reflected in the Purchase-Money UCC security interests, these
interests shall be satisfied and the Government's second UCC security interest
will ascend to first priority.
THE EQUIPMENT SHALL BE INVENTORIED sufficiently to describe with certainty in
the security agreement and associated UCC filing. The inventory shall be valued
by appraisers acceptable to the Government. The inventory and appraisals shall
be at the Borrower's cost and paid before this loan is closed, unless this
requirement is specifically waived by the Government.
THE UCC SECURITY AGREEMENT SHALL CONTAIN the following provisions:
(a) That the Government may enter upon any premises where the Equipment
may be located and marshal, secure, protect, and do all things necessary to
preserve the Equipment immediately upon the Borrower's default, but before any
judicial action regarding such default; and
(b) Such other provisions as the Government deems necessary to protect
its interest; and
(c) Omega Protein, Inc., formerly Zapata Protein (USA), Inc., and Omega
Protein Corporation, formerly Marine Genetics Corporation, agree that neither
corporation will enter into
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any transaction or agreement with any party which will result in that party
having a secured interest in the Equipment unless that party first enters into a
written agreement, with provisions acceptable to the Government, that:
(i) Except for purchase money lien holders, recognize the
Government's senior interest in, and sole rights to, the equipment or proceeds
of the Equipment's liquidation; and
(ii) Agree not to interfere in any way with, but instead to cooperate
in all reasonable ways with, the Government entering upon any property owned or
leased by the Borrower in order to marshal, secure, protect, and do all things
necessary to preserve the Equipment.
2. THE REAL PROPERTY includes:
A Deed of Trust in the full amount of the FOG Debt, on such real property, as
more fully described in Exhibit 1, attached, owned by Borrower, together with
all improvements thereon which comprise the Borrower's fisheries processing
facility in Reedville, Virginia.
3. THE GUARANTEE: An unconditional guarantee of repayment of the FOG Debt
will be given to the Government by Omega Protein Corporation, formerly Marine
Genetics Corporation, (the "Guarantor").
ARTICLE III. ADDITIONAL COLLATERAL
1. Individual Transferable Quotas: Should a limited fisheries access system
be initiated at some future date under which the Borrower is granted a
transferable fishery conservation and management allocation (including, but not
limited to, allocations, permits, quotas, licenses, cage tags, or any other
fisheries access restriction or right, however characterized, of whatsoever
nature) affecting, necessary for, or in any other way, however characterized,
associated with any of the property included in the Collateral, the Borrower
agrees to grant to the Government a full senior security interest in such
allocation by whatsoever means deemed by the Government to be appropriate
(including, but not limited to, the Borrower's execution of security agreements
and the filing of financing statements under the UCC). Further, if the Borrower
fails to do so, the Borrower agrees that the Government may use, for the purpose
of executing and otherwise perfecting whatever documents may be required to
effect the grant to the Government of such a full security interest in such
fisheries conservation and management allocation, the attorney-in-fact authority
conferred upon the Government by ARTICLE XI of this agreement.
2. OTHER COLLATERAL: Any new, different, substitute or other collateral
which may, from time to time, be provided by Borrower or Guarantor to the
Government, will be subject to all of the covenants and provisions of all of the
documents executed in connection with this transaction, including, but not
limited to the Deed of Trust and Security Agreement, the Ship Mortgage, this
Financial Agreement, the Guaranteed Note, the Promissory Note, and UCC security
interests.
ARTICLE IV. GOVERNMENT'S PRIOR WRITTEN CONSENT REQUIRED
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Without the prior written consent of the Chief, Financial Services Division,
National Marine Fisheries Service, which consent will not unreasonably be
withheld: (1) The Borrower may not take any of the following actions; and (2)
The Guarantor may not take any of the actions listed in Paragraphs 1 through 8,
below.
1. PAY TO ANY OFFICER, partner, shareholder, or any other person, any salary,
commission, bonus, management fee, dividend or other consideration, however
characterized, in excess of either reasonable industry standards or ordinary
financial prudence for companies of the Borrower's size and financial condition
at the time that such consideration is paid, and Borrower bears the burden of
proving reasonability.
2. PURCHASE OR REDEEM ANY SHARES OF ITS OWN STOCK.
3. MAKE ANY ADDITIONAL INVESTMENT (excluding purchases, etc. in connection
with routine/continuing maintenance and preservation of the Borrower's property
and excluding acquisition of capital assets representing the reinvestment of
involuntary conversion proceeds in assets similar to those in respect of which
the Borrower has received such involuntary proceeds providing such proceeds are,
or are committed to be so reinvested within 90 days after receipt thereof) in,
or incur any additional liability for, the purchase, acquisition, lease, or
other use, however characterized, of any real property, machinery, equipment,
fixtures, furniture, or fixed property in connection with the Borrower's present
level of operations in any one fiscal year in excess of an aggregate of five
percent of the Borrower's total assets.
4. START ANY NEW BUSINESS OR ACQUIRE ANY OTHER BUSINESS, or the assets of any
other business, whether by purchase, merger, consolidation, affiliation, or any
other means, however characterized, whatsoever except as may otherwise be
permitted herein, or sell, liquidate, dissolve, spin-off, split-up or in any
other way, however characterized, dispose of its own assets except as may be
required in the normal course of operations reasonably necessary to carry on its
day-to-day business.
5. GUARANTEE OR BECOME CONTINGENTLY LIABLE in any way as surety, endorser,
creditor, co-maker, accommodation maker, or in any other way, however
characterized, for the debt or obligations of any party whatsoever, except as
may be permitted herein or required in the normal course of operations
reasonably necessary to carry on day-to-day business activities.
6. ALLOW ITSELF TO BE ACQUIRED BY, or otherwise reorganized into, however
characterized, any other Company, unless the acquiring Company or reorganized
entity is reasonably acceptable to the Government and agrees to:
(a) provide the Government a 100% unconditional guarantee of all debt
actually or contingently owed the Government; and
(b) be bound by these covenants; and
(c) be bound by such other covenants as the Government shall reasonably
require to protect its interest; and
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(d) provide the Government such other assurances and security as the
Government may require.
7. ESTABLISH ANY TRUST, retirement fund or any other fund, however
characterized, for the benefit of itself or any party, or transfer any monies,
property, or other assets of any kind, however characterized, into any such fund
whether now or hereafter existing (and any such action shall be void and without
effect insofar as the Government's interests are concerned). /2/
8. TRANSFER ANY MONIES, property, or other assets, however characterized, to
any party by way of gift or by any other means, however characterized, for any
consideration less than payment by such party of the full and fair market value
thereof (and any such action shall be void and without effect insofar as the
Government's interests are concerned); provided, however, that reasonable
transfers not significantly affecting the Borrower's net worth, and not
inconsistent with the Borrower's or the Guarantor's obligation to protect the
Government from loss by preserving its net worth, shall be exempted.
9. MAKE ANY DISTRIBUTION OF BORROWER'S ASSETS for compensation (including
salaries, withdrawals, fees, bonuses, commissions, drawing accounts, and other
payments, whether directly or indirectly, in money or otherwise, hereinafter
"compensation") for services, or give any preferential treatment, make any
advances, directly or indirectly by way of loans, gifts, notes, or otherwise, to
any employee or Affiliate or increase the compensation of any person above that
set forth in any application or document submitted in connection with the
Guarantee. In the event an Affiliate increases the compensation paid to the
Borrower or any employee of the Borrower, beyond that authorized or consented to
by the Government, the compensation payable to such person by the Borrower will
be forthwith correspondingly reduced, the overpayment returned to the Affiliate,
and immediate notice thereof given to the Government by the Borrower.
ARTICLE V. BORROWER'S OBLIGATIONS & COVENANTS
The Borrower shall be bound by and do, perform or discharge all of the following
actions.
1. NOTICES TO THE GOVERNMENT: Within ten (10) days of its occurrence,
Borrower and the Guarantor must give the Government written notice of any of the
following:
(a) Any pending litigation, business reverse, casualty, loss, or any
other matter which diminishes:
(i) its ability to service any debt actually or contingently owed
the Government; or
(ii) its ability to perform any other duty or obligation owed the
Government; or
____________________________
/2/This provision excludes contributions, not exceeding $2,000 per year per
person, to any such party's IRA, Keogh, or 401K account. Any contributions in
excess of $2,000 per year per person to any other retirement account, and any
contributions in any amount to any trust or other fund of whatsoever kind, must
be approved in advance and in writing by us.
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(iii) its ability to fully and faithfully perform any covenant with
the Government; or
(iv) the value of any property or other assets pledged to the
Government; or
(v) the net worth of any party against whom the Government has
recourse for this debt.
(b) The institution of any suit, which demands $100,000 or more, against
the Borrower or others deemed by the Government to affect adversely its interest
hereunder, in the Note or otherwise.
ARTICLE VI. FINANCIAL REPORTING TO AND INSPECTIONS BY
THE GOVERNMENT
1. BORROWER AGREES TO PROVIDE THE GOVERNMENT AT THE END OF EACH OF ITS TAX OR
ACCOUNTING YEARS, a certified correct copy of:
(a) a balance sheet; and
(b) an income and expense statement for the preceding twelve months; and
(c) an aging report of all receivables outstanding; and
(d) an inventory report for all inventory maintained at the end of each
year.
2. CERTIFICATION OF FINANCIAL INFORMATION: Borrower agrees that:
ANNUALLY: At the end of each fiscal year, said items, [VI, 1(a) through 1(d)]
will be audited by independent certified public accountants who are acceptable
to the Government.
ALL ANNUAL financial reports required hereunder shall include a certification
from the Borrower's Chief Financial Officer that either:
(a) There has been no default, as provided by the security instruments,
during the reporting period; or
(b) There has been a default, as provided by said security instruments,
during the reporting period. In this case the nature, extent, prospective
consequences, and all other relevant details of such default shall be fully set
forth in such certification.
3. INCOME TAX RETURNS: All tax returns shall be timely filed /3/ and a copy
of Borrower's Federal Income Tax Return, along with all supporting schedules,
must be delivered to the Government within 15 days of its filing or issuance.
Borrower agrees to execute a consent and
____________________________
/3/ Timely filing shall include valid extensions filed with the Internal Revenue
Service.
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waiver, valid so long as Borrower owes a debt to the Government, which allows
the Internal Revenue Service to release directly to the Government, Borrower's
Federal Income Tax Returns, whenever the Government requests same. /4/
4. BORROWER TO DELIVER ALL REQUIRED FINANCIAL STATEMENTS, notices, returns or
reports to the Government's Southeast Regional Financial Services Branch. All
financial statements shall be delivered within 90 days of the close of the
fiscal or accounting year, or such quarter in such year, to which they relate.
5. METHOD OF BOOKKEEPING: Borrower will, at all times, keep proper books of
account in a manner satisfactory to the Government, including financial and
operating statements including schedules showing all compensation paid by the
Borrower.
6. GOVERNMENT INSPECTIONS: Permit the Government, or any representative
selected by the Government, in such manner and at such times as the Government
may require, to (a) make inspections and audits of any books, records, papers,
or other documents /5/ of whatsoever nature in the custody and control of the
Borrower, Guarantor, or any other entity, relating in any way to the financial
or business condition or prospects of the Borrower, or Guarantor, including the
making of copies thereof and extracts therefrom, and (b) make inspections and
appraisals of any of the Borrower's or Guarantor's physical assets.
7. BORROWER TO PAY THE COST OF ANNUAL INSPECTIONS: The cost of annual
inspections, audits, or appraisals shall be paid by the Borrower.
8. GUARANTOR'S OBLIGATIONS: Paragraphs 1, 2, 3, 4, and 6, above, of this
ARTICLE VI, apply to the Guarantor. Additionally, the Guarantor shall provide
to the Government, at the end of each tax year, a certified correct copy of its
Statement of Financial Condition, and if applicable, its SEC-10K Report.
_________________________
/4/ Borrower agrees to execute IRS Form Nos. 4506 and 8821, thereby implementing
the provisions of 26 USC (S)6103(c). Failure to do so constitutes an event of
default.
/5/ Including but not limited to off-loading receipts, fish-sale receipts,
business transaction journals, etc.
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ARTICLE VII. GUARANTEE FEES
1. THE BORROWER AGREES TO PAY TO THE GOVERNMENT the amount required for the
payment of each Guarantee fee at the rate of 1% per year, first, on the date
hereof and, thereafter, on or before the anniversary date of the Guaranteed
Note. In the event the Government at any time determines and gives notice to
the Borrower that the amount of any fee paid under the Guarantee is not correct
the Borrower shall within thirty (30) days after receipt of such notice pay the
Government the amount of any deficiency specified in said notice. In the event
that the fee paid by the Borrower to the Government is in excess of the amount
required by the Guarantee, such excess shall be credited to the account of the
Borrower. In the event that Borrower fails to pay a Guarantee fee, said fee
shall be deemed to be an indebtedness of the Borrower and shall be secured by
the Deed of Trust and Security Agreement the Ship Mortgage, and until paid shall
bear interest at the same rate as that provided in the Note, and upon
acceleration of the amounts owed under the Note shall bear interest at the
accelerated rate.
2. ALL FEES SHALL BE PAID BY THE DELIVERY by the Borrower to the Government
in person or by mail addressed to the Government, by check or money order in the
required amount payable to the order of the Government, together with
identification of the specific Guarantee to which the fee relates and the period
covered by the payment.
3. THE BORROWER AGREES THAT ALL AMOUNTS PAID BY IT IN ACCORDANCE WITH THIS
SECTION SHALL BE AS FOLLOWS:
(a) THE FEE REQUIRED FOR THE GUARANTEE shall be computed on the average
principal amount of the Promissory Note outstanding and any amounts which are
due and owing under said Promissory Note during the annual period covered by
said fee.
(b) FEES SHALL BE SUBJECT TO REDUCTION for erroneous calculations, for
voluntary prepayments made under the Note and other security documents, and for
extraordinary payments made under the Note and other security documents, such as
proceeds of insurance upon total loss applied in reduction of principal and
additional payments contingent on earnings. Fees shall be subject to increase
for erroneous calculations and for payments required under the Note and other
security documents, which are delinquent.
(c) THE PAYMENT OF THE INITIAL FEE is being made to the Government
concurrently with the execution and delivery of the Guaranteed Note, the receipt
whereof by the Government is hereby acknowledged, and covers a twelve-month
period commencing with the date hereof.
(d) EACH FEE SHALL BE DEEMED TO BE FULLY EARNED as of the commencement
of the period to which it is applicable. No refund will be made by the
Government of the initial fee paid or of any subsequent annual fee, or deficient
fee applied in payment in accordance with this SECTION in the event the
Guarantee shall terminate, except as provided in this SECTION.
(e) IN THE EVENT THE GUARANTEE SHALL TERMINATE, the obligation to pay
further fees hereunder (other than deficient fees) shall cease as of the time of
such
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termination. If payment under the Guarantee shall have been properly demanded
and shall not have been made, for any reason (other than under the conditions
under which the Government is not required to make payment under the Guarantee)
within the thirty-day period from proper demand, the obligation to pay further
premium charges hereunder (other than deficient premium charges) shall cease as
of the last time the Government shall have been obligated to make payment under
the Guarantee.
(f) IF AT THE TIME OF TERMINATION of the Guarantee the Government holds
any excess fee or any annual fee which has not been applied in payment in
accordance with this SECTION (or the time for application of which has not
arrived), such excess fee shall be (i) refunded to the Borrower if the Guarantee
shall terminate pursuant to payment in full of the Note and (ii) retained by the
Government as collateral security for the payment of the Note and any amounts
due under the security documents, and any sum due to the Government if the
Guarantee shall terminate pursuant to payment of the Guarantee by the Government
or if there is a failure of the holder of the Guaranteed Note to properly demand
payment of the Guarantee from the Government within 60 days of notification of a
default under the Guaranteed Note by the Government and the Guarantee is
terminated. If payment of the Guarantee shall have been demanded and shall not
have been made, for any reason (other than under the conditions under which the
Government is not required to make payment of the Guarantee) within the thirty-
day period therefor, any excess fee or any annual fee which has not been applied
in payment in accordance with this SECTION (or the time for application of which
has not arrived), as of the time the Government shall have been obligated to
make payment under the Guarantee, shall be retained by the Government as
indemnity.
ARTICLE VIII. LOUISIANA LAW TO GOVERN
To the extent not governed by the laws of the United States, all provisions of
this Financial Agreement shall be construed, given effect, and enforced
according to the laws of the State of Louisiana. With respect to any claim or
proceeding relating to this Financial Agreement, the Borrower and Guarantor
hereby consent to and subject themselves to the jurisdiction of the state and
federal courts located in the State of Louisiana, and agree that the venue of
any action or proceeding relating to this Financial Agreement shall lie
exclusively in said state. The parties hereto acknowledge and agree, however,
that in the event that an action to foreclose a Ship Mortgage or Deed of Trust
and security agreement is brought, it will be brought pursuant to the laws of
the state where the real property is located and the parties hereto hereby
consent to and subject themselves to the jurisdiction of the courts of said
state.
ARTICLE IX: DEFAULT
1. THE OCCURRENCE OF ANY OF THE FOLLOWING CONSTITUTES AN EVENT OF DEFAULT:
(a) ANY FAILURE TO OBSERVE, PERFORM, COMPLY WITH AND DISCHARGE ALL OF THE
COVENANTS, CONDITIONS, AND OBLIGATIONS WHICH ARE IMPOSED ON:
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(i) BORROWER by this Title XI Financial Agreement, the Promissory
Note, dated May 12, 1998, Deed of Trust and Security Agreement,
dated, May 12, 1998, and First Preferred Ship Mortgage on the fishing
vessel GRAND CALLIOU, Official Number 509018 dated May 12, 1998, and
any other agreement or document executed in connection with this
Financial Agreement and the Note, concurrently or otherwise,
inclusive of amendments thereto, in connection with this Financial
Agreement, or subsequent amendment or agreement, regardless of
whether or not the Borrower shall be a party to said agreement or
document, and such default shall continue for thirty (30) days; or
(ii) ANY GUARANTOR by any Guaranty Agreement, whether or not the
Borrower is party to said agreement, and such default shall continue
for thirty (30) days; or
(b) ANY FAILURE TO PAY OR MAKE PAYMENTS ON:
(i) INTEREST ON THE NOTE OR THE GUARANTEED NOTE when and as the same
shall become due and payable as therein provided, and such default
shall continue for thirty (30) days; or
(ii) PRINCIPAL OF THE NOTE OR THE GUARANTEED NOTE when and as the
same shall become due and payable, whether at maturity, by notice of
acceleration, or otherwise, and such default shall continue for
thirty (30) days; or
(iii) GUARANTEE FEES as required by ARTICLE VII of this document,
and such default shall continue after ten (10) days written notice;
or
(c) FINANCIAL EVENTS:
(i) Borrower makes a general assignment for the benefit of the
Borrower's creditors; or
(ii) Borrower loses the right to do business, by forfeiture or
otherwise; or
(iii) A receiver or receivers of any kind whatsoever, whether
appointed or not, in admiralty, bankruptcy law, common law, or equity
proceedings, and whether temporary or permanent, shall be appointed
for all property of the Borrower; or
(iv) PETITION OR OTHER PROCEEDING OR ACTION IN BANKRUPTCY, regarding
the Borrower, is filed by the Borrower or by creditors of the
Borrower; or
(d) FAILURE TO MAINTAIN ANY OF THE INSURANCE COVERAGE as outlined in
Paragraph 4: Insurance Requirements, found on pages 14 and 15 of the Approval
Letter.
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(e) A MATERIAL MISREPRESENTATION OR UNDISCLOSED FACT, made or omitted in
any application, agreement, affidavit, or other document, submitted in
connection with the Guarantee, on behalf of, or for the benefit of, or by the
Borrower; or
(f) INSTITUTION OF ANY SUIT AGAINST THE BORROWER or others deemed by
the Government to affect adversely its interest hereunder, in the Note or
otherwise;
(g) IMPAIRMENT OF ANY COLLATERAL.
2. GOVERNMENT ACTIONS UPON OCCURRENCE OF AN EVENT OF DEFAULT, whether or not
the Guaranteed Note has been paid to the Bank by the Government, the Government
may, in the Government's discretion, so long as such event of default shall be
continuing, do any or all of the following:
(a) DECLARE THE NOTE TO BE DUE AND PAYABLE IMMEDIATELY and upon such
declaration the entire principal of and interest on the Note shall become and be
immediately due and payable, and thereafter shall bear interest at eighteen
percent (18%) per year unless such would violate the usury laws of the state
where the Note and the Guaranteed Note are executed, in which case the maximum
legal rate of that state shall prevail; and/or
(b) BRING SUIT IN COURT OF COMPETENT JURISDICTION, at discretion of the
Government, to obtain judgment for any and all amounts due under the Note, or
otherwise hereunder, and collect the same out of any and all property of the
Borrower; and/or
(c) FORECLOSE THE SHIP MORTGAGE, DEED OF TRUST AND SECURITY AGREEMENT AND
SELL any real and/or personal property which secures the FOG Debt; and/or
(d) RETAKE AND/OR SELL THE EQUIPMENT WITHOUT LEGAL PROCESS as provided by
the Ship Mortgage, Deed of Trust and Security Agreement, or any other document
which has been executed by or on behalf of the Borrower; and/or
(e) OVERDUE GUARANTEE FEES shall, beginning with the first day such
guarantee fees are due but unpaid, be added to the principal of the Promissory
Note, earn interest at the same rate as specified in the Promissory Note for
overdue principal, and be secured by all of the collateral and security
documents. This provision will not be deemed a waiver of any of the
Government's rights or other remedies, as set out above, and elsewhere, and such
overdue guarantee fees shall remain due and payable as originally scheduled.
ARTICLE X. TITLE XI FINANCIAL AGREEMENT GOVERNS; SEVERABILITY
To the extent that any of the terms and conditions of this Financial Agreement
are inconsistent or in contradiction with the terms and conditions of any other
agreement between the Government and the Borrower, including but not limited to
previously executed Title XI financial agreements, then the terms of this
Financial Agreement shall govern, otherwise, all such terms and conditions of
such other agreements will continue with full force and effect.
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<PAGE>
The unenforceability or invalidity of any provision(s) of this Title XI
Financial Agreement shall not render any other provision(s) herein unenforceable
or invalid.
ARTICLE XI. POWER OF ATTORNEY
Borrower hereby irrevocably appoints the Government the true and lawful
attorney of the Borrower, in its name and stead to execute any other document
necessary to perfect or protect the Government's security interests regarding
this transaction and/or all aspects of the FOG Debt.
ARTICLE XII: ENVIRONMENTAL HAZARD INDEMNIFICATION
Borrower and Guarantor hereby agree to the following with respect to
environmental hazards or contamination associated with the Collateral:
A. That, at closing, Borrower and Guarantor will execute a Certification and
Indemnification Agreement Regarding Environmental Matters which provides that
they shall, jointly and severally, be liable for any and all contamination,
cleanup, and environmental actions against the Collateral. That they are,
jointly and severally, liable for all costs and claims associated with or
resulting from any claim, cleanup, or lien imposed against any of the
Collateral.
B. That Borrower and Guarantor will hold the Government harmless from any
claim or duty arising from environmental defects or hazards associated with the
Collateral.
C. At closing, Borrower must certify in writing that, to the best of its
knowledge, there are currently no defects or environmental hazards on or about
the Collateral.
In the event this loan is not closed because of the discovery of such defects
or environmental hazards previously unknown to Borrower, the Government will
refund the commitment fee less all costs incurred by the Government in
attempting to close.
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<PAGE>
IN WITNESS WHEREOF, the Borrower has executed this Title XI Financial
Agreement the day and year first above written.
GOVERNMENT:
UNITED STATES OF AMERICA
Secretary of Commerce
National Oceanic and Atmospheric Administration
____________________________________
Chief, Financial Services Branch
Southeast Region
National Marine Fisheries Service
Attest: BORROWER: Omega Protein, Inc.
By: By:
--------------------------- ----------------------------
Title: Secretary Title:
------------------------ -------------------------
Date: , 1998 Date: , 1998
------------------------- --------------------------
(SEAL)
Attest: GUARANTOR: Omega Protein Corporation
By: By:
--------------------------- ----------------------------
Title: Secretary Title:
------------------------ -------------------------
Date: , 1998 Date: , 1998
------------------------- --------------------------
(SEAL)
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<PAGE>
EXHIBIT 10.6
SECURITY AGREEMENT
This is a Security Agreement between OMEGA PROTEIN, INC., ("Debtor") and
the UNITED STATES OF AMERICA ("Secured Party").
RECITALS
Debtor and certain other entities have entered into a Title XI Financial
Agreement with Secured Party dated this date (the "Financial Agreement"). Words
which are capitalized herein and in the attached Exhibit A which are defined in
the Financial Agreement shall have the same meanings as given in the Financial
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in the
Financial Agreement, the parties do hereby agree as follows:
1. Grant of a Security Interest. In order to secure the payment of the
Promissory Note, Debtor does hereby grant Secured Party a security interest in
the collateral described on Exhibit A hereto ("Collateral").
2. Indebtedness Secured. This Security Agreement shall secure the payment of
all amounts owing under the Promissory Note and all other amounts owed by the
Debtor to the Secured Party.
3. Events of Default. All of the events of default enumerated in the Financial
Agreement shall constitute events of default under this Security Agreement, and
the effect of the occurrence of any event of default shall have the same effect
specified in the Financial Agreement. Secured Party shall have all the rights
and remedies available to Secured Party under the Virginia Business and Commerce
Code and such other rights and remedies as are available under applicable law,
subject to the provisions of the Financial Agreement. Immediately upon the
occurrence of an event of default, but before any judicial action regarding such
default, Secured Party may enter upon any premises where the Collateral may be
located and marshal, secure, protect, and do all things necessary to preserve
the Collateral.
4. Financial Agreement Governs. In the event of a conflict between the
Financial Agreement and this Security Agreement, the Financial Agreement shall
control. Specifically, and without limiting the foregoing, the terms of the
security interest granted hereunder are subject to the provisions of Article II,
Section 4 of the Financial Agreement.
DATED: May , 1998
<PAGE>
Omega Protein, Inc.
By:
---------------------------------
Controller and Assistant Treasurer
United States of America
By:
----------------------------------
Name:
Title: Chief, Financial Services Branch
Southeast Region
NOAA, National Marine Fisheries Services
<PAGE>
EXHIBIT 10.7
Case No. OG-G-867
- -----------------
FIRST PREFERRED SHIP MORTGAGE
TO THE UNITED STATES OF AMERICA
ARTICLE I: CREATION OF ENCUMBRANCE
SECTION 1. PREFERRED SHIP MORTGAGE: THIS MORTGAGE, dated the day of
, 1998, by Omega Protein, Inc., formerly Zapata Protein (USA),
Inc., 1514 Martens Drive, Hammond, Louisiana, 70401, owning 100%, (herein, the
"BORROWER") to the United States of America, acting by and through the Secretary
of Commerce, NOAA, National Marine Fisheries Service (NMFS), Financial Services,
Southeastern Branch, 9721 Executive Center Drive North, St. Petersburg,
Florida 33702 (herein, the "GOVERNMENT"),
WITNESSETH:
SECTION 2. ENCUMBERED VESSEL: WHEREAS, the BORROWER is the sole owner of
the fishing VESSEL, GRAND CALLIOU, O.N. 509018, more fully described in
ARTICLE I, Section 4, of this Mortgage; and
SECTION 3. OBLIGATIONS SECURED: WHEREAS, the BORROWER, in consideration
of the issuance of a certain Guarantee by the GOVERNMENT (the "Guarantee"),
pursuant to Title XI of the Merchant Marine Act, 1936, as amended (the "Title
XI"), guaranteeing the payment of the unpaid interest on, and the unpaid balance
of the principal on a certain promissory note dated the date hereof, executed
and delivered by the BORROWER in the principal amount of $668,399.00 (the
"Guaranteed Note"), has executed and delivered to the GOVERNMENT its promissory
note dated , 1998, in the principal amount of 668,399.00, a copy of
which is attached hereto as Exhibit 1 (the "Promissory Note"), and has agreed to
execute and deliver this First Preferred Ship Mortgage (the "Mortgage") to the
GOVERNMENT (for the purpose of securing the payment of the principal of and
interest on the Guaranteed Note and the Promissory Note (the "Notes") in
accordance with its terms and the Mortgage.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, receipt of which is hereby acknowledged by the BORROWER,
and in order to secure the payment of the principal of and interest on the
Notes, any amended, substitute or subsequent Notes, and the payment of all other
sums arising from this transaction, any future advances or refinancing of this
debt, or any other sums that may hereafter become secured by this Mortgage, and
to secure the performance and observance of and compliance with the covenants,
terms, and conditions herein, and in the Notes contained, and in all other
documents executed by the BORROWER and the GOVERNMENT, including, but not
limited to all Approval-in-Principle Letters and the Title XI Financial
Agreement, and to secure the payment of all other indebtedness at any time
hereafter owing by the BORROWER to the GOVERNMENT, has granted, conveyed,
mortgaged, pledged, assigned, transferred, set over, and confirmed and does by
these presents grant, convey, mortgage, pledge, assign, transfer, set over, and
confirm unto the GOVERNMENT the whole of the VESSEL described in SECTION 4,
below.
SECTION 4. SECURITY AGREEMENT: The VESSEL subject to this Mortgage is
that certain oil screw VESSEL named GRAND CALLIOU, Official Number 509018, of
about 537 gross tons and 366 net tons, register, together with all her
accessories and appurtenances, including, but not limited to anchors, apparel,
boats, boilers, cables, catch, chains, charter hire, electronics, engines,
equipment, fishing gear, freight, furniture, machinery, masts, motors, nets,
product, related gear, rents or profits, rigging, sails, skiffs, spare parts,
spars, substitutions, supplies, tackle, and parts and accessories affixed to or
used in connection therewith, whether now owned or hereafter acquired, whether
on board or not, and all additions, improvements, renewals, and replacements
hereafter made in, on, or to the said VESSEL or any part thereof, and in, on, or
to its equipment and appurtenances as aforesaid (herein the "VESSEL"), BORROWER
further grants to the GOVERNMENT, pursuant to the Uniform Commercial Code of
Louisiana, a security interest in said goods, together with all of BORROWER'S
accounts receivable, contract rights, contracts, general intangibles, inventory,
Individual Transferable Quotas, licenses, permits, and proceeds of any of the
foregoing. In the event of a foreclosure sale, under the terms of this Mortgage,
or under judgment of a court, all property herein described may, at the option
of the GOVERNMENT, be sold as a whole or in parts, and it shall not be necessary
to have present at the place of sale the property or any part thereof. With
respect to the property hereinabove described, this Mortgage shall constitute a
security agreement between the BORROWER and the GOVERNMENT. The GOVERNMENT shall
have all of the rights conferred on secured parties by the Uniform Commercial
Code. Such rights shall be
<PAGE>
cumulative of all other rights of the GOVERNMENT hereunder. It is expressly
agreed that if on default the GOVERNMENT should proceed to dispose of the
property, or any part thereof, in accordance with the provisions of the Uniform
Commercial Code, ten (10) days notice by the GOVERNMENT to the BORROWER shall be
deemed to be reasonable notice under any provisions of the Uniform Commercial
Code requiring such notice; provided, however, that the GOVERNMENT may at its
option dispose of the property, or any part thereof, in accordance with the
GOVERNMENT'S rights and remedies pursuant to the other provisions of this
Mortgage, in lieu of proceeding under the Uniform Commercial Code.
Should a limited fisheries access system be initiated at some future date under
which the BORROWER is granted, or has been granted, prior to the date of this
Mortgage, a transferable fishery conservation and management allocation
(including, but not limited to, allocations, permits, quotas, licenses, cage
tags, or any other fisheries access restriction or right (however characterized)
of whatsoever nature affecting, necessary for, or in any other way (however
characterized) associated with any of the property included in or subject to the
Security Documents, the BORROWER agrees that it shall grant to the GOVERNMENT a
full senior security interest in such allocation by whatsoever means deemed by
the GOVERNMENT (in the GOVERNMENT'S sole discretion) to be appropriate
(including, but not limited to, the BORROWER'S execution of security agreements
and the filing of financing statements under the U.C.C.). Further, if the
BORROWER fails to do so, the BORROWER agrees that the GOVERNMENT may (in the
GOVERNMENT'S sole discretion) use, for the purpose of executing, delivering, and
otherwise perfecting whatever documents may be required to perfect the grant to
the GOVERNMENT of such a full security interest in such fisheries conservation
and management allocation, the attorney-in-fact authority conferred upon the
GOVERNMENT by the Security Documents.
SECTION 5. FINANCING STATEMENT: Some of the items of property described
herein are goods that are or are to become accessories and appurtenances to the
VESSEL described herein, and it is intended that as to those goods, this
Mortgage shall be effective as a financing statement. Information concerning the
security interest created by this instrument may be obtained from the BORROWER
or the GOVERNMENT, at the addresses set out in the first paragraph of this
Mortgage.
TO HAVE AND TO HOLD all and singular the above-mortgaged and described
property unto the GOVERNMENT forever;
PROVIDED ALWAYS, and the condition of these presents is such, that if the
BORROWER, its successors or assigns shall pay, or cause to be paid, the
principal of and interest on the Notes in accordance with the terms of the Notes
and the Mortgage and shall pay any and all other sums that may hereinafter
become secured by this Mortgage in accordance with the terms hereof, and shall
keep, perform, and observe all and singular the covenants and promises in the
Notes and in the Mortgage contained, expressed, or implied to be kept,
performed, and observed by or on the part of the BORROWER, then this Mortgage
and the estate and rights hereby granted shall cease, determine, and be void;
otherwise to remain in full force and effect.
The GOVERNMENT hereby covenants and agrees that the VESSEL is to be held by
the BORROWER subject to the further covenants, conditions, and uses hereinafter
set forth as follows:
ARTICLE II: BORROWER'S OBLIGATIONS
SECTION 1. CITIZENSHIP AND TITLE REQUIREMENTS: The BORROWER (i) is and
shall continue to be a citizen of the United States as defined in SECTION 2 of
the Shipping Act, 1916, as amended, for coastwise trade, and (ii) is entitled to
own and operate the VESSEL under her marine document and shall maintain such
marine document in full force and effect. The Notes and this Mortgage have been
duly executed and delivered, and the Notes in the hands of the holder thereof is
and will be a valid and enforceable obligation of the BORROWER in accordance
with its terms. The BORROWER lawfully owns and is lawfully possessed of the
whole of the VESSEL free from any lien whatsoever except the lien of this
Mortgage, and other liens permitted by Section 8 of ARTICLE II, and covenants
that it will warrant and defend the title and possession thereto and every part
thereof for the benefit of the GOVERNMENT against the claims and demands of all
persons or entities.
2
<PAGE>
SECTION 2. INSURANCE REQUIREMENTS
(a) THE BORROWER WILL, AT ALL TIMES AND AT ITS OWN EXPENSE, KEEP THE
VESSEL INSURED WITH RESPONSIBLE UNDERWRITERS and through responsible brokers,
all in good standing and satisfactory to the GOVERNMENT, fully and adequately
protecting the VESSEL and the GOVERNMENT'S interest therein against all marine
perils and disasters and all hazards and risks, in any way arising out of the
ownership, operation, or maintenance of the VESSEL, including but not limited to
insurance as follows:
(i) WHILE BEING OPERATED, NAVIGATING HULL INSURANCE must be in an
amount equal to the full fair market value of the VESSEL. The policy valuation
on the hull shall not exceed the aggregate amount insured by hull policies. The
hull insurance shall be placed under the form of policy known as American
Institute of Marine Underwriters form, or under such other form of policy as the
GOVERNMENT may approve, insuring against the usual risks covered by such
policies, including four-fourths running down clause, Inchmaree clause, and
breach of warranty clause; and
(ii) WHEN AND WHILE THE VESSEL IS LAID UP, and in lieu of the
aforesaid navigating hull insurance referred to in (i) of this Section, port
risk insurance under forms of port risk policies approved by the GOVERNMENT.
(b) THE BORROWER EXPRESSLY COVENANTS AND AGREES TO KEEP THE POLICIES
RENEWED from time to time, to keep the same valid at all times for the amounts
aforesaid, and to keep the premiums thereon fully paid at all times so long as
this Mortgage shall be in effect; provided that the policies required by
paragraphs (a)(i) and (a)(ii) of this Section may provide, so long as no Event
of Default has occurred and is continuing, that payment of losses up to $100,000
or such other amount as may be approved by the GOVERNMENT, may be paid directly
to the BORROWER provided that the total amount of the loss, net of the
deductible does not exceed $100,000. The BORROWER shall not do any act nor
voluntarily suffer or permit any act to be done whereby insurance is or may be
suspended, impaired, or defeated, and shall not suffer nor permit the VESSEL to
engage in any voyage or to carry any cargo not permitted under the policy or
policies of insurance in effect, unless and until the BORROWER shall first cover
the VESSEL in the amount herein provided for, with insurance satisfactory to the
GOVERNMENT for such voyage or for the carriage of such cargo.
(c) IN THE EVENT THE BORROWER FAILS TO PROCURE ANY OF THE INSURANCE
hereinabove mentioned, or fails to perform any of the covenants and agreements
contained herein, the GOVERNMENT may, but shall be under no duty to, procure
such other or different insurance or coverage as it may deem advisable with
uncontrolled discretion in the GOVERNMENT as to the nature, form, type, class,
amount, and extent of such insurance or coverage; and all sums expended or
advanced by the GOVERNMENT in procuring such insurance shall be secured by and
shall be due and payable as provided in Article II, SECTION 8, hereof.
(d) ALL INSURANCE SHALL BE TAKEN OUT IN THE NAME OF THE BORROWER AND THE
GOVERNMENT as their interest may appear and policies and certificates shall
provide that there shall be no recourse against the GOVERNMENT for payment of
premiums and shall further provide for at least 20 days prior written notice to
be given to the GOVERNMENT by the underwriters in the event of cancellation or
modification. All original policies, binders, certificates, and covenants and
all endorsements and riders thereto shall be delivered to the GOVERNMENT for
approval and custody.
(e) ALL INSURANCE POLICIES OR CERTIFICATES SHALL PROVIDE THAT LOSSES
THEREUNDER SHALL BE PAYABLE TO THE GOVERNMENT. If no Event of Default exists
under this Mortgage, the GOVERNMENT may, in its discretion, pay, from the
proceeds of the insurance directly to the repairer, the amount of any authorized
repairs, or if the BORROWER shall have first fully repaired the damage to the
satisfaction of the GOVERNMENT and paid the cost thereof, to the BORROWER as
reimbursement therefor. Any balance remaining from the aforesaid insurance
proceeds will be applied as directed by the GOVERNMENT. If an Event of Default
exists, the GOVERNMENT shall retain such insurance and, if such Event of Default
is not cured, may apply the same in the manner provided in Article III,
SECTION 10, hereof.
(f) IN THE EVENT OF AN ACTUAL OR CONSTRUCTIVE TOTAL LOSS, or an agreed or
compromised total loss of or in case of requisition of title to the VESSEL, all
amounts payable therefor shall, subject to Article II, SECTION 2 hereof, be paid
to
3
<PAGE>
the GOVERNMENT and shall be applied first, to the payment of the expenses of the
GOVERNMENT in collecting such payments, and second, as provided in Article III,
SECTION 10, hereof.
(g) IN THE EVENT THAT ANY CLAIM OR LIEN IS ASSERTED AGAINST THE VESSEL for
loss, damage, or expense which is covered by insurance hereunder, and it is
necessary for the BORROWER to obtain a bond or supply other security to prevent
arrest of the VESSEL or to release the VESSEL from arrest on account of such
claim or lien, the GOVERNMENT, on request of the BORROWER, may, in the sole
discretion of the GOVERNMENT, and upon notice to the BORROWER, assign to any
person, firm, or corporation executing a surety or guarantee bond or other
agreements, to save or release the VESSEL from such arrest, all right, title,
and interest of the GOVERNMENT in and to said insurance covering said loss,
damage, or expense, as collateral security to indemnify against liability under
said bond or other agreement.
(h) PRIOR TO AN EVENT OF DEFAULT, protection and indemnity insurance will
be required to be maintained on the VESSEL that is the subject of the Preferred
Ship Mortgage in an amount acceptable to the GOVERNMENT.
SECTION 3. NO LIENS TO BE PLACED AGAINST THE VESSEL:
(a) Neither the BORROWER, any charterer, the Master of the VESSEL, nor any
other person has or shall have any right, power, or authority to create, incur,
or permit to be placed, imposed, or continued upon the VESSEL any lien
whatsoever other than the lien of this Mortgage or Permitted Liens as defined
herein.
(b) Permitted Liens. "Permitted Liens" means liens or other charges or
encumbrances:
(i) arising for damages out of tort covered by insurance except for
any deductible amounts applicable thereto, for wages of a stevedore when
employed directly by the owner, operator, master, ship's husband or agent of any
VESSEL, for wages of the crew of any VESSEL, for general average, for salvage,
including contract salvage, provided the same are paid immediately when due;
(ii) in favor of any person furnishing repairs, supplies, towage, use
of dry dock or marine railway, or other necessaries to a VESSEL on the order of
BORROWER, or of a person authorized by BORROWER, provided the same are paid
immediately when due.
(iii) imposed on any VESSEL for taxes or GOVERNMENTAL charges or
levies, provided the same are paid immediately when due;
(iv) incurred in the ordinary course of business of any VESSEL not
relating to money borrowed which (1) will be paid immediately when due, and
(2) which, in the aggregate, at any time are not significantly material to the
operations or financial condition of BORROWER; and
(v) arising by operation of law as a result of the modification of
the VESSEL, including mechanic's liens, provided the same are paid immediately
when due;
(vi) in favor of the United States of America, the United States
Department of Commerce, National Marine Fisheries Service, Financial Services
Division;
PROVIDED, HOWEVER, that with respect to the deductible amounts described in
clause (i) and liens or encumbrances of the type described in clauses (ii),
(iii) and (v) not arising from or incurred in the ordinary course of business of
BORROWER, BORROWER shall have set aside adequate reserves determined in
accordance with generally accepted accounting principles, provided that for such
deductible amounts and liens or encumbrances which, in the aggregate, exceed
US $100,000.00, such reserves are reasonably satisfactory to the GOVERNMENT and,
provided, further, that the Permitted Liens described herein shall include only
liens which are subordinate to, unless otherwise provided by, applicable law,
the lien of the security interest in each VESSEL granted to the GOVERNMENT.
As used herein, the term "immediately when due" shall mean the time when,
according to applicable law, customary industry practices, or a prior course of
dealing or other agreement between BORROWER and the lienholder, the lienholder
expects payment to be
4
<PAGE>
made; provided that, if BORROWER desires to contest an asserted lien, BORROWER
may do so if BORROWER acts in good faith and by appropriate proceedings and has
set aside the reserves described above.
SECTION 4. NOTICE OF MORTGAGE: The BORROWER shall carry a properly
certified copy of this Mortgage with the VESSEL's papers on board the VESSEL,
shall exhibit the same on demand to any person having business with the VESSEL,
or to any representative of the GOVERNMENT, and shall place and keep prominently
displayed in the pilot house, master's cabin, and engine room of the VESSEL a
framed, printed or typewritten notice reading as follows:
"NOTICE OF MORTGAGE: This VESSEL is covered by a First Preferred Ship Mortgage
given to the United States of America, under authority of the Ship Mortgage Act,
1920, as amended. Under the terms of said Mortgage, neither the owner of this
VESSEL, any charterer, the Master of this VESSEL, nor any other person has any
right, power, or authority to create, incur, or permit to be imposed upon the
VESSEL any liens, maritime or otherwise, other than the lien of said Mortgage
and liens for crew's wages, for wages of a stevadore when employed directly by
the owner, the operator, master or agent of this VESSEL, for salvage, or the
extent there are liens subordinate to the Mortgage, other liens incident to
current operation for repairs"
SECTION 5: NOTICES TO THE GOVERNMENT:
(a) OF ACTION AGAINST VESSEL: In the event that a suit or claim is filed
against the VESSEL, or if the VESSEL shall be levied upon or taken into custody,
or detained by any proceeding in any court, or tribunal, the BORROWER will,
within 72 hours, notify the GOVERNMENT by telegram or facsimile, confirmed by
letter, and the BORROWER will, within fifteen (15) days thereafter, cause the
VESSEL to be discharged.
(b) OF CASUALTIES OR DAMAGE TO THE VESSEL: Within 72 hours of the event,
the BORROWER shall furnish the GOVERNMENT full information regarding any
casualties or other accidents or damage to the VESSEL, including copies of any
supporting documents, i.e., accident reports, claims, etc.; provided that such
obligation shall not exist with respect to any casualty, accident, or damage
that is less than $50,000 in amount, or is covered by insurance (including any
deductible permitted by this Mortgage).
SECTION 6: MAINTENANCE AND INSPECTION COSTS:
(a) VESSEL MAINTENANCE: At all times, at the BORROWER'S own cost and
expense, the BORROWER will maintain and preserve the VESSEL in as good
condition, working order and repair as on the date of this Mortgage, ordinary
wear and tear excepted; provided, however, if subsequent to the date of this
Mortgage, the VESSEL is reconstructed or reconditioned, the BORROWER will keep
the VESSEL in as good condition, working order, and repair as the VESSEL was on
the date said reconstruction or reconditioning was completed, ordinary wear and
tear excepted. In addition to the foregoing, the BORROWER will keep the VESSEL
in as good condition as will enable her to pass such inspection as may be
required by marine underwriters as a condition of their writing such insurance
in such amounts as are required under this Mortgage.
(b) INSPECTION OF VESSEL: The BORROWER shall afford the GOVERNMENT or its
authorized representatives full and complete access to the VESSEL, in port or at
sea, at such times as the GOVERNMENT, in its sole discretion, may require, for
the purpose of inspecting or valuing the VESSEL, her cargo, log, and papers.
(c) BORROWER TO PAY THE COST OF ANNUAL INSPECTIONS, audits or appraisals,
provided for in Paragraphs 6(a) and 6(b), immediately above, within 30 days of
the GOVERNMENT's demand and all such amounts disbursed by the GOVERNMENT for
such purpose shall, until fully repaid by the BORROWER, be added (payable upon
the GOVERNMENT'S demand) to the BORROWER'S Promissory note to the GOVERNMENT and
shall earn interest at the same rate as the other principal of the BORROWER'S
Promissory Note and shall be secured by the Ship Mortgage and other securities
which secure the BORROWER'S Promissory Note to the GOVERNMENT.
SECTION 7. TAXES & FEES:
5
<PAGE>
(a) The BORROWER will pay and discharge when due and payable from time to
time all taxes, assessments, GOVERNMENTAL charges, fines, and penalties lawfully
imposed on the VESSEL.
(b) The BORROWER may fail to pay and discharge any taxes, assessments,
governmental charges, fines and penalties (together, "Charges") imposed on the
VESSEL so long as and to the extent that such Charges are being protested in
good faith by proper proceedings diligently pursued.
SECTION 8. REIMBURSEMENT OF GOVERNMENT EXPENDITURES: The BORROWER will
reimburse the GOVERNMENT for any and all expenditures which the GOVERNMENT may
elect to make from time to time to protect the security granted hereunder (in
the event of the BORROWER'S failure to do so), including, without limitation of
the foregoing, payment of taxes, repairs, insurance premiums, the discharge of
any lien, libel or seizure of the VESSEL, and expenses incurred by the
GOVERNMENT in retaking the VESSEL; and any such payment made by the GOVERNMENT
shall be for the account of the BORROWER, and the making thereof by the
GOVERNMENT shall not cure the BORROWER'S default in that regard nor constitute a
waiver of any right or remedy granted to the GOVERNMENT hereunder, and all sums
so expended by the GOVERNMENT or any liability incurred by it shall be
immediately due and payable and shall be deemed to be an indebtedness of the
BORROWER and secured by this Mortgage, and until paid shall bear interest at the
same rate as that provided in the Promissory Note.
SECTION 9: GOVERNMENT'S PRIOR WRITTEN CONSENT REQUIRED: The BORROWER
shall not, without prior written consent of the Chief, Financial Services
Division, National Marine Fisheries Service, take any of the following actions:
(a) SELL, MORTGAGE, TRANSFER, OR CHARTER THE VESSEL, and any such written
consent obtained from the GOVERNMENT to any one sale, mortgage, transfer, or
charter, shall not be construed to be a waiver of this provision with respect to
any subsequent proposed sale, mortgage, transfer, or charter. Any such sale,
mortgage, transfer, or charter of the VESSEL shall be subject to the provisions
of this Mortgage and to the lien it creates.
(b) REMOVE, ATTEMPT TO REMOVE, OR ALLOW THE VESSEL TO BE MOVED beyond the
Exclusive Economic Zone (EEZ) of the United States of America, as defined in 16
USC (S)1802(6)/1/, with the further limitation that the VESSEL may not be moved
to or from zones contiguous to the territorial seas of the Commonwealth of
Puerto Rico, U.S. Virgin Islands or Northern Mariana Islands without prior
written consent of the Chief, Financial Services Division, (NMFS). Further, it
is an event of default if VESSELS which are in foreign waters are not returned
to the EEZ of the continental United States upon written demand made by the
GOVERNMENT upon the VESSEL owner.
(c) TRANSFER PORT OF DOCUMENTATION OF THE VESSEL.
SECTION 10. COMPLIANCE WITH FEDERAL SHIP MORTGAGE ACT: The BORROWER will
comply with and satisfy all the provisions of the Ship Mortgage Act, 1920, as
amended, 46 USC 31301, et seq. in order to establish and maintain this Mortgage
as a Preferred Ship Mortgage upon the VESSEL.
SECTION 11. OPERATING RESTRICTIONS:
(a) DOCUMENTATION: The BORROWER will keep the VESSEL documented under the
laws of the United States.
- ------------------------------
/1/ 16 USC (S)1802(6): The Exclusive Economic Zone of the United States is a
zone contiguous to the territorial sea, including zones contiguous to the
territorial sea of the United States, the Commonwealth of Puerto Rico, the
commonwealth of the Northern Mariana Islands (to the extent consistent with the
Covenant and the United Nations Trusteeship Agreement), and the United States
overseas territories and possessions. The Exclusive Economic Zone extends to a
distance 200 nautical miles from the baseline from which the breadth of the
territorial sea is measured. In cases where the maritime boundary with a
neighboring State remains to be determined, the boundary of the Exclusive
Economic Zone shall be determined by the United States and other State concerned
in accordance with equitable principles.
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(b) LAWFUL OPERATION: The BORROWER will not cause or permit the VESSEL to
be operated in any manner contrary to law or contrary to any rules and
regulations which may from time to time be prescribed pursuant to law.
(c) IF THE GOVERNMENT'S WRITTEN CONSENT TO REMOVE THE VESSEL BEYOND THE
LIMITS OF THE UNITED STATES IS OBTAINED, the BORROWER will not abandon the
VESSEL in a foreign port. The BORROWER will not engage in any unlawful trade or
violate any law or carry any cargo that will expose the VESSEL to penalty,
forfeiture, or capture, and will not do, or suffer or permit to be done,
anything which can or may injuriously affect the documentation of the VESSEL
under the laws and regulations of the United States.
(d) UPON DEMAND BY THE GOVERNMENT TO THE MASTER OF THE VESSEL or the
BORROWER, the BORROWER will return the VESSEL to the EEZ of the United States
and, if the GOVERNMENT so demands, to a port of call chosen by the GOVERNMENT,
thereby revoking any prior consent extended by the GOVERNMENT with respect to
operation of the VESSEL outside the EEZ of the United States.
SECTION 12. SEVERABILITY CLAUSE: In the event that this Mortgage, the
Notes, or any provisions hereof or thereof shall be deemed invalid in whole or
in part by reason of any present or future law of the United States or any
decision of any authoritative court, said invalidity or unenforceability shall
not render any other provision(s) herein unenforceable or invalid; and the
remaining provision(s) shall remain in full force and effect.
SECTION 13. POWER OF ATTORNEY: If the documents at any time held by the
GOVERNMENT are deemed by the GOVERNMENT, for any reason, to be insufficient to
carry out the true intent and spirit of this Mortgage and the Notes, then from
time to time the BORROWER will execute on its own behalf such other and further
assurances and documents as in the opinion of counsel for the GOVERNMENT may be
required more effectually to subject the VESSEL to the payment of the principal
sum of the Notes, together with interest thereon, as in the Notes and this
Mortgage. Upon failure of the BORROWER so to do, the GOVERNMENT may execute any
and all such other and further assurances and documents, for and in the name of
the BORROWER and the BORROWER hereby irrevocably appoint the GOVERNMENT the
agent attorney-in-fact of the BORROWER so to do. Any expenses of the GOVERNMENT
in connection with the foregoing shall be a debt due from the BORROWER to the
GOVERNMENT in payment thereof and shall be secured by the lien of this Mortgage.
ARTICLE III: DEFAULT
SECTION 1. THE OCCURRENCE OF ANY OF THE FOLLOWING CONSTITUTES AN EVENT OF
DEFAULT:
(a) ANY FAILURE TO OBSERVE, PERFORM, COMPLY WITH AND DISCHARGE ALL OF THE
MATERIAL COVENANTS, CONDITIONS, AND OBLIGATIONS WHICH ARE IMPOSED ON:
(i) BORROWER by the Approval-in-Principle Letter, dated January 22,
1998, the Title XI Financial Agreement, dated , 1998, the
Promissory Note, this Mortgage and any other agreement or document executed in
connection with this Mortgage and the Note, concurrently or otherwise, inclusive
of amendments thereto, in connection with this Mortgage, or subsequent Mortgage,
regardless of whether or not the BORROWER shall be a party to said agreement or
document, and such default shall continue for fifteen (15) days after written
notice thereof from the GOVERNMENT; or
(ii) BORROWER by any Guaranty Agreement, whether or not the BORROWER
is party to said agreement, and such default shall continue for fifteen (15)
days after written notice thereof from the GOVERNMENT; or
(b) ANY FAILURE TO PAY OR MAKE PAYMENTS ON:
(i) INTEREST ON THE PROMISSORY NOTE OR THE GUARANTEED NOTE when and
as the same shall become due and payable as therein and herein provided, which
continues for 15 days, and such default shall continue for fifteen (15) days
after written notice thereof from the GOVERNMENT; or
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(ii) PRINCIPAL OF THE PROMISSORY NOTE OR THE GUARANTEED NOTE when and
as the same shall become due and payable, whether at maturity, by notice of
acceleration, or otherwise, and such default shall continue for fifteen (15)
days after written notice thereof from the GOVERNMENT; or
(iii) GUARANTEE FEES AS REQUIRED BY ARTICLE VII OF THE TITLE XI
FINANCIAL AGREEMENT, WHICH CONTINUES FOR 15 DAYS AFTER NOTICE THEREOF FROM THE
GOVERNMENT; or
(iv) ANY OTHER SUMS OWED TO THE GOVERNMENT, including but not limited
to past, present or future advances or extensions of credit.
(c) FINANCIAL EVENTS:
(i) BORROWER makes a general assignment for the benefit of the
BORROWER'S creditors; or
(ii) BORROWER loses the right to do business, by forfeiture or
otherwise; or
(iii) A receiver or receivers of any kind whatsoever, whether
appointed or not, in admiralty, bankruptcy, common law, or equity proceedings,
and whether temporary or permanent, shall be appointed for the VESSEL or for any
other property of the BORROWER; or
(iv) A PETITION OR OTHER PROCEEDING OR ACTION IN BANKRUPTCY,
regarding the BORROWER, is filed by the BORROWER or by creditors of the
BORROWER; however, no proceeding or action in bankruptcy filed against the
BORROWER by its creditors shall constitute an event of default under the
Preferred Ship Mortgage unless such proceeding or action has not been dismissed
sixty (60) days after the filing thereof; or
THE BORROWER UNDERSTANDS THAT IF IT FILES BANKRUPTCY, IT WILL
LOSE THE VESSEL. THE BORROWER EXPRESSLY AGREES TO AND UNDERSTANDS THAT IN THE
EVENT OF BANKRUPTCY, THE VESSEL WHICH IS THE SECURITY FOR THIS PREFERRED SHIP
MORTGAGE SHALL NOT GO OUT TO SEA, AND WILL REMAIN IN PORT IN THE JURISDICTION OF
THE COURT WHERE THE BANKRUPTCY PETITION IS FILED.
(d) ACTUAL OR CONSTRUCTIVE UNINSURED TOTAL LOSS OF THE VESSEL; or
(e) A MISREPRESENTATION OR UNDISCLOSED FACT, deemed material by the
GOVERNMENT, made or omitted in any application, agreement, affidavit, or other
document, submitted in connection with the Guarantee, on behalf of, or for the
benefit of, or by the BORROWER; or
(f) IMPAIRMENT OF COLLATERAL shall not constitute an event of default
under the Preferred Ship Mortgage unless (1) the impairment results in a
diminution of the value of the collateral in excess of $80,000.00, and (2) the
impairment has not been cured or corrected within 60 days after the occurrence
of the impairment, or if not so entirely cured and corrected, either (i)
BORROWER is not proceeding diligently toward cure or correction, or (ii) it does
not appear reasonable likely that such cure or correction shall occur within one
hundred eighty (180) days; or
(g) IMPAIRMENT OF ANY OTHER COLLATERAL which is given in addition to the
VESSEL which is the subject of this Preferred Ship Mortgage, and which is not
corrected nor cured within sixty (60) days.
SECTION 2. GOVERNMENT ACTIONS UPON OCCURRENCE OF AN EVENT OF DEFAULT,
whether or not the Guaranteed Note has been paid to the Lender by the
GOVERNMENT, the GOVERNMENT may, in the GOVERNMENT's discretion, as long as such
Event of Default shall be continuing, include any or all of the following:
(a) DECLARE THE NOTE TO BE DUE AND PAYABLE IMMEDIATELY and upon such
declaration the entire principal of and interest on the Note shall become and be
immediately due and payable, and thereafter shall bear interest at eighteen
percent (18%) per year unless such would violate the usury laws of the state
where this Mortgage, the Note and the Guaranteed Note are executed, in which
case the maximum legal rate of that state shall prevail; and/or
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(b) BRING SUIT AT LAW, IN EQUITY, OR IN ADMIRALTY, as it may be advised,
to receive judgment for any and all amounts due under the Note, or otherwise
hereunder, and collect the same out of any and all property of the BORROWER
whether covered by this Mortgage or otherwise; and/or
(c) RETAKE THE VESSEL WITHOUT LEGAL PROCESS wherever the same may be
found, and the BORROWER or other person in possession forthwith upon demand of
the GOVERNMENT shall surrender to the GOVERNMENT possession of the VESSEL, and,
without being responsible for loss or damage, the GOVERNMENT may hold, lay-up,
lease, charter, operate, or otherwise use the VESSEL for such time and upon such
terms as it may deem to be for its best advantage, accounting only for the net
profits, if any, arising from such use of the VESSEL and charging against all
receipts from the use of the VESSEL, or from the sale thereof by court
proceeding or pursuant to subsection (e) following, all costs, expenses,
charges, damages, or losses by reason of such use; and if at any time the
GOVERNMENT shall avail itself of the right herein given it to retake the VESSEL
and shall retake it, the GOVERNMENT shall have the right to dock the VESSEL for
a reasonable time at any dock, pier, or other premises of the BORROWER without
charge, in which case the BORROWER hereby warrants that the VESSEL will be kept
in a safe place and maintained in good condition, and the BORROWER will act as
substitute trustee in accordance with requirements set by the GOVERNMENT; and/or
(d) FORECLOSE THIS MORTGAGE pursuant to the terms and provisions of the
Ship Mortgage Act, 1920, as amended, 46 USC 31301, et seq., or by other judicial
process as may be provided in the Statutes; and/or
(e) SELL THE VESSEL: In addition to any and all other rights, powers, and
remedies elsewhere in this Mortgage or by law granted to and conferred upon the
GOVERNMENT, sell the VESSEL upon such terms and conditions as it may deem to be
for its best advantage, including the right to sell and dispose of the VESSEL
free from any claim of or by the BORROWER, at public sale, by sealed bids or
otherwise, after first giving notice of the time and place of sale, with a
general description of the property by first publishing notice of any such sale
for ten (10) consecutive days, except Sundays, in some newspaper of general
circulation at the place designated for such sale, and by mailing notice of such
sale to the BORROWER at his last known address; such sale may be held at such
place and at such time as the GOVERNMENT in such notice may have specified, or
may be adjourned by the GOVERNMENT from time to time by announcement at the time
and place appointed for such sale or for such adjourned sale, and without
further notice of publication the GOVERNMENT may make any such sale at the time
and place to which the same shall be so adjourned; and any such sale may be
conducted without bringing the VESSEL to the place designated for such sale and
in such manner as the GOVERNMENT may deem to be for its best advantage, and the
GOVERNMENT may become the purchaser at any such sale, and shall have the right
to credit on the purchase price any or all sums of money due to the GOVERNMENT
under the Note, or otherwise hereunder.
SECTION 3. WAIVER OF DEFAULT: If the BORROWER shall have removed and
remedied each Event of Default within thirty (30) days after the occurrence
thereof, then in every such case the GOVERNMENT shall waive any such Event of
Default; but no such waiver shall extend to nor affect any subsequent or other
Event of Default nor impair any rights or remedies consequent thereon; and
provided, further, that if at any time after the expiration of thirty (30) days
after any Event of Default shall have occurred, all Events of Default shall have
been remedied and removed and full performance made by the BORROWER to the
satisfaction of the GOVERNMENT and all installments of principal and interest in
arrears (including interest at the rate set out in this SECTION) and the
reasonable charges and expenses, if any, of the GOVERNMENT, it agents and
attorneys, shall have been paid, then and in every such case the GOVERNMENT may
waive any such Event of Default; and provided, also, that no waiver hereunder
shall extend to nor affect any subsequent or other Event of Default nor impair
any rights or remedies consequent thereon.
SECTION 4. ANY SALE OF THE VESSEL made in pursuance of this Mortgage
shall operate to divest and forever bar the BORROWER from any and all right,
title, and interest of any nature whatsoever of the BORROWER therein and
thereto. No purchaser shall be bound to inquire whether notice has been given,
or whether any Default has occurred, or as to the propriety of the sale, or as
to the application of proceeds thereof.
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SECTION 5. BORROWER TRANSFERS POWERS OF ATTORNEY TO GOVERNMENT:
(a) POWER OF ATTORNEY: The BORROWER does hereby irrevocably appoint the
GOVERNMENT the true and lawful attorney of the BORROWER, in its name and stead
to make all necessary transfers of the VESSEL pursuant to the terms of this
Mortgage and any other documents executed by the BORROWER, and for that purpose
it shall execute all necessary instruments of assignment and transfer, and
BORROWER hereby ratifying and confirming all that its said attorney shall
lawfully do by virtue hereof. Nevertheless, the BORROWER, shall, if so
requested by the GOVERNMENT, ratify and confirm such sale by executing and
delivering to the purchaser of the VESSEL such proper bill of sale, conveyance,
instrument of transfer, and release as may be designated in such request.
(b) POWER OF ATTORNEY: The BORROWER hereby irrevocably appoints the
GOVERNMENT the true and lawful attorney of the BORROWER so long as an Event of
Default shall have occurred and shall not have been waived in accordance with
SECTION 3 hereof, in the name of the BORROWER, to demand, collect, receive,
compromise, and sue for, so far as may be permitted by law, all hire, earnings,
issues, revenues, income, and profits of the VESSEL and all amounts due from
underwriters under any insurance thereon as payment of losses or as return
premiums or otherwise, salvage awards and recoveries, recoveries in general
average or otherwise, any right of action against the designer, builder,
surveyor, or other material party for any fault, negligence, or deficiency in
design, construction or survey of the VESSEL, and all other sums, due or to
become due, at or after the time of the happening of any Event of Default, in
respect of the VESSEL or in respect of any insurance thereon from any person
whomsoever, and to make, give and execute in the name of the BORROWER,
acquittances, receipts, releases, or other discharges for the same, whether
under seal or otherwise, and to endorse and accept in the name of the BORROWER
all checks, notes, drafts, warrants, agreements, and all other instruments in
writing with respect to the foregoing.
(c) APPOINTMENT OF RECEIVER AND SALE OF VESSEL: BORROWER covenants and
agrees that so long as an Event of Default shall have occurred and shall not
have been waived in accordance with SECTION 3 hereof, the GOVERNMENT in any suit
to enforce any of its rights, powers, or remedies shall be entitled as a matter
of right and not as a matter of discretion (i) to the appointment of a receiver
or receivers of the VESSEL and that any receiver so appointed shall have full
right and power to use and operate the VESSEL, and (ii) to a decree ordering and
directing the sale and disposal of the VESSEL, and the GOVERNMENT may become the
purchaser at said sale, and the GOVERNMENT shall have the right to credit on the
purchase price any and all sums of money due to the GOVERNMENT under the Notes,
or otherwise hereunder.
SECTION 6. THE BORROWER AGREES TO PAY ALL REASONABLE ATTORNEY FEES
incurred by the GOVERNMENT because of BORROWER'S failure to perform or discharge
its obligations, as provided by this Mortgage, the Notes, or any other document
or agreement executed in connection therewith, and BORROWER agrees that these
fees shall be deemed to be an indebtedness of the BORROWER and shall be secured
by this Mortgage and shall be due and payable and until paid, shall bear
interest at the same rate as that provided in the Notes, and upon acceleration
of the amounts owed under the Notes, shall bear interest at the accelerated
rate.
SECTION 7. ACTIONS AGAINST THE VESSEL:
(a) POWER OF ATTORNEY: In the event that the VESSEL shall be arrested or
detained by a marshal or other officer of any court of law, equity, or admiralty
jurisdiction in any country or nation of the world or by any government or other
authority and shall not be released from arrest or detention within fifteen (15)
days from the date of arrest or detention, the BORROWER does hereby authorize
and empower the GOVERNMENT in the name of the BORROWER and does hereby
irrevocably appoint the GOVERNMENT and its successors and assigns the true and
lawful attorney of the BORROWER, in its name and stead to apply for and receive
possession of and to take possession of the VESSEL with all rights and powers
that the BORROWER might have, possess, or exercise in any such event; and this
power of attorney shall be irrevocable and may be exercised not only by the
GOVERNMENT but also by an appointee or appointees, with full power of
substitution, to the same extent as if the said appointee or appointees had been
named as one of the attorneys above named by express designation.
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(b) POWER OF ATTORNEY: The BORROWER also authorizes and empowers the
GOVERNMENT or the GOVERNMENT'S appointee or appointees, as the true and lawful
attorney of the BORROWER, to appear in the name of the BORROWER, or its
successors or assigns, in any court of any country or nation of the world where
a suit is pending against the VESSEL because of or on account of any alleged
lien against the VESSEL from which the VESSEL has not been released and to take
such proceedings as to them or any of them as may seem proper towards the
defense of such suit and the discharge of such lien, and all expenditures made
or incurred by them or any of them for the purpose of such defense or discharge
shall be a debt due from the BORROWER to the GOVERNMENT and payment thereof
shall be secured by the lien of this Mortgage.
(c) JURISDICTION AND VENUE: The BORROWER hereby expressly and irrevocably
consents to the jurisdiction of any court in any country whatsoever wherein the
VESSEL may at any time be located for the foreclosure of this Mortgage, the sale
of the VESSEL, or the enforcement of any other remedy or right hereunder, and
hereby expressly and irrevocably submits the person of the BORROWER and the
VESSEL to the jurisdiction of any such court in any country in any such action
or proceeding, including, but not limited to the jurisdiction of the federal
court which maintains jurisdiction over the VESSEL.
(d) STATE LAW TO GOVERN: To the extent not governed by the laws of the
United States, this Mortgage shall in all respects be governed by and construed
in accordance with the laws of the State of Louisiana. The BORROWER irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
situated in the State of Louisiana in any proceeding relating to this Mortgage
and agrees that any process or summons in any such action may be served by
mailing to BORROWER a copy thereof.
SECTION 8. RIGHTS AND REMEDIES OF THE GOVERNMENT:
(a) EACH AND EVERY POWER AND REMEDY HEREIN SPECIFICALLY GIVEN TO THE
GOVERNMENT OR OTHERWISE IN THIS MORTGAGE SHALL BE CUMULATIVE and shall be in
addition to every other power and remedy herein specifically given or now or
hereafter existing at law, in equity, admiralty, or by statute, and each and
every power and remedy whether specifically herein given or otherwise existing
may be exercised from time to time and as often and in such order as may be
deemed expedient by the GOVERNMENT, and shall not be construed to be a waiver of
the right to exercise at the same time or thereafter any other power or remedy.
No delay or omission by the GOVERNMENT in the exercise of any right or power or
in the pursuance of any remedy occurring upon any Event of Default shall impair
any such right, power, or remedy or be construed to be a waiver of any such
Event of Default or to be any acquiescence therein; nor shall the acceptance by
the GOVERNMENT of any security or of any payment of or on account of the Note
maturing after any Event of Default or of any payment on account of any past
Event of Default be construed to be a waiver of any right to take advantage of
any future Event of Default or of any past Event of Default not completely cured
thereby.
(b) THE GOVERNMENT, IN ADDITION TO SUCH OTHER RIGHTS OR REMEDIES it may
have, shall have the right, in its discretion, to take any and all action
authorized by Sections 1105(c) and 1105(e) of Title XI and, to the extent not in
express conflict with the action authorized by said Sections, or with this
SECTION, any and all action provided for in or authorized or permitted by or in
respect of this Mortgage, the Notes, Collateral or Security, and Policies of
Insurance (including all action provided for in or authorized or permitted by or
in respect of any or all said documents by the GOVERNMENT).
SECTION 9. GOVERNMENTAL FAILURE TO JUDICIALLY ENFORCE THE PROVISIONS OF
THESE DOCUMENTS DOES NOT INVALIDATE SAME: Where the GOVERNMENT shall have
proceeded to enforce any right, power, or remedy under this Mortgage, or any
other document which has been executed by the BORROWER, by foreclosure, entry,
or otherwise, and such proceedings shall have been discontinued or abandoned for
any reason, or shall have been determined adversely to the GOVERNMENT, then and
in every such case the BORROWER and the GOVERNMENT shall be restored to their
former positions and rights hereunder with respect to the property subject or
intended to be subject to this Mortgage, and all rights, remedies, and powers of
the GOVERNMENT shall continue as if no such proceedings had been taken.
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SECTION 10. THE PROCEEDS OF ANY SALE OF THE VESSEL (after paying or
deducting, in the case of sale, under any judicial proceedings, the fees, costs,
and other charges therein), the net earnings from any management, charter, or
other use of the VESSEL by the GOVERNMENT under any of the powers above
specified, and the proceeds of any claim for damages on account of the VESSEL
received by the GOVERNMENT while exercising any such power, and the proceeds of
any insurance on the VESSEL (subject to the provisions of this agreement) shall
be applied as follows:
First: To the payment of all expenses and charges including the expenses
of any sale, counsel fees, the expenses of any taking of possession of the
VESSEL, and any other expenses or advances made or incurred by the GOVERNMENT in
the protection of its rights or in the pursuance of its remedies hereunder and
to the payment of any damages sustained by GOVERNMENT from the default or
defaults of the BORROWER; and at the option of the GOVERNMENT to provide a fund
adequate in the opinion of the GOVERNMENT to furnish suitable indemnity against
liens claiming priority over this Mortgage;
Second: To the payment of the amount then due and unpaid upon the Notes
for principal and interest;
Third: To the payment of all other sums secured hereby, including fees,
whether due or not, and of all damages liquidated or otherwise hereunder; and
Fourth: Any surplus then remaining shall belong and be paid or returned to
the BORROWER or to whomever shall be lawfully entitled to receive the same.
ARTICLE IV: POSSESSION AND USE OF VESSEL DURING TERM OF MORTGAGE
Until an Event of Default hereunder shall happen, the BORROWER (a) shall be
suffered and permitted to retain actual possession and use of the VESSEL and (b)
subject to Article II, SECTION 6, hereof, shall have the right, from time to
time, in its discretion, and without application to the GOVERNMENT, and without
obtaining a release thereof by the GOVERNMENT, to dispose of, free from the lien
hereof, any boilers, engines, machinery, bowsprits, masts, spars, sails,
rigging, boats, fishing gear, anchors, chains, tackle, apparel, furniture,
fittings, equipment, or any other appurtenances of the VESSEL that are no longer
useful, necessary, profitable, or advantageous in the operation of the VESSEL,
first or simultaneously replacing the same by new boilers, engines, machinery,
bowsprits, masts, spars, sails, rigging, boats, fishing gear, anchors, chains,
tackle, apparel, furniture, fittings, equipment, or any other appurtenances of
substantially equal value to the BORROWER, which shall forthwith become subject
to the lien of this Mortgage.
ARTICLE V: GENERAL TERMS & CONDITIONS OF MORTGAGE
SECTION 1. TERMS OF THIS MORTGAGE: For the purposes of this Mortgage,
the total amount is SIX HUNDRED SIXTY-EIGHT THOUSAND, THREE HUNDRED NINETY-NINE
DOLLARS ($668,399.00) and interest and performance of mortgage covenants; the
date of maturity is , 2013, and the discharge amount is
the same as the total amount owed to the GOVERNMENT.
SECTION 2. MULTIPLE ORIGINALS: This Mortgage may be executed
simultaneously in any number of counterparts and all such counterparts executed
and delivered each as an original shall constitute but one and the same
instrument. The invalidity of any provision of this Mortgage shall not affect
the remainder, which shall in such event be construed as if the invalid
provision had not been inserted.
SECTION 3. MORTGAGE BINDING ON HEIRS, ETC.: All the covenants, promises,
stipulations, and agreements of the BORROWER in this Mortgage shall bind the
BORROWER, the BORROWER'S heirs, executors, administrators, successors, and
assigns. Whenever used, the singular number shall include the plural, the
plural the singular, and the use of any gender shall be applicable to all
genders.
SECTION 4. NO WAIVER OF PREFERRED STATUS: Nothing in this Mortgage shall
be construed as a waiver of the preferred status of this Mortgage by the
GOVERNMENT. In the event that any provision of this Mortgage would, as a matter
of law, operate to waive the preferred status thereof, such provision for all
intents and purposes, shall be deemed eliminated therefrom as though such
provision had never been inserted herein.
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SECTION 5. MORTGAGE CANNOT BE ALTERED OR WAIVED: This Mortgage may not be
amended or supplemented except in writing by the BORROWER with the written
consent thereto of the GOVERNMENT. The provisions of this Mortgage may not be
waived except in writing by the GOVERNMENT.
SECTION 6. DEFINITIONS:
(a) Any REFERENCE IN THIS MORTGAGE TO ANY OTHER INSTRUMENT or document,
including any reference thereto by a designated term shall for the purpose of
this Mortgage be deemed to mean or refer to, unless the context otherwise
requires, such other instrument or document as the same may be amended or
supplemented in writing or as the provisions thereof may be waived in writing
with the prior written consent (except as they shall be a party or parties
thereto) of the BORROWER and the GOVERNMENT.
(b) The term "POLICIES OF INSURANCE" as used herein, means any and all
insurance policies and related binders, riders, endorsements, certificates of
entry, etc., e.g., those referred to in SECTION 2 of Article II.
(c) The term "COLLATERAL" as used herein, means any funds, guaranties, or
other property or rights therein of any nature whatsoever or the proceeds
thereof which may have been, are, or hereafter may be hypothecated, directly or
indirectly by the undersigned or others, in connection with, or as security for,
the Promissory Note to the United States, any future advances or extensions of
credit and this Mortgage or any part hereof.
(d) The term "BORROWER" includes individuals and entities; singular and
plural; and masculine and feminine gender.
(e) The term "AFFILIATE" as used herein shall include any person or
concern that, directly or indirectly, through one or more intermediates,
controls, or is controlled by, or is under common control with, the BORROWER.
The term "CONTROL" including the terms "CONTROLLED BY" and "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 the BORROWER, whether
through ownership, by contract, or otherwise.
(f) The term "SECURITY DOCUMENTS" UCC Agreements, Title XI Financial
Agreements, United States Guaranteed Promissory Note, Preferred Ship Mortgage to
the USA, Promissory Note to the United States of America, United States
Guaranteed Promissory Note, Mortgagor's Certificate, Security Agreement, and
Deed of Trust.
SECTION 7: TERMINATION OF MORTGAGE: If the whole amount of the Note and
the Guaranteed Note, including all amendments or substitutions to either,
(principal and interest) shall be paid in accordance with its terms and the
terms of this Mortgage, and all other sums that may have become secured by the
lien of this Mortgage shall be paid, then this Mortgage and the estate and
rights hereunder shall cease, terminate and be void; and the GOVERNMENT, at the
request of BORROWER and at BORROWER's cost and expense, shall execute on forms
prepared by BORROWER which are satisfactory to the GOVERNMENT, and deliver to
BORROWER proper instruments acknowledging satisfaction of and discharging this
Mortgage.
IN WITNESS WHEREOF, THE BORROWER has executed this Mortgage the day and
year first above written.
ATTEST: BORROWER: Omega Protein, Inc.
By: By:
------------------------------- --------------------------------
Title: Title:
---------------------------- -----------------------------
Date: , 1998
-------------------
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ACKNOWLEDGMENT
STATE OF
--------------------------
COUNTY OF
-------------------------
On the day of , 1998, before me personally appeared
, to me known, who being by me duly sworn, did
depose and say that he is the of
, and that he signed his name to said Mortgage by like order, and the
said acknowledged to me that he executed said Mortgage as the
of said corporation; and that the same is the free and voluntary act and deed
of said corporation and of himself as such
, for the uses and purposes therein expressed.
----------------------------------------
Notary Public
My commission expires
-------------------
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EXHIBIT 10.8
DEED OF TRUST
DATED AS OF MAY 12, 1998
MADE BY
OMEGA PROTEIN, INC.
TO
MATSON C. TERRY, II, OF
NORTHUMBERLAND COUNTY, VIRGINIA
AND
B.H.B. HUBBARD, III, OF
LANCASTER COUNTY, VIRGINIA, TRUSTEES
FOR THE BENEFIT OF
THE UNITED STATE OF AMERICA
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DEED OF TRUST AND SECURITY AGREEMENT
COMMONWEALTH OF VIRGINIA
COUNTY OF NORTHUMBERLAND
1. PARTIES: WHEREAS, OMEGA PROTEIN, INC., a Virginia corporation,
hereinafter "Grantor", whether one or more, is indebted to the UNITED STATES OF
AMERICA acting by and through the Secretary of Commerce, Office of the Financial
Services Division, National Marine Fisheries Service, National Oceanic and
Atmospheric Administration, hereinafter "Beneficiary", in the aggregate amount
of Two Million, Five Hundred Ninety-three Thousand, Seven Hundred Sixty-one and
No/100 Dollars ($2,593,761.00), together with interest thereon, as evidenced by
three promissory notes, each payable to the order of the United States of
America acting by and through the Secretary of Commerce, Office of the Financial
Services Division, National Marine Fisheries Service, National Oceanic and
Atmospheric Administration which bear interest and are payable according to the
terms of said notes and which have a final maturity dates of ________________.
2. THE PROMISSORY NOTES TO THE UNITED STATES OF AMERICA: NOW, THEREFORE,
in consideration of the premises and in order to secure the prompt and full
payment of said indebtedness, and any future advance(s), additional advance(s),
and/or readvance(s), and/or any renewal(s), extension(s), restructuring(s),
reamortization(s), any other sums provided for in any loan document, and/or any
other loan treatment(s) thereof, or any part thereof, and the interest thereon
and any and all other indebtedness(es) (including future advance(s) now or
hereafter owed by any of the undersigned to the Beneficiary), whether such
indebtedness(es) is primary or secondary, direct or indirect, contingent or
absolute, matured or unmatured, joint or several, and otherwise secured or not,
and the faithful performance of and compliance with all the terms, agreements,
provisions, obligations, covenants, conditions, warrants, representations, and
stipulations herein made, or made in any Loan Agreement or in any other document
related to the promissory note described as follows:
(a.) The Promissory Note to the United States of America executed by
Grantor
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in the principal amount of Nine Hundred Eighty-seven Thousand,
Three Hundred Nine & No/100 Dollars, ($987,309.00), with interest on the
unpaid principal computed from the ___ day of ________, 1998, at the rate
of ______ percent (___%) per year, payment to be made in installments of
_________ Dollars ($________), including principal and interest quarterly,
with the balance of principal and interest due ___ years from the date of
said Note. The first quarterly payment shall be due on the ___ day of
_______, 1998, and each quarterly payment thereafter shall be due on the
day of the month that the first quarterly payment is due thereunder.
(b.) The Promissory Note to the United States of America executed by
Grantor in the principal amount of Nine Hundred thirty-eight Thousand,
Fifty-three & No/100 Dollars, ($938,053.00), with interest on the unpaid
principal computed from the ___ day of ________, 1998, at the rate of
______ percent (___%) per year, payment to be made in installments of
_________ Dollars ($________), including principal and interest quarterly,
with the balance of principal and interest due ___ years from the date of
said Note. The first quarterly payment shall be due on the ___ day of
_______, 1998, and each quarterly payment thereafter shall be due on the
day of the month that the first quarterly payment is due thereunder.
(c.) The Promissory Note to the United States of America executed by
Grantor in the principal amount of Six Hundred Sixty-Eight Thousand, Three
Hundred Ninety-nine & No/100 Dollars, ($668,399.00), with interest on the
unpaid principal computed from the ___ day of ________, 1998, at the rate
of ______ percent (___%) per year, payment to be made in installments of
_________ Dollars ($________), including principal and interest quarterly,
with the balance of principal and interest due ___ years from the date of
said Note. The first quarterly payment shall be due on the ___ day of
_______, 1998, and each quarterly payment thereafter shall be due on the
day of the month that the first quarterly payment is due thereunder.
3. THE PROPERTY: OMEGA PROTEIN, INC., hereinafter Grantor, whether one or
more, in consideration of the premises and other good and valuable consideration
paid to Grantor by Matson C. Terry, II, Esq., and B.H.B. Hubbard, III, Esq., as
Trustees, either of whom may act, whose address is P.O. Box 340, Irvington,
Virginia 22480, hereinafter, "Trustee", does hereby convey and warrant unto
Trustees with General Warranty the following described real estate hereinafter
"The Property", situate in Northumberland County, Virginia, to-wit:
SEE ATTACHED EXHIBIT "A"
together with all buildings and other improvements, hereditaments and
appurtenances thereunto belonging, or in any wise appertaining now existing or
hereafter erected upon the premises and all the income and rents arising
therefrom. Grantor does hereby intend to convey and does convey all
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of Grantor's right, title and interest in and to any strips and gores Grantor
may now own contiguous to the above described property.
4. MINERALS INCLUDED: It is expressly understood and agreed, as a part of
the consideration for the loan made to the Grantor and secured by the premises
hereinabove described, that this instrument covers and includes all surface,
subsurface and/or mineral estate ownership now or after acquired by the
undersigned in the above-property and whether or not expressly excepted from the
description to the above security premises, any provisions herein to the
contrary being of no force and effect.
5. PLEDGE OF PERSONAL PROPERTY: AND FOR THE CONSIDERATION AFORESAID, and
as further security for any and all debt(s) and obligation(s) described above,
said Grantor does hereby assign, pledge and transfer to the Beneficiary, and
grant to the Beneficiary a security interest in and to the following described
property and interests, to-wit: (1) all timber of all kind, character and
description planted and/or growing, or to be planted and/or grown, on the
hereinabove described property; (2) all crop allotments, quotas, and/or (3) all
rents, profits, issues, income, royalties, bonuses, and revenues of said
property, or any part or interest herein, from time to time accruing whether
under leases or tenancies now existing or hereafter created; (4) each and every
policy of hazard insurance or the like now or hereafter in effect which insures
said property or any building, fixture and/or improvement thereon or any part
thereof, together with all the right, title and interest of Grantor in and to
such policy, including but not limited to any premiums paid (or rights to return
premiums) and/or all proceeds or payments thereunder; (5) all judgments, award
of damages and settlements hereafter made resulting from condemnation
proceedings or the taking of the real property, or any part thereof, under the
power of eminent domain, or for any damage (whether caused by such taking or
otherwise) to the property, or any part thereof, or to any rights appurtenant
thereto; (6) all building materials, equipment, fixtures and fittings of all
kind, character, and description used in connection with or relating to said
property and/or buildings, fixtures or improvements thereon; (7) all equipment,
including, but not limited to: forklifts, bobcats, cranes, pallet trucks, lift
trucks and other product or material movement equipment of whatsoever nature;
all trailers, tanks, trucks, or other rolling stock of whatsoever nature; all
fish unloading, transfer and conveying equipment of whatsoever nature; all fish
processing equipment of whatsoever nature; all
4
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fish weighing equipment of whatsoever nature; all cooling, refrigerating,
freezing and other fish holding equipment (blast freezers, plate freezers,
coolers, or other refrigeration equipment) of whatsoever nature; all fish
packaging equipment of whatsoever nature; all fish baskets, totes, tanks, tubs,
and other fish holding equipment of whatsoever nature; all ice makers of
whatsoever nature; all hand and power tolls of whatsoever nature; all office
equipment of whatsoever nature; all fish hatching, releasing, rearing, growing,
tending, and other equipment of whatsoever nature in any way associated with
fisheries cultivation of every sort-all together with all associated equipment,
machinery, parts, tools, or other items of whatsoever nature and whether fixed
or unfixed to the Project Property or any other premises whatsoever; and/or (8)
all tangible or intangible property found on the premises and products,
proceeds, and additions and/or replacement of any or all of the property
described above in items 1 through 8.
IN TRUST, however, to secure and enforce the repayment of all of Grantor's
obligations under the promissory note set forth above and to secure Grantor's
promises contained hereinafter.
GRANTOR FURTHER COVENANTS, WARRANTS AND AGREES:
7. TAXES, FEES: To pay when due all taxes, liens, judgments, assessments
or fees assessed against said property and to promptly furnish Beneficiary with
tax receipts or like documents evidencing payment of or release from all taxes,
liens, judgments, assessments or fees. By execution hereof, Grantor agrees to
pay when due all community water system assessment and meter fees, if any,
applicable to said property, and in the event of foreclosure, hereby does
transfer and assign to the purchaser all of Grantor's interest and membership,
if any, in said community water system applicable to said property, and agrees
to execute such documents as are necessary to effectuate such transfer.
8. INSURANCE REQUIREMENT: To insure and keep insured buildings and other
improvements now on or which may hereafter be placed on said premises, against
loss or damage by fire, water windstorm and/or all hazards included within
"extended coverage", as well as loss or damage by flood in areas designated by
the U.S. Department of Housing and Urban Development as subject to flood, any
policy evidencing such insurance to be deposited with, and the loss thereunder
to be payable to Beneficiary as its interest may appear, and providing for
immediate notification to
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<PAGE>
Beneficiary of any lapse, cancellation or other impairment of said insurance.
All policies shall be written by reliable insurance companies authorized to
write policies of insurance in the State of Virginia, acceptable to Beneficiary.
At the option of Beneficiary, and subject to the general regulations of U.S.
Department of Commerce, where applicable, sums received by Beneficiary form such
insurance companies may be used to pay for reconstruction or repair of destroyed
or damaged buildings or improvement(s); or, if not so applied may, at the sole
option of the Beneficiary, be applied in payment of any indebtedness, matured or
unmatured, secured by this deed of trust and security agreement. The Beneficiary
will be listed on any insurance policy and named as First Loss Payee on all
insurance covering real property, except Liability coverage, in which case the
Beneficiary is named a Loss Payee as its interest may appear. The Beneficiary
will also be listed as a First Loss Payee on all insurance covering personal
property, as its interest may appear.
9. USE OF THE PROPERTY: That the aquaculture portion of the premises
hereinbefore described, if any, shall be continuously used in a husbandlike
manner for aquaculture production which incorporates good aquaculture practices
that will produce the maximum yield consistent with conservation goals; that in
the event that any part of the premises is used for agriculture, it shall be
conducted in a husbandlike manner, that Waste will not be committed or
permitted; if timber land is involved as security, Grantor will follow good and
approved forestry practices to minimize or prevent fire danger, erosion or
depreciation, protect young trees, and maintain forest production; it is agreed,
however, that no timber now or hereafter affected hereby will be cut, removed,
damaged or turpentined (except such as is customarily used on the property for
fuel, fencing or repairs) without the prior written consent of the Beneficiary.
Grantor will promptly notify Beneficiary of any damage to timber from any
source. Grantor will, where practical, promptly notify Beneficiary of any
potential damage to timber. In the event this covenant, or any part, is
breached, Grantor agrees to pay all costs and expenses, including reasonable
attorney's fees, incurred by Beneficiary in investigating such violation and in
protecting and preserving this security.
10. EVENTS OF DEFAULT-REMEDIES: This conveyance, however, is in trust to
secure the payment and performance of the obligations. But if Grantor fails to
pay when due any sums secured hereby or if default is made by Grantor (or any
one of them) in the payment or performance of any of the obligations under the
Note, Promissory Note to the United States, Deed
6
<PAGE>
of Trust and Security Agreement, Title XI Agreement, or any other document or
agreement associated with this transaction, or in case Grantor should become
insolvent, commit an Act of Bankruptcy, or apply to a bankruptcy court to be
adjudicated a voluntary bankrupt, or proceedings be instituted to put Grantor in
involuntary bankruptcy, or should any proceedings be taken against Grantor for
the appointment of a receiver, assignee or trustee, or should Grantor make an
assignment for benefit of one or more creditors, or should Beneficiary in good
faith deem itself insecure and its prospect of payment impaired, or if any loan
proceeds are used for a purpose that will: (1) contribute to excessive erosion
of highly erodible land or to the conversion of wetlands to produce an
agricultural commodity, as further explained in 7 CFR Part 1940, Subpart G,
Exhibit M, or (2) result in poor aquaculture practices, then in that event all
of the obligations shall, at the option of Beneficiary, be and become at once
due and payable without notice to Grantor, and Trustee herein named or his
successor or successors shall, at the request of Beneficiary, sell all or any
part of the Property as set out in (S) 30 of this Deed of Trust and Security
Agreement. In the event of any such default, Beneficiary shall also have all the
remedies of a secured party under the Uniform Commercial Code of Virginia and
any other applicable law. All remedies of Beneficiary shall be cumulative. A
failure on the part of Beneficiary to exercise any remedy or option contained in
this Deed of Trust and Security Agreement in the event of default shall not
constitute a waiver of Beneficiary's right to exercise said remedy or option in
the event of that or any subsequent default.
11. COMPLIANCE WITH ALL REGULATIONS: With respect to the Property,
Grantor covenants with Beneficiary, that Grantor has complied, is in
compliance, and will at all times comply in all respects with all applicable
laws (whether statutory, common law or otherwise), rules, regulations, orders,
permits, licenses, ordinances, judgments, or decrees of all governmental
authorities (whether federal, state, local or otherwise), including, without
limitation, all laws regarding public health or welfare, environmental
protection, water and air pollution, composition of product, underground storage
tanks, toxic substances, hazardous substances, hazardous materials, hazardous
wastes, other wastes or used oil, asbestos, occupational health and safety,
nuisances, trespass, and negligence.
12. HOLD HARMLESS AGREEMENT: Grantor agrees to indemnify and hold
Beneficiary, its directors, employees, agents, and its successors and assigns,
harmless from and
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against any and all claims, losses, damages, liabilities, fees, penalties,
charges, judgments, administrative orders, remedial action requirements,
enforcement actions of any kind, and all costs and expenses incurred in
connection therewith (including but not limited to, attorney's fees and
expenses, including all attorney's fees and expenses incurred by Beneficiary in
and for this indemnity), arising directly or indirectly, in whole or in part out
of any failure of Grantor to comply with the environmental representations,
warranties and covenants contained herein.
13. SURVIVAL OF GRANTOR'S LIABILITY: Grantor's representations,
warranties, covenants and indemnities contained herein shall survive the
occurrence of any event whatsoever, including without limitation, the
satisfaction of the promissory note secured hereby, the reconveyance or
foreclosure of the mortgage, the acceptance by Beneficiary of a deed in lieu of
foreclosure, or any transfer or abandonment of the property, failure to comply
strictly with the representations, warranties, covenants and indemnities
commenced herein shall constitute a default under this deed of trust.
14. VALID THIRD LIEN: That this deed of trust and security agreement is a
valid third lien against all the land, interests and improvements offered and/or
appraised as security for this loan and that the property and interests
described herein is now free and clear of any and all other liens and
encumbrances except as otherwise set forth herein. If the validity of this deed
of trust, or if Grantor's title to any of said land, interests or improvements
is questioned in any manner, or if any part of such land, interests or
improvements is not properly described herein, Beneficiary may, in its
discretion, investigate and take such action as it considers necessary or
desirable for the protection of its interests and for this purpose may employ
legal counsel or expert assistance and the Grantor will promptly pay all
expenses so incurred by Beneficiary.
The lien of this deed of trust is subordinate and of inferior dignity to
the lien of that certain prior deed of trust dated July 18, 1989, from Zapata
Haynie Corporation to Michael T. Bradshaw, et al, Trustees, securing the United
States of America in the original amount of $4,675,000.00, recorded in Deed Book
298, at Page 80, in the Clerk's Office of the Circuit Court of Northumberland
County, Virginia, as amended by that certain Amendment dated March 31, 1993,
recorded in Deed Book 348, at Page 130, in the Clerk's Office aforesaid.
The lien of this deed of trust further is subordinate and of inferior
dignity to the lien of that
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certain prior deed of trust dated October 30, 1996, from Zapata Protein (USA),
Inc., to James C. Breeden, et al, Trustees, securing the United States of
America in the original amount of $1,848,562.00, recorded in Deed Book 407, at
Page 706, in the Clerk's Office of the Circuit Court of Northumberland County,
Virginia.
15. GRANTOR TO PAY EXPENSES: That if Grantor defaults in any of the
provisions of this Deed of Trust and Security Agreement, particularly, but not
limited to, (S)(S) 7, 8, 9 or 14, then Beneficiary may pay such taxes, liens,
judgments or assessments, obtain and pay for such insurance, advance such
attorney's fees, expenses and costs, or take any other action or incur any other
expenditures that Beneficiary determines are necessary to protect Beneficiary's
interests and Grantor agrees to immediately pay Beneficiary all amounts so
advanced and that all amounts so advanced shall be secured hereby.
16. USE OF PROCEEDS: That all representations and statements made in the
application for this loan are true and correct, that the proceeds of this loan
will be used solely for the purposes specified in said application and that
Grantor will comply with all requirements and conditions imposed by Beneficiary
in making this loan.
17. NON-ALIENATION CLAUSE: To not sell, assign or convey any part or all
of the mortgaged premises (regardless of whether the buyer or assignee "assumes"
the note or takes the mortgage premises "subject to" such note, or whether by
contract for deed or sale) without first obtaining the Beneficiary's prior
written consent as long as the above note, or any part, or any other sum owed to
the Beneficiary, remain unpaid. If Grantor is a corporation, not to change the
substantial ownership and/or control of said corporation without first obtaining
the Beneficiary's prior written consent as long as the above note, or any part,
or any other sums owed to the Beneficiary, remain unpaid.
18. PROMPT PAYMENT PROVISION: That all payments of principal and interest
(or any part thereof) not made when due shall bear interest from due date to the
date of payment thereof by maker or assumptor at the default rate which is equal
to eighteen percent (18%) per annum. All advances made by the holder hereof
shall be secured by and under this Deed of Trust and Security Agreement and
shall be payable with interest from the date each advance is made until paid by
maker or assumptor at the default rate.
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19. RELEASE PROVISION: That Beneficiary may at any time, without notice,
release any of the property described herein, grant extensions or deferments of
time of payment of the indebtedness secured hereby, or any part thereof, grant
subordinations of lien(s) or release from liability any parties who are or may
become liable for the payment of said indebtedness, without affecting the
priority of this lien or the personal liability of the Grantor or any other
party liable or who may become liable for the indebtedness secured by this
instrument. If all or any part of the property hereinabove described becomes
vested in any party other than Grantor, Beneficiary may, without notice to
Grantor, deal with such successor in interest with reference to this instrument
and the debt(s) and obligation(s) hereby secured in the same manner as with the
Grantor, without in any way releasing, vitiating or discharging the Grantor's
liability hereunder or for the debt(s) and obligation(s) hereby secured and
extension(s) of time for payment or other loan treatment(s) described herein
given or permitted by Beneficiary shall not operate to release, vitiate, or
discharge the liability of the Grantor herein, either in whole or in part.
20. BENEFICIARY NON-WAIVER: That the failure of Beneficiary to exercise
any option or make any decision or election under any term or covenant herein
expressed shall not be deemed a waiver of the right to exercise such option or
to make such decision or election at any time.
21. SUCCESSORS & ASSIGNS BOUND: That each covenant and agreement herein
contained shall inure to the benefit of and bind the successors and assigns of
Beneficiary and Grantor.
22. SUBSTITUTE TRUSTEE: Beneficiary may, without notice to any party to
this Deed of Trust and Security Agreement, or to the successors or assigns, and
without regard to the willingness or inability of Trustee to act, or to execute
this trust, appoint another person or succession of persons to act as Trustee
herein, and such appointee or substitute shall have all the title, authority and
powers in the execution of this trust as are vested in Trustee. If Beneficiary
be a corporation such appointment may be made by any one of its officers or
agents. No single exercise of this power of appointment, the power of sale, or
any other power or right given in this Deed of Trust and Security Agreement
shall exhaust the right to exercise such power but all rights and powers herein
given may be exercised as often as may be necessary for the collection of all
amounts secured by this Deed of Trust and Security Agreement until said amounts
are fully paid and discharged. At any sale hereunder, Trustee may from time to
time, adjourn said sale to a later date without re-advertising the
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sale by giving notice of the time and place of such continued sale at the time
Trustee shall make such adjournment. And at any sale made to enforce the trust
herein given, Beneficiary or any person in interest may become a purchaser and
upon payment of the purchase price, Trustee shall secure a deed of conveyance
which conveyance shall vest full and perfect title in such purchaser upon
payment of the purchase price.
23. LIFE INSURANCE: That in the event Grantor purchases life insurance
(group, credit or other) in connection with this loan but subsequently fails to
pay the premium to keep same in force, the Beneficiary, at its option, may pay
such premium on Grantor's behalf, charge such payment to the loan, and such
advance of premiums shall be secured by this mortgage and bear interest the same
as other advances provided for in this Deed of Trust and Security Agreement.
Any policy evidencing such insurance to be deposited with and any loss
thereunder to be payable to Beneficiary as its interest may appear.
24. FINANCIAL STATEMENT: To furnish to the Beneficiary upon a request a
financial statement and income statement attested to by Grantor or verified by a
public accountant.
25. DEATH OF SIGNATORY: All parties to this deed of trust or to the note
hereby secured covenant and agree that upon the death of any signatory, maker,
or comaker of such note the owner and holder of said note may, at holder's
option, mature or accelerate the entire balance owing on said note whereupon all
amounts owing by virtue thereof shall be immediately due and payable.
26. INSPECTION: The Grantor hereby grants and will cause any tenants to
grant to Beneficiary, its agents, attorneys, employees, consultants,
contractors, successors and assigns, an irrevocable license and authorization
upon reasonable notice to enter upon and inspect the Property and facilities
thereon and perform such tests, including without limitation, subsurface testing
soils and groundwater testing and other tests which may physically invade the
Property thereon, as the Beneficiary, in its sole discretion, determines is
necessary to protect its security interest, provided however, that under no
circumstances shall the Beneficiary be obligated to perform such inspections or
tests.
27. NONTRANSFERABILITY: Except as provided by regulations of the
Beneficiary neither the property or any portion thereof or interest therein
shall be leased, assigned, sold, transferred, or encumbered, voluntarily or
otherwise, without the prior written consent of the
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Beneficiary. The Beneficiary shall have the sole and exclusive rights as
Beneficiary hereunder, including but not limited to the power to grant consents,
partial releases, subordinations and satisfaction, and no insured holder shall
have any right, title and interest in or to the lien or any benefits hereof.
28. ACCELERATION OPTION: If all or any part of the Property or an
interest therein is sold, transferred, encumbered or otherwise disposed of by
Grantor without Beneficiary's prior written consent, Beneficiary may, at
Beneficiary's option, declare all of the obligations to be immediately due and
payable. Beneficiary shall have waived such option to accelerate if, prior to
the sale or transfer, Beneficiary and the person to whom the Property is to be
sold or transferred reach agreement in writing that the credit of such person is
satisfactory to Beneficiary and that the interest payable on the sums secured by
the Deed of Trust and Security Agreement shall be at such rate as Beneficiary
shall request and the party assuming the obligations meets the criteria set out
in Title XI for all borrowers. Regardless of any assumption or transfer of the
Property and/or the obligations arising under the Deed of Trust and Security
Agreement, Grantor will not be released from any obligation to Beneficiary until
the entire debt and all sums associated therewith are paid in full. If
Beneficiary exercises such option to accelerate, Beneficiary shall mail Grantor
notice of acceleration. Such notice shall provide a period of not less than 30
days from the date of notice is mailed within which Grantor may pay the sums
ordered due. If Grantor fails to pay such sums prior to the expiration of such
period, Beneficiary may, without further notice or demand on Grantor, invoke any
remedies permitted by this Deed of Trust and Security Agreement, or any other
security document associated with this transaction.
29. PAYMENT OF ADVANCES: Now, if Grantor shall pay said indebtedness and
any future advances, additional advances, readvances or any other indebtedness
in addition to the original indebtedness set forth herein, and secured hereby,
and keep and perform all of the covenants and agreements of this deed of trust,
it shall become null and void.
30. FORECLOSURE AND SALE OF THE PROPERTY: This deed of trust shall be
construed to impose and confer upon the parties hereto, and the Beneficiaries
hereunder, all duties, rights and obligations as set forth in Section 55-59, and
55-59.1 through 55-59.4 and 55-60 of the Code of Virginia as now in force and
(to the extent that any amendment thereof shall not limit the
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rights of the Trustees or Beneficiaries hereunder or the obligations of the
Grantor) as hereafter amended; and further to incorporate herein the following
provisions by the short form references below, of Sections 55-59 and 55-59.1
through 55-59.4 and 55-60 of the Code of Virginia:
ADVERTISEMENT REQUIRED: Four times in a newspaper
published or having general circulation in Northumberland County
BIDDER'S DEPOSIT: of Ten Percent (10%) may be required.
EXEMPTIONS WAIVED.
SUBJECT TO CALL UPON DEFAULT.
RENEWAL OR EXTENSIONS PERMITTED.
31. MULTIPLE COUNTIES: In case the real estate herein described is
situated in more than one county or in more than one judicial district of a
county or counties, a foreclosure sale of all of said real estate may be made in
any one of the counties or judicial districts in which any part thereof is
situated, after giving notice of the time, place and terms of sale in the manner
above described in each county and judicial district in which any part of said
land lies.
32. SURRENDER OF POSSESSION: It is further stipulated and agreed that in
case of any sale hereunder Grantor shall immediately surrender possession to
the purchaser. If Grantor fails to do so, Grantor shall become a tenant at
sufferance of the purchaser, subject to an action for unlawful entry and
detainer.
33. BENEFICIARY'S RIGHT TO BID: It is expressly agreed between the
parties hereto, that in the event of foreclosure and sale, that the Beneficiary
hereunder, or its successors and assigns, may bid at any such sale or sales and
may purchase the property secured hereunder if the high bidder therefor, as if
Beneficiary were a stranger to this conveyance.
34. MAILING ADDRESS: For purposes of giving any notice that may be
required by the terms of this deed of trust, Grantor hereby stipulates and
agrees that his mailing address is P.O. Box 2866, Hammond, La 70404 and
Beneficiary may rely upon this stipulation until such time as Beneficiary has
been advised in writing by Grantor of a change of address.
35. SEVERABILITY: The unenforeceability or invalidity of any provision(s)
of this Deed of Trust and Security Agreement shall not render any other
provision(s) herein unenforceable or invalid. This Deed of Trust and Security
Agreement may be amended only by an instrument in writing, signed by Grantor and
Beneficiary, and may not be amended orally or by any course of
13
<PAGE>
conduct or otherwise than by written instrument.
All riders, appendages, exhibits, erasures, corrections and
interlineations, if any, have been made and approved before signing hereof.
IN WITNESS WHEREOF, the Grantor has caused its name to be signed hereto
and its corporate seal affixed and attested pursuant to corporate resolutions,
which resolutions have not been rescinded, revoked or modified.
Omega Protein, Inc.
By:
-------------------------------
Its
SEAL
ATTEST:
--------------------------------
Its
STATE OF __________________,
CITY/COUNTY OF __________________,
Personally appeared before me, the undersigned authority in and for said
County and State the within named ________________________ and
______________________ the ____________ and ___________________ ,respectively,
of Omega Protein, Inc., who severally acknowledged that they signed and
delivered the above and foregoing instrument on the day and year and for the
14
<PAGE>
purposes therein mentioned as their own voluntary act and deed.
WITNESS my hand and official seal this ____ day of _________________, 1998.
__________________________________
Notary Public
My commission expires: _________________________
NOTARY AFFIX SEAL HERE!
15
<PAGE>
EXHIBIT A
To Virginia Real Property Deed of Trust
Legal Description
All of those eighteen (18) certain lots, pieces or parcels of land,
together with all improvements thereon and all appurtenances thereunto
appertaining, situate, lying and being in Fairfields Magisterial District,
Northumberland County, Virginia, more particularly described as follows:
PARCEL ONE: Containing five and forty-three one-hundredths acres, more or less,
being the same land that was conveyed to Edna V. Crowther by Albert Morris, et
al, by deed bearing date the 16th day of April, 1906, of record in the Clerk's
Office of the Circuit Court of Northumberland County, Virginia, in Deed Book
"Q", at Page 556 and is described therein as follows:
"Beginning at a post on the shore of Cockrell's Creek, a corner with the land
this day conveyed to the Morris Fisher Company by the parties of the first part
and running thence N 26 1/2 E 9.82 chains across point and pond to a post on the
shore of Cockrell's Creek, a corner with the land this day conveyed to Morris
Fisher Company as aforesaid, thence S 89 3/4 E 1.77 chains around the shore of
Cockrell's Creek to a post a corner with the "Browns' Point" land; thence S 75
1/8 E. 2.77 chains along the line of said "Brown's Point" land to a post a
corner with the land this day conveyed by the parties of the first part to John
P. Crowther, thence S 26 1/2 W. 14.59 chains across point to a post in a marsh,
a corner with the land this day conveyed to John P. Crowther, as aforesaid, and
a side line with the Haynie Snow Company; thence S. 88 3/4 W 35 chains to a
marked cedar tree; thence N 86 1/4 W 74 chains to a post on the shore of
Cockrell's Creek, a corner with the land of the Haynie Snow Company; thence up
and around the shore of Cockrell's Creek following the meanderings thereof the
following courses and distances: N 1 W 2.28 chains, N 15 3/8 W 1.11 chains, N
32 7/8 W 1.88 chains to point of beginning."
PARCEL TWO: Containing nine and thirty-five one hundredths acres more or less,
as aforesaid, being the same land that was conveyed to John P. Crowther by
Albert Morris, et al, by deed bearing date 16th day of April, 1906, and of
record in the Clerk's Office aforesaid in Deed Book "Q" at Page 558; and is
described therein as follows:
"Beginning at a post in marsh, a corner with the land this day conveyed by the
parties of the first part to Edna V. Crowther and on a side line with the land
of Haynie Snow Company and running thence S 89 3/8 E 8.39 chains along the land
of Haynie Snow Company and John A. Haynie, to a post; thence N 19 1/2 E 12.86
chains to a post, near corner of barn, and on a side line with the "Browns'
Point" land, thence N 81 2 W 6.09 chains along line of "Browns' Point" land to a
post a corner with land this day conveyed by parties of the first part to Edna
V. Crowther; thence S 26 2 W 14.59 chains along the line of the land of Edna v.
Crowther to a point of beginning."
16
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PARCEL THREE: Containing eight and one-half (8 1/2) acres, but was sold and is
hereby conveyed not by the acre, but in gross, be the area thereof however so
much more or however so much less than is above stated, and is bounded as
follows, to-wit: On the north, west and south by the waters of Cockrell's
Creek, and on the east by the land formerly of Edna V. Crowther, and is the
identical lot or tract of land which was conveyed to Wilmer E. Davis by deed
from Northumberland Fisheries, Incorporated, bearing date on December 20, 1935,
reference to which said deed and to deeds and papers therein mentioned, is
hereby especially made for a more full and complete description of the lot or
tract of land hereby conveyed.
The said Parcels One, Two and Three are the identical parcels as were conveyed
unto Menhaden Fisheries, Inc., by deed of Menhaden Products Co., Inc. dated
April 27, 1984, duly recorded in the Clerk's Office aforesaid in Deed Book 238,
at Page 33.
PARCEL FOUR: Containing 1.70 acres, be the same however ever so much more or
less, and being more particularly shown and described as "R.O. Dawson", on that
certain plat of survey entitled, "Boundary Survey of the Land of Reedville Oil
and Guano Company, Incorporated" dated December 29, 1958, made by Charles E.
Tomlin, Jr., Certified Land Surveyor, which plat was duly filed in the Clerk's
Office aforesaid on February 12, 1959, in Plat Book 1, at Page 186, to which
plat reference is hereby expressly made for a further and more accurate
description of the real estate herein conveyed.
Being the identical property which was conveyed unto Zapata Haynie Corporation
by deed of Erma Gladys Cockrell, et vir, et al, dated March 11, 1975, duly
recorded in the Clerk's Office aforesaid in Deed Book 174, at Page 476.
PARCEL FIVE: Containing one acre by estimation, be the same ever so much more
or less, being more particularly shown and described in part as "D.F. Wood" on
the aforesaid plat of survey entitled, "Boundary Survey of the land of Reedville
Oil and Guano Company, Incorporated", and being further described with reference
to a plat of survey entitled, "Boundary Survey of the Land of Zapata Haynie
Corporation" dated January 23, 1975, made by Warren R. Keyser, Certified Land
Surveyor, as follows: Beginning at a pipe along the center line of a ravine or
marsh, a corner with land of Zapata Haynie Corporation; thence North 06 degrees
41' 43" East along the line of Zapata Haynie Corporation a distance of 227.20
feet to a pipe, thence South 87 degrees 15' 37" West along line of Zapata Haynie
Corporation a distance of 204.42 feet to a pipe; thence South 88 degrees 37' 37"
East along the land of Zapata Haynie Corporation a distance of 136.53 feet to a
pipe; thence South 22 degrees 08' 37" East along the land of Zapata Haynie
Corporation a distance of 90.47 feet to a pipe in the center of a marsh or
ravine; thence South 42 degrees 27' 23" West along the center line of the marsh
or ravine to a point in a pond; thence South 80 degrees 17' 53" West along the
approximate center line of the pond, marsh or ravine to a pipe, the point of
beginning, said parcel being shown as "D.F. Woods" on said plat.
Being the identical property which was conveyed unto Zapata Haynie Corporation
be deed of William Henley Lee, Jr., et ux, et al, dated December 30, 1982, duly
recorded in Deed Book 226, at Page
17
<PAGE>
441 in the Clerk's Office aforesaid.
PARCEL SIX: Containing 16.6 acres, but conveyed in gross and not by the acre,
as is more fully shown on the plat of survey prepared by Charles E. Tomlin, Jr.,
Certified Land Surveyor, dated May 23, 1978, entitled, "Boundary Survey of
Zapata Haynie Corp." which plat is duly recorded in the Clerk's Office aforesaid
in Deed Book 196, at Page 560, 561, reference to which is hereby expressly made
for a further more accurate description of the real estate herein conveyed.
Together with a right of way along the existing private road extending from the
southeasterly corner of the property described as Parcel Six to Virginia State
Highway Route No. 659, for purposes of ingress and egress to and from the
property herein conveyed and the State Highway.
Being the identical property which was conveyed unto Zapata Haynie Corporation
by deed of Cecil Jett Haynie and Reba S. Haynie, husband and wife, dated May 25,
1978, duly recorded in the Clerk's Office aforesaid in Deed Book 196, at Page
558.
PARCEL SEVEN: Containing 16.837 acres, be the same however so much more or
less, this conveyance being made in gross and not by the acre, and being more
particularly shown and described as Parcels "B" and "C" containing 0.187 acres
and 16.65 acres respectively, as more particularly shown and described on that
certain plat of survey entitled, "Plat of 3 Parcels of land Located about 0.77
of a Mile South of Tibitha, in the Fairfield District, Northumberland County,
Virginia", made by Robert L. Downing, Certified Land Surveyor, dated March 31,
1978, revised April 11, 1978, duly recorded in the Clerk's Office aforesaid in
Deed Book 197, at Page 214, reference to which plat is hereby made for a further
and more accurate description of the real estate herein conveyed.
This conveyance is made expressly subject to all easements, restrictions,
covenants and conditions of record to the extent that they may lawfully affect
the property hereby conveyed, including, without limitation, the easement of
right of way for Virginia State Highway Route No. 684, as the same is shown on
the aforesaid plat.
Being in part a portion of the property which was conveyed unto Zapata Haynie
Corporation by deed of Joseph C. Jett, Jr., and Violett Best Jett, husband and
wife, dated April 24,1978, duly recorded in Deed Book 196, at Page 216, together
with that certain small portion of land acquired in a certain deed of exchange
dated May 8, 1978, by and between Zapata Haynie Corporation and John B. Lowry
and Barbara W. Lowry, husband and wife, duly recorded in Deed Book 197, at Page
210.
PARCEL EIGHT: Containing approximately 14.53 acres, be the same however ever so
much more or less, this conveyance being made in gross and not by the acre, and
being all that remains of a certain 21.74 acre tract more particularly shown and
described on a certain plat of survey entitled, "Boundary Survey of the Land of
Reedville Oil and Guano Company, Incorporated", dated January 12, 1966, duly
recorded in the Clerk's Office aforesaid in Deed Book 131, at Page 250-A, LESS
AND EXCEPT HOWEVER that certain 7.2122 acre tract conveyed to Reedville Sanitary
District by deed of Zapata Haynie Corporation dated September 23, 1977, duly
recorded in the Clerk's Office
18
<PAGE>
aforesaid in Deed Book 210, at Page 344.
Being the designated portion of that certain real estate which was conveyed unto
Reedville Oil & Guano Company, Incorporated by deed of Earl Robertson Evans, et
ux, dated February 4, 1966, duly recorded in Deed Book 131, at Page 249, in the
Clerk's Office aforesaid.
PARCEL NINE: Containing 2.400 acres as more particularly shown and described on
that certain plat of survey entitled, "Boundary Survey of the Land of Haynie
Products, Inc.", dated October 24, 1972, made by Warren R. Keyser, Certified
Land Surveyor, a copy of which plat of survey is duly recorded in the Clerk's
Office aforesaid in Deed Book 162, at Page 342-A, reference to which plat is
hereby expressly made for a further and more accurate description of the real
estate herein conveyed.
Being the identical property which was conveyed unto Haynie Products, Inc., by
deed of Daisy K. Fisher, widow, dated December 22, 1972, duly recorded in Deed
Book 162, at Page 341, in the Clerk's Office aforesaid.
PARCEL TEN: Containing 10.8 acres, be the same however ever so much more or
less, the same being conveyed in gross and not by the acre, and being more
particularly shown and described on a certain plat of survey made by Charles E.
Tomlin, Jr., Certified Land Surveyor, dated December 11, 1958, a copy of which
plat of survey is duly recorded in the Clerk's Office aforesaid in Plat Book 1,
at Page 178, reference to which plat of survey is hereby expressly made for a
further and more accurate description of the real estate herein conveyed.
Together with a perpetual easement of right of way over, upon and across the
twenty (20) foot right of way as shown on the aforesaid plat lying along the
southeasterly boundary of the property hereby conveyed.
Being the identical property which was conveyed unto Reedville Oil & Guano
Company, Incorporated, by deed of Earl Robertson Evans and Louise McKenney
Evans, husband and wife, dated December 26, 1958, duly recorded in the Clerk's
Office aforesaid in Deed book 109, at Page 267.
PARCEL ELEVEN: Containing 4.6 acres, be the same however ever so much more or
less, this conveyance being made in gross and not by the acre, and being more
particularly shown and described as "Lot 9" surveyed January 26, 1959, on a
certain plat of survey entitled, "Boundary Survey of the Land of Reedville Oil &
Guano Company, Incorporated", made by Charles E. Tomlin, Jr., Certified Land
Surveyor, dated January 31, 1959, a copy of which plat of survey is duly
recorded in the Clerk's Office aforesaid in Plat Book 1, at Page 185, reference
to which plat is hereby expressly made for a further and more accurate
description of the real estate herein conveyed.
Together with and subject to a certain twenty (20) foot wide easement of right
of way leading from Virginia State Highway Route No. 659, as shown on the said
plat of survey, the use of which right of way shall be in common with all others
lawfully entitled to the use thereof.
19
<PAGE>
Being the identical property which was conveyed unto Reedville Oil & Guano
Company, Incorporated by deed of Nellie Mae Jenkins, widow, dated January 31,
1959, duly recorded in the Clerk's Office aforesaid in Deed Book 109, at Page
342.
PARCEL TWELVE: Containing 2.6 acre, be the same however ever so much more or
less, this conveyance being made in gross and not by the acre, and being more
particularly shown and described as "Lot 1", on that certain plat of survey
entitled, "Boundary Survey of the Land of Reedville Oil & Guano Company,
Incorporated", made by Charles E. Tomlin, Jr., Certified Land Surveyor, dated
December 29, 1958, filed in the Clerk's Office aforesaid on February 12, 1959,
in Plat Book 1, at Page 186, reference to which plat of survey is hereby
expressly made for a further and more accurate description of the real estate
herein conveyed.
Being the identical property which was conveyed unto Reedville Oil & Guano Co.,
Incorporated, by deed of Seaboard Oil and Guano Company, Incorporated, dated
March 17, 1913, duly recorded in the Clerk's Office aforesaid in Deed Book W, at
Page 247.
PARCEL THIRTEEN: Containing 4.34 acres, be the same however ever so much more
or less, this conveyance being made in gross and not by the acre, and being more
particularly shown and described as "Lot 2", on that certain plat of survey
entitled, "Boundary Survey of the Land of Reedville Oil & Guano Company,
Incorporated", made by Charles E. Tomlin, Jr., Certified Land Surveyor, dated
December 29, 1958, filed in the Clerk's Office aforesaid on February 12, 1959 in
Plat Book 1, at Page 186, reference to which plat of survey is hereby expressly
made for a further and more accurate description of the real estate herein
conveyed.
Being the identical property which was conveyed unto Reedville Oil & Guano
Company, Incorporated, by deed of Raymond L. Haynie, et ux, et al, dated
February 23, 1931, duly recorded in the Clerk's Office aforesaid in Deed Book
KK, at Page 64.
PARCEL FOURTEEN: Containing .69 of an acre and more particularly shown and
described as "Lot 3" on that certain plat of survey entitled, "Boundary Survey
of the Land of Reedville Oil & Guano, Incorporated", dated December 29, 1958,
made by Charles E. Tomlin, Jr., Certified Land Surveyor, which plat of survey
was filed in the Clerk's Office aforesaid on February 12, 1959 in Plat Book 1,
at Page 186, reference to which plat of survey is hereby expressly made for a
further and more accurate description of the real estate herein conveyed.
Being the identical property which was conveyed unto Reedville Oil & Guano
Company, Incorporated be deed of Daniel F. Haynie and Cora E. Haynie, his wife,
dated January 5, 1934, duly recorded in Deed Book LL, at Page 196 in the Clerk's
Office aforesaid.
PARCEL FIFTEEN: Containing 1.86 acres and more particularly shown and described
as "Lot 4" on that certain plat of survey entitled, "Boundary Survey of the Land
of Reedville Oil & Guano Company, Incorporated", dated December 29, 1958, made
by Charles E. Tomlin, Jr., Certified Land
20
<PAGE>
Surveyor, a copy of which plat of survey was filed for record in the Clerk's
Office aforesaid on February 12, 1959, in Plat Book 1, at Page 186, reference to
which plat of survey is hereby expressly made for a further and more accurate
description of the real estate herein conveyed.
Being the designated parcel conveyed unto Reedville Oil & Guano Company,
Incorporated, by deed of Ruth Haynie Page, widow, et al; dated December 4, 1951,
duly recorded in the Clerk's Office aforesaid in Deed Book 96, at Page 169.
PARCEL SIXTEEN: Containing 3.17 acres and more particularly shown and described
as "Lot 5" on that certain plat of survey entitled, "Boundary Survey of the Land
of Reedville Oil & Guano Company, Incorporated", dated December 29, 1958, made
by Charles E. Tomlin, Jr., Certified Land Surveyor, filed for record in the
Clerk's Office aforesaid on February 12, 1959 in Plat Book 1, at Page 186,
reference to which plat of survey is hereby expressly made for a further and
more accurate description of the real estate herein conveyed.
Being the designated tract which was conveyed unto Reedville Oil & Guano
Company, Incorporated, by deed of Ruth Haynie Page, widow, et al, dated December
4, 1959, duly recorded in the Clerk's Office aforesaid in Deed Book 96, at Page
169.
PARCEL SEVENTEEN: Containing 1.75 acres and more particularly shown and
described as "Lot 6" on that certain plat of survey entitled, "Boundary Survey
of the Land of Reedville Oil and Guano Company, Incorporated", dated December
29, 1958, made by Charles E. Tomlin, Jr., Certified Land Surveyor, filed for
record in the Clerk's Office aforesaid on February 12, 1959, in Plat Book 1, at
Page 186, reference to which plat of survey is hereby expressly made for a
further and more accurate description of the real estate herein conveyed.
Being the identical property which was conveyed unto Reedville Oil & Guano
Company, Inc. by deed of Raymond O. Dawson, et ux, dated October 28, 1954, duly
recorded in Deed Book 100, at Page 495 in the Clerk's office aforesaid.
PARCEL EIGHTEEN: Containing 2.67 acres, being more particularly shown and
described as "Lot 7" on that certain plat of survey entitled, "Boundary Survey
of the Land of Reedville Oil & Guano Company, Incorporated", dated December 29,
1958, made by Charles E. Tomlin, Jr., Certified Land Surveyor, filed for record
in the Clerk's Office aforesaid on February 12, 1959, in Plat Book 1, at Page
186, reference to which plat of survey is hereby expressly made for a further
and more accurate description of the real estate herein conveyed.
Being the identical property which was conveyed unto Reedville Oil & Guano
Company, Incorporated, by deed of John Webster Davenport, et ux, dated July 16,
1954, duly recorded in Deed Book 101, at Page 56, in the Clerk's Office
aforesaid.
Parcels One through Eighteen hereinabove described are conveyed expressly
subject to all easements,
21
<PAGE>
conditions, covenants and restrictions of record to the extent they may lawfully
affect the subject property.
Reedville Oil & Guano Company, Incorporated had its name changed to Haynie
Products, Inc. as more particularly set forth in a certain set of Articles of
Amendment dated January 24, 1968, duly recorded in Charter Book 3, at Page 347
in the Clerk's Office aforesaid. Zapata Haynie Corporation was the successor by
merger to Haynie Products, Inc., and Menhaden Fisheries, Inc. Zapata Haynie
Corporation had its name changed to Zapata Protein (USA), Inc. as more
particularly set forth in a certain set of Articles of Amendment dated March 31,
1994, recorded in the Clerk's Office aforesaid in Charter Book 5, at Page 401.
Zapata Protein (USA). Inc. had its name changed to Omega Protein, Inc., as more
particularly set forth in a certain set of Articles of Amendment dated March 4,
1998, recorded in the Clerk's Office of the State Corporation Commission for the
Commonwealth of Virginia.
22
<PAGE>
EXHIBIT 10.9
REVOLVING CREDIT NOTE
---------------------
August 11, 1998 $20,000,000.00
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, OMEGA PROTEIN CORPORATION, a
Nevada corporation, and OMEGA PROTEIN, INC., a Virginia corporation,
(collectively, the "Company"), promises to pay to the order of SUNTRUST BANK,
SOUTH FLORIDA, NATIONAL ASSOCIATION, a national banking association (the
"Lender"), in immediately available funds in lawful money of the United States
of America, on the sooner of (i) the Commitment Termination Date, as defined in
the Credit Agreement (as herein defined), or (ii) the acceleration of this
indebtedness as herein provided, the lesser of (i) the principal sum of TWENTY
MILLION AND NO/100 Dollars ($20,000,000.00) or (ii) so much thereof as shall
have been from time to time disbursed in accordance with the Credit Agreement
and not theretofore repaid, as shown on the grid schedule attached hereto, at
the main office of SunTrust Bank, South Florida, National Association, or any
successor Lender, as defined in the Credit Agreement, or at such other place as
the holder hereof may designate by notice in writing to the Company.
In addition to principal, the Company agrees to pay interest on the
principal amounts disbursed hereunder from time to time from the date of each
disbursement until paid at such rates of interest and upon such dates as
provided in the Credit Agreement.
This Revolving Credit Note (this "Note") is the Note defined in, and
evidences Advances incurred pursuant to, that certain Revolving Credit
Agreement, dated as of August 11, 1998, by and among the Company and the Lender
(as amended, restated, modified and supplemented from time to time, the "Credit
Agreement"). Reference hereby is made to the Credit Agreement for a full and
complete description of such terms and conditions, including, without
limitation, the circumstances under which the maturity of this Note may or will
be accelerated and the unpaid balance and all accrued and unpaid interest shall
become due and payable. Unless otherwise defined herein, all capitalized terms
used in this Note shall have the same meanings as set forth in the Credit
Agreement. This Note is and remains secured by certain personal property of the
Company and its Subsidiaries pursuant to the Security Documents executed as of
August 11, 1998, to which reference is made for a full description of the
collateral securing this Note.
The Lender, upon the occurrence and during the continuance of any
Event of Default, shall have a right of set-off against any deposit balances of
the Company in the possession of the Lender, and the Lender may apply the same
against payment of this Note or any other indebtedness of the Company to the
Lender. The payment of any indebtedness evidenced by this Note shall not affect
the enforceability of this Note as to any future, different or other
indebtedness evidenced hereby. In the event the indebtedness evidenced by this
Note is collected by legal action or through an attorney at law, the Lender
shall be entitled to recover from the Company all costs of collection including
reasonable attorneys' fees actually incurred.
<PAGE>
The Company acknowledges that the actual crediting of the amount of
any Advance under the Credit Agreement to an account of the Company or payment
under a Letter of Credit Obligation to an account of the Company or any
Guarantor or recording such amount on the grid schedule attached hereto shall,
in the absence of manifest error, constitute presumptive evidence of such
Advance or payment. Such account records or grid schedule shall constitute, in
the absence of manifest error, presumptive evidence of principal amounts
outstanding and repayments made under this Note and the Credit Agreement, at any
time and from time to time, provided that the failure of the Lender to record on
the grid schedule or in such account records the amount of any Advance or
payment shall not affect the obligation of the undersigned to repay such amount,
together with interest thereon, in accordance with this Note and the Credit
Agreement.
Failure or forbearance of the Lender to exercise any right hereunder,
or otherwise granted by the Credit Agreement or by law, shall not affect or
release the liability of the Company hereunder, and shall not constitute a
waiver of such right unless so stated in writing by such of the Lenders as are
required under the Credit Agreement to effect such waiver. THIS NOTE SHALL BE
DEEMED TO BE MADE UNDER, AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY, THE LAWS OF THE STATE OF FLORIDA. TIME IS OF THE ESSENCE OF THIS NOTE.
PRESENTMENT FOR PAYMENT, NOTICE OF DISHONOR AND PROTEST ARE HEREBY
WAIVED.
[Remainder of page intentionally left blank]
<PAGE>
Executed under hand and seal in _____________, _____________, on the
11 day of August, 1998.
OMEGA PROTEIN CORPORATION,
a Nevada corporation
By: /s/ ROBERT W. STOCKTON
---------------------------------
Robert W. Stockton
Executive Vice-President
Attest:
-----------------------------
Name:
Title:
[CORPORATE SEAL]
OMEGA PROTEIN, INC., a Virginia corporation
By: /s/ ROBERT W. STOCKTON
-----------------------------------
Robert W. Stockton
Vice-President
Attest:
--------------------------------
Name:
Title:
[CORPORATE SEAL]
<PAGE>
STATE OF GEORGIA )
COUNTY OF FULTON ) ss:
I HEREBY CERTIFY that on July 2, 1998, before me, an officer duly
authorized in the State of Georgia, County of Fulton to take acknowledgments,
personally appeared ROBERT W. STOCKTON OF ____________________________, Texas to
me known to be the Executive Vice President and Chief Financial Officer of OMEGA
PROTEIN CORPORATION and OMEGA PROTEIN, INC., the corporations which executed the
within Promissory Note dated July 2, 1998 in the maximum principal amount of
$20,000,000.00, and he acknowledged to me that he executed the Note on behalf of
said corporations as the Executive Vice President and Chief Financial Officer
thereof.
_____________________________________________
Signature of Notary Public - State of Georgia
_____________________________________________
Notary Public, State of Georgia
Personally Known ____________________________
Produced Identification______________________
Type of Identification_______________________
<PAGE>
EXHIBIT 10.10
SECURITY AGREEMENT
(COMPANY)
THIS SECURITY AGREEMENT (the "Agreement"), made as of August 11,
1998, by OMEGA PROTEIN CORPORATION, a Nevada corporation, and OMEGA PROTEIN,
INC., a Virginia corporation (individually and collectively, the "Company") in
favor of SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION, a national banking
association (the "Lender").
W I T N E S S E T H:
WHEREAS, the Company and Lender have entered into that certain
Revolving Credit Agreement, dated as of even date hereof (the "Credit
Agreement"), pursuant to which the Lender agreed to establish a $20,000,000
Commitment in favor of the Company; and
WHEREAS, it is a condition precedent to Lender's making the Commitment
available to the Company that the Company execute and deliver to the Lender a
security agreement substantially in the form hereof;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. Defined Terms. Terms used but not otherwise defined herein shall
have the meanings assigned to them in the Credit Agreement. The following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
"Account Debtor" shall mean any "account debtor," as such term is
defined in Section 9-105(1)(a) of the UCC.
"Accounts" shall mean any "accounts," as such term is defined in
Section 9-106 of the UCC, now owned or hereafter acquired by the Company or
in which the Company now has or hereafter acquires any rights, and, in any
event, shall include, without limitation, all accounts receivable, book
debts and other forms of obligations (other than forms of obligations
evidenced by Chattel Paper, Documents or Instruments) now owned or
hereafter received or acquired by or belonging or owing to the Company
(including, without limitation, under any trade names, styles or divisions
thereof) whether arising out of goods sold or leased or services rendered
by the Company or from any other transaction, whether or not the same
involves the sale or lease of goods or services by the Company (including,
without limitation, any such obligation which might be characterized as an
account or contract right under the UCC) and all of the Company's rights
in, to and under all purchase orders or receipts now owned or hereafter
acquired by it for goods or services, and all of the Company's rights to
any goods represented by any of the foregoing (including, without
limitation, unpaid seller's rights of rescission, replevin, reclamation and
<PAGE>
stoppage in transit and rights to returned, reclaimed or repossessed
goods), and all moneys due or to become due to the Company under all
contracts for the sale of goods or the performance of services or both by
the Company (whether or not yet earned by performance on the part of the
Company or in connection with any other transaction), now in existence or
hereafter occurring, including, without limitation, the right to receive
the proceeds of said purchase orders and contracts, and all collateral
security and guarantees of any kind given by any Person with respect to any
of the foregoing.
"Chattel Paper" shall mean any "chattel paper," as such term is
defined in Section 9-105(1)(b) of the UCC, that relates directly or
indirectly to Accounts, Inventory or the Proceeds of Accounts or Inventory
now owned or hereafter acquired by the Company or in which the Company now
has or hereafter acquires any rights and wherever located.
"Collateral" shall have the meaning assigned to such term in Section 2
of this Agreement.
"Computer Equipment" shall mean all computers, software, and
electronic data-processing and other office equipment now owned or
hereafter acquired by the Company or any Guarantor in which the Company or
any Guarantor now has or hereafter acquires any rights and wherever
located, and any and all additions, substitutions and replacements of any
of the foregoing, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto, provided however, that Computer Equipment shall not include any
computers, software, electronic data processing, telecommunications and
other office equipment relating solely to the processing of information for
the payroll, human resources, engineering and plant operations departments
of the Company.
"Contracts" shall mean all contracts, undertakings, or other
agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) that relate directly or indirectly to Accounts, Inventory or
the Proceeds of Accounts or Inventory, in or under which the Company may
now or hereafter have any right, title or interest, including, without
limitation, with respect to an Account, any agreement relating to the terms
of payment or the terms of performance thereof.
"Documents" shall mean any "documents," as such term is defined in
Section 9-105(1)(f) of the UCC, that relate directly or indirectly to
Accounts, Inventory or the Proceeds of Accounts or Inventory now owned or
hereafter acquired by the Company or in which the Company now has or
hereafter acquires any rights and wherever located.
"Equipment" shall mean any "equipment," as such term is defined in
Section 9-109(2) of the UCC, now owned or hereafter acquired by the Company
or in which the Company now has or hereafter acquires any rights and
wherever located, and, in any
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event, shall include, without limitation, all machinery, equipment, molds,
furnishings, fixtures, and computers and other electronic data-processing
and other office equipment now owned or hereafter acquired by the Company
or in which the Company now has or hereafter acquires any rights and
wherever located, and any and all additions, substitutions and replacements
of any of the foregoing, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto, provided however, that Equipment shall not include Computer
Equipment.
"General Intangibles" shall mean any "general intangibles," as such
term is defined in Section 9-106 of the UCC, now owned or hereafter
acquired by the Company or in which the Company now has or hereafter
acquires any rights, and, in any event, shall include, without limitation,
all right, title and interest which the Company may now or hereafter have
in, under or with respect to any Contract, causes of action, franchises,
tax refund claims, customer lists, Trademarks, Patents, rights in
intellectual property, Licenses, permits, copyrights, trade secrets,
proprietary or confidential information, inventions and discoveries
(whether patented or patentable or not) and technical information,
procedures, designs, knowledge, know-how, software, data bases, business
records data, skill, expertise, experience, processes, models, drawings,
materials and records, goodwill, all claims under guaranties, security
interests or other security held by or granted to the Company to secure
payment of the Accounts by an Account Debtor obligated thereon, all rights
of indemnification and all other intangible property of any kind and
nature.
"Hereby," "herein," "hereof," "hereunder" and words of similar import
refer to this Agreement as a whole (including, without limitation, any
exhibits or schedules hereto) and not merely to the specific Section,
paragraph or clause in which the respective word appears.
"Instruments" shall mean any "instrument," as such term is defined in
Section 9-105(1)(i) of the UCC, that relates directly or indirectly to
Accounts, Inventory or the Proceeds of Accounts or Inventory now owned or
hereafter acquired by the Company or in which the Company now has or
hereafter acquires any rights and wherever located, other than instruments
that constitute, or are a part of a group of writings that constitute,
Chattel Paper.
"Inventory" shall mean any "inventory," as such term is defined in
Section 9-109(4) of the UCC, now owned or hereafter acquired by the Company
or in which the Company now has or hereafter acquires any rights and
wherever located, and, in any event, shall include, without limitation,
all inventory, merchandise, goods and other personal property, now owned or
hereafter acquired by the Company or in which the Company now has or
hereafter acquires any rights and wherever located, which are held for
sale or lease or are furnished or are to be furnished under a contract of
service or which constitute raw materials, work in process or materials
used or consumed or to be used or consumed in
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the Company's business, or the processing, packaging, delivery or shipping
of the same, and all finished goods.
"License" shall mean any Patent License, Trademark License or other
under which the Company is the licensor or licensee, and in the case of
Licenses under which the Company is the licensee, all rights to collect
royalties thereunder.
"Obligations" shall mean all amounts owing to the Lender pursuant to
the terms of this Agreement, the Credit Agreement, or any other Loan
Document, including without limitation, all Advances (including all
principal and interest payments due thereunder), Letter of Credit
Obligations, Fees, expenses, indemnification and reimbursement payments,
indebtedness, liabilities, and obligations of the Company and its
Subsidiaries, covenants and duties of the Company and its Subsidiaries to
the Lender of every kind, nature and description, direct or indirect,
absolute or contingent, due or not due, in contract or tort, liquidated or
unliquidated, arising under this Agreement, the Credit Agreement or under
the other Loan Documents, by operation of law or otherwise, now existing or
hereafter arising or whether or not for the payment of money or the
performance or the nonperformance of any act, including, but not limited
to, all debts, liabilities and obligations owing by the Company and its
Subsidiaries to others which the Lender may have obtained by assignment or
otherwise, and all damages which the Company and its Subsidiaries may owe
to the Lender by reason of any breach by the Company or any of its
Subsidiaries of any representation, warranty, covenant, agreement or other
provision of this Agreement or of any other Loan Document.
"Patent License" shall mean all written agreements granting any right
to make, use, sell and/or practice any invention or discovery that is the
subject matter of a Patent now owned or hereafter acquired by the Company
or in which the Company now has or hereafter acquires any rights.
"Patent" or "Patents" shall mean one or all of the following now owned
or hereafter acquired or developed by the Company or in which the Company
now has or hereafter acquires any rights, including, without limitation,
pursuant to any Patent License, and wherever located: (i) all letters
patent of the United States or any other country and all applications for
letters patent of the United States or any other country, (ii) all
reissues, reexaminations, continuations, continuations-in-part, divisions,
and extensions of any of the foregoing, and (iii) all inventions disclosed
in and claimed in the Patents and any and all trade secrets and knowhow
related thereto.
"Proceeds" shall mean "proceeds," as such term is defined in Section
9-306(1) of the UCC and, in any event, shall include, without limitation,
(i) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Company from time to time with respect to any of the
Collateral, (ii) any and all payments (in any form whatsoever) made or due
and payable to the Company from time to time in connection with any
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<PAGE>
requisition, confiscation, condemnation, seizure or forfeiture of all or
any part of the Collateral by any governmental body, authority, bureau or
agency (or any person acting under color of governmental authority), (iii)
any claim of the Company against third parties (A) for past, present or
future infringement of any Patent or Patent License or (B) for past,
present or future infringement or dilution of any Trademark or Trademark
License or for injury to the goodwill associated with any Trademark,
Trademark registration or Trademark licensed under any Trademark License,
(iv) any and all other amounts from time to time paid or payable under or
in connection with any of the Collateral, and (v) the following types of
property acquired with cash proceeds: Accounts, Chattel Paper, Contracts,
Documents, General Intangibles, Equipment and Inventory.
"Rolling Stock" shall mean engine operated equipment now owned or
hereafter acquired by the Company or any of its Subsidiaries, including,
aircraft, rough terrain cranes, manlifts, dump trailers, wheel loaders,
skid steer loaders, forklifts, skip loaders and utility wheel loaders.
"Security Agreement" shall mean this Agreement, dated as of the date
hereof, executed by the Company in favor of the Lender, as the same may be
amended, restated, supplemented or otherwise modified from time to time,
and any exhibits or schedules hereto.
"Supplemental Documentation" shall have the meaning assigned to it in
Section 5(a) of this Agreement.
"Trademark" or "Trademarks" shall mean one or all of the following now
owned or hereafter acquired by the Company or in which the Company now has
or hereafter acquires any rights (including, without limitation, pursuant
to any Trademark License): (i) all trademarks, trade names, corporate
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of any State
of the United States or any other country or any political subdivision
thereof, (ii) all extensions or renewals thereof and (iii) the goodwill of
the Company connected with the use of, and symbolized by, any of the
foregoing.
"Trademark License" shall mean all of the following now owned or
hereafter acquired by the Company or in which the Company now has or
hereafter acquires any rights: any written agreement granting any right to
use any Trademark or Trademark registration.
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<PAGE>
"UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Florida; provided, however, in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of the Lender's security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of Florida, the term "UCC" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection
or priority and for purposes of definitions related to such provisions.
"Vessel" shall mean all fishing vessels now owned or hereafter
acquired by the Company and any of its Subsidiaries, including, without
limitation, [purse boats].
2. Grant of Security Interest. (a) Collateral. As collateral
security for the prompt and complete payment and performance when due (whether
at stated maturity, by acceleration or otherwise) of all the Obligations and to
induce the Lender to enter into the Credit Agreement, make the Advances and
issue the Letters of Credit in accordance with the terms thereof, the Company
hereby grants to the Lender a security interest in all of the Company's right,
title and interest in, to and under the following property whether now owned by
or owing to or hereafter acquired by or arising in favor of the Company
(including under any trade names, styles, or derivations thereof), and whether
owned or consigned by or to or leased from or to, the Company regardless of
where located, but expressly excluding (i) any real estate currently owned by or
hereafter acquired by the Company, (ii) Vessels, (iii) Rolling Stock, (iv)
Equipment, and (v) any Proceeds of such real estate, Vessels, Rolling Stock and
Equipment (all of which being hereinafter collectively referred to as the
"Collateral"):
(i) all Accounts of the Company;
(ii) all Chattel Paper of the Company;
(iii) all Contracts of the Company;
(iv) all Documents of the Company;
(v) all Computer Equipment of the Company;
(vi) all General Intangibles of the Company;
(vii) all Instruments of the Company;
(viii) all Inventory of the Company;
(ix) all accounts maintained by the Company with any financial
institution which relate directly or indirectly to Accounts, Inventory or
Proceeds of Accounts or
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<PAGE>
Inventory, including without limitation, all of the accounts described in
Schedule 5 attached hereto, and all funds on deposit therein, all
investments arising out of such funds, all claims thereunder or in
connection therewith, all cash, securities, rights and other property at
any time and from time to time received, receivable or otherwise
distributed in respect of such accounts, such funds or such investments;
(x) all books, records, printouts, ledger cards, files,
correspondence, computer programs, tapes, disks and related data processing
software, including source and object codes (owned by the Company or in
which it has an interest) which at any time evidence or contain information
relating to any of the Collateral (including, without limitation, customer
lists and supplier lists) or are otherwise necessary or helpful in the
collection thereof or realization thereupon;
(xi) guaranties, warranties, liens on real or personal property,
leases, and other agreements and property which in any way secure or relate
to any Accounts, Inventory, General Intangibles, Contracts, Documents,
Instruments or Chattel Paper, or are acquired for the purpose of securing
and enforcing any item thereof; and
(xii) to the extent not otherwise included, all Proceeds of each of
the foregoing and all accessions to, substitutions and replacements for,
and rents, profits and products of each of the foregoing;
provided, however, that the foregoing grant of a security interest shall be
subordinated with respect to any assets in which a security interest currently
is or hereinafter will be granted by the Company pursuant to transactions or
agreements in form and substance satisfactory to the Lender.
(b) Property in Possession. In addition, as collateral security for
the prompt and complete payment and performance when due of the Obligations and
in order to induce the Lender as aforesaid, the Lender is hereby granted a lien
and security interest in all property of the Company held by the Lender,
including, without limitation, all property of every description, now or
hereafter in the possession or custody of or in transit to the Lender for any
purpose, including safekeeping, collection or pledge, for the account of the
Company, or as to which the Company may have any right or power.
(c) The Company intends and hereby acknowledges that the grant of a
security interest in the Collateral to the Lender conveys a security interest in
all right, title and interest of the Company to the Collateral, whether such
Collateral is owned individually, jointly or severally by the Company.
3. Right of Lender; Limitations on the Lender's Obligations;
License.
(a) The Company Remains Liable. It is expressly agreed by the Company
that,
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<PAGE>
anything herein to the contrary notwithstanding, the Company shall remain liable
under each of its Contracts and each of its Licenses to observe and perform all
the conditions and obligations to be observed and performed by it thereunder and
the Company shall perform all of its duties and obligations thereunder, all in
accordance with and pursuant to the terms and provisions of each such Contract
or License. The Lender shall not have any obligation or liability under any
Contract or License by reason of or arising out of this Agreement or the
granting to the Lender of a security interest therein or the receipt by the
Lender of any payment relating to any Contract or License pursuant hereto, nor
shall the Lender be required or obligated in any manner to perform or fulfill
any of the obligations of the Company under or pursuant to any Contract or
License, or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any Contract or License, or to present or file any claim, or
to take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at any
time or times.
(b) Direct Collection. The Lender may at any time, on or after the
Acceleration Date, open the Company's mail and collect any and all amounts due
from Account Debtors, and notify Account Debtors of the Company, parties to the
Contracts of the Company, obligors of Instruments of the Company and obligors in
respect of Chattel Paper of the Company that the Accounts and the right, title
and interest of the Company in and under such Contracts, such Instruments and
such Chattel Paper have been assigned to the Lender and that payments shall be
made directly to the Lender or to a lockbox designated by the Lender. Upon the
request of the Lender made at any time on or after the Acceleration Date, the
Company will so notify such Account Debtors, parties to such Contracts, obligors
of such Instruments and obligors in respect of such Chattel Paper. The Lender
also may at any time on or after the Acceleration Date, in its own name or in
the name of the Company, communicate with such Account Debtors, parties to such
Contracts, obligors of such Instruments and obligors in respect of such Chattel
Paper to verify with such Persons to the Lender's sole satisfaction the
existence, amount and terms of any such Accounts, Contracts, Instruments or
Chattel Paper.
(c) Test Verifications. Upon reasonable prior notice to the Company
(unless an Event of Default has occurred, in which case no notice is necessary),
the Lender shall have the right to make test verifications of the Accounts and
physical verifications of the Inventory in any reasonable manner and through any
reasonable medium that it considers advisable, provided however, that (i) the
Lender must choose a manner and medium which will not be conspicuous to the
clients and customers of the Company, (ii) the Company agrees to furnish all
such assistance and information as the Lender may require in connection
therewith, and (iii) in the event the Lender exercises its right to make test
verifications at a time when no Event of Default has occurred or is continuing,
the Lender shall pay all expenses associated with such test verification.
4. Representations, Warranties and Covenants. The Company hereby
represents, warrants and covenants that:
(a) Locations, Name of Debtor, Etc. All of the Inventory is located
at the
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<PAGE>
places specified in Schedule 1 attached hereto and such location is an owned,
leased or bailment location as specified in Schedule 1 attached hereto. The
correct corporate name, the principal place of business and the chief executive
office of the Company and the places where the Company's books and records
concerning the Collateral are currently kept are set forth in Schedule 2
attached hereto and made a part hereof. All records concerning Accounts and
General Intangibles and all originals of any Documents, Instruments or Chattel
Paper are located at the addresses set forth on Schedule 2 and none of the
Accounts or General Intangibles is evidenced by a promissory note or other
Instrument except for notes or other Instruments which have been delivered to
the Lender.
(b) Accounts Accurate. The amount represented by the Company to the
Lender in the most recent financial statements delivered to the Lender and from
time to time in the future as the amount owing by each Account Debtor is within
five percent (5%) of the true and correct amount actually owing by such Account
Debtor thereunder, and the aggregate amount owing by all Account Debtors in
respect of all Accounts is within five percent (5%) of the true and correct
amount actually owing by such Account Debtors thereunder.
(c) Exclusive Possession and Control. The Company has exclusive
possession and control of the Inventory, except for (i) Inventory temporarily in
transit with common or other carriers, (ii) Inventory located at (A) a location
listed on Schedule 1 specifying that the Company does not have exclusive
possession and control or (B) such other locations as are permitted by the
Lender pursuant to Section 5(b) of this Agreement, and (iii) Inventory located
at the places of business of the Company's customers.
(d) Legal Owner. The Company is the legal and beneficial owner of, or
has rights to use, the Collateral free and clear of all Liens other than
Permitted Liens and, in the case of Patents or Trademarks, free and clear of all
licenses, registered-user agreements and covenants not to sue third persons.
The Company has not, during the five (5) years preceding the date hereof, been
known as or used any other corporate, trade or fictitious name, except as
disclosed on Schedule 3 hereto, nor acquired all or substantially all the
assets, capital stock or operating unit of any Person, except as disclosed on
Schedule 3 hereto, and each predecessor in interest of the Company during the
five (5) years preceding the Closing Date is disclosed on Schedule 3 hereto.
(e) No Security Agreement. No effective security agreement, financing
statement, equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in any public
office, except (i) such as may have been filed by the Company in favor of the
Lender pursuant to this Agreement, and (ii) those filed by the United States to
secure the Title XI Financing.
(f) Financing Statements. This Agreement creates in favor of the
Lender a legal, valid and enforceable Lien on the Collateral, securing the
payment of the Obligations. When financing statements have been filed in the
appropriate offices under the UCC in the
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<PAGE>
locations listed on Schedule 4, the Lender will have a fully perfected first
priority Lien on the Collateral, except where limited or prohibited by the terms
of a Contract, provided however, that with regard to any Lien on the collateral
securing any Title XI Financing, a description of such collateral and the
respective locations to be attached hereto as Schedule 4(f), the Lender will
have a fully perfected security interest subordinate only to any security
interest securing such Title XI Financing. When the Trademark Security Agreement
has been filed in the United States Patent and Trademark Office, the Lender will
have a fully perfected first priority Lien on the Collateral, to the extent such
Lien may be perfected by the filing of such agreements in the United States
Patent and Trademark Office.
(g) No Governmental Approval. No Governmental Approval, and no notice
to any governmental agency is required either (i) for the grant of a Lien by the
Company in the Collateral pursuant to this Agreement or (ii) the exercise by the
Lender of the rights provided for in this Agreement or the remedies in respect
to the Collateral pursuant to this Agreement other than any notice and consent
required pursuant to the Title XI Financing.
(h) Trademarks. The Trademarks and any trademarks in which the
Company has been granted rights pursuant to Trademark Licenses, are subsisting
and have not been adjudged invalid or unenforceable; each of the Trademarks and
any trademark in which the Company has been granted rights pursuant to Trademark
Licenses, is valid and enforceable; to the best of the Company's knowledge, no
claim has been made that the use of any of the Trademarks or any trademark in
which the Company has been granted rights pursuant to the Trademark Licenses
does or may violate the rights of any third person; upon registration of its
Trademarks, the Company will use for the duration of this Agreement, proper
statutory notice in connection with its use of the Trademarks; and the Company
will use, for the duration of this Agreement, consistent standards of quality in
its manufacture of products sold under the Trademarks and any Trademarks in
which the Company has been granted rights pursuant to the Trademark Licenses.
(i) Patents. As of the date hereof the Company has no rights in or to
any Patents or Patent Licenses.
5. Covenants. The Company covenants and agrees with the Lender that
from and after the date of this Agreement:
(a) Further Documentation; Pledge of Instruments. At any time and
from time to time, upon the written request of the Lender, and at the sole
expense of the Company, the Company will promptly and duly execute and deliver
any and all such further instruments, documents and agreements and take such
further action as the Lender may deem necessary or desirable in order to perfect
and protect any Lien granted or purported to be granted hereby or to enable the
Lender to exercise and enforce its rights and remedies hereunder with respect to
the Collateral. Without limiting the generality of the foregoing, the Company
will (i) secure all consents and approvals necessary or appropriate for the
assignment to the Lender of any material License or material Contract held by
the Company or in which the Company has any rights,
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(ii) mark conspicuously each item of Chattel Paper and each related Contract and
each of its records pertaining to the Chattel Paper, with a legend, in form and
substance satisfactory to the Lender, indicating that such Chattel Paper or
related Contract is subject to the security interest granted hereby, (iii) if
any Account shall be evidenced by a promissory note or other Instrument
(including, without limitation, any Letter of Credit on which the Company is
named as a beneficiary), deliver and pledge to the Lender hereunder such
certificate, note or other Instrument duly indorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and substance
reasonably satisfactory to the Lender, and (iv) execute and file such financing
or continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, in form and substance reasonably
satisfactory to the Lender, in order to perfect and preserve the security
interest granted or purported to be granted hereby. The Company hereby
authorizes the Lender to file any such financing or continuation statements
without the signature of the Company to the extent permitted by applicable law.
The Company hereby agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement to the extent permitted by applicable law. If any Inventory
is in the possession or control of any warehouseman or any of the Company's
agents or processors, the Company shall, upon the Lender's reasonable request,
notify such warehouseman, agent or processor of the Lender's security interest
in such Inventory and, upon the Lender's request, instruct them to hold all such
Inventory for the Lender's account and, from and after the occurrence of, and
during the continuance of, an Event of Default, subject to the Lender's
instructions.
(b) Location of Inventory. The Company shall keep the Inventory at
the places specified in Schedule 1 hereof, except for Inventory temporarily in
transit between such locations and, so long as no Event of Default has occurred
and is continuing, the Company may designate additional Inventory locations
within the continental United States ("Domestic Locations") by delivering
written notice to the Lender at least thirty (30) days prior to establishing any
such location, provided however, that the Company may, so long as no Event of
Default has occurred and is continuing, designate additional Inventory locations
outside of the continental United States ("Foreign Locations") with prior
written consent of the Lender, which consent may be withheld if the Company is
unable to perfect the Lender's security interest in all Collateral located at
such Foreign Location. Prior to the establishment of a Domestic Location the
Company shall cause to be made all filings under the UCC necessary or
appropriate to preserve the perfection of the security interests described
herein in the Inventory to be located at such location and to the extent that
such location is owned by any Person other than the Company, will obtain a lien
waiver with respect to such Inventory in form and substance reasonably
satisfactory to the Lender. Upon the establishment of a Domestic Location,
Schedule 1 hereto shall be deemed amended to add such location thereto without
further action by the Lender or the Company, and the Company hereby authorizes
the Lender to substitute a new Schedule 1 hereto to reflect such additional
location(s). Prior to the establishment of a Foreign Location in a country
other than the United States, the Company shall cause all requirements under
such countries' law to be satisfied such that the Lender shall have a valid and
enforceable security interest in all Collateral located in such Foreign
Location.
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(c) Location of Other Collateral. The Company will keep its principal
place of business and chief executive office and the office where it keeps all
records concerning the Collateral, and the office where it keeps all originals
of any Documents, Instruments or Chattel Paper, at the locations therefor
specified in Schedule 2 unless (i) the Company shall have given the Lender at
least thirty (30) days' prior written notice of the establishment of a new
location (which shall be within the United States) and (ii) the Company shall
have made all filings under the UCC necessary or appropriate and obtained any
Collateral Access Agreements (as determined by the Lender in its reasonable
discretion) to preserve the perfection of Lender's Lien in the Collateral. The
Company will hold and preserve such records and Documents, Instruments and
Chattel Paper and will permit representatives of the Lender, or any authorized
employee, agent or representative thereof, at any time during customary business
hours and as often as shall be reasonably requested, to inspect and make copies
and abstracts from such records and Documents, Instruments and Chattel Paper.
(d) Maintenance of Records. The Company will keep and maintain at the
Company's own cost and expense satisfactory and complete records of the
Collateral in a manner reasonably acceptable to the Lender, including, without
limitation, a record of all payments received and all credits granted with
respect to such Collateral and a record of the Lender's security interest on the
Collateral. Upon the occurrence and during the continuance of an Event of
Default, the Company shall, for the Lender's further security, deliver and turn
over to the Lender or the Lender's designated representatives at any time upon
request by the Lender or the Lender's designated representative, copies of any
such books and records (including, without limitation, any and all computer
tapes, programs, and source codes relating to the Collateral or any part or
parts thereof).
(e) Indemnification. In any suit, proceeding or action brought by the
Lender relating to any Account, Chattel Paper, Contract, General Intangible or
Instrument for any sum owing thereunder, or to enforce any provision of any
Account, Chattel Paper, Contract, General Intangible or Instrument, the Company
will save, indemnify and keep the Lender harmless from and against all expense,
loss or damages suffered by reason of any defense, setoff, counterclaim,
recoupment or reduction of liability whatsoever of the obligor thereunder,
arising out of a breach by the Company of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing to, or
in favor of, such obligor or its successors from the Company, and all such
obligations of the Company shall be and remain enforceable against and only
against the Company and shall not be enforceable against the Lender.
(f) Limitations of Liens on Collateral. The Company will not create,
permit or suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove, any Lien on the Collateral, and will
defend the right, title and interest of the Lender in and to any of the
Company's rights to the Collateral, including, without limitation, the proceeds
and products thereof, against the claims and demands of all Persons whatsoever,
excluding any Permitted Liens.
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(g) No Changes in Payments. The Company will not (i) grant any
extension of the time of payment of any of the Collateral except in the ordinary
course of business or compromise, compound or settle the same for less than the
full amount thereof except in the ordinary course of business, (ii) release,
wholly or partly, any Person liable for the payment thereof except in the
ordinary course of business, or (iii) allow any credit or discount whatsoever
thereon other than trade discounts granted in the ordinary course of business.
(h) Limitations on Disposition of Assets. The Company will not sell,
transfer, lease or otherwise dispose of any of the Collateral or contract to do
so, except to the extent permitted under the terms of the Credit Agreement.
(i) Notice of Liens, etc. The Company will advise the Lender
promptly, and in reasonable detail, of (i) any material Lien or claim made by or
asserted against any or all of the Collateral, and (ii) the occurrence of any
other event which would have a Material Adverse Effect on the aggregate value of
the Collateral or on the Liens with respect to such Collateral created
hereunder.
(j) Notice Regarding Governmental Accounts. The Company shall
promptly comply with, and continue to comply with, the Assignment of Claims Act
of 1940, as amended (31 U.S.C. (S) 3727 et seq.) and any other comparable law or
act enacted by any state or local governmental authority (collectively, the
"Assignment Laws") applicable to all Contracts and all Accounts with respect to
which the United States of America or any department, agency or instrumentality
thereof or any other state or local governmental agency is, respectively, a
party or the Account Debtor (all such Contracts and Accounts hereinafter
collectively referred to as "Government Receivables"). The Company shall
promptly deliver to the Lender evidence of such compliance, which evidence shall
be in form and substance satisfactory to the Lender. At any time when an Event
of Default has occurred and is continuing, the Company will take any action
required or requested by the Lender to give notice of the Lender's security
interest in such Government Receivables under the provisions of the Assignment
Laws.
(k) Limitations on Name Change. The Company will not change its name,
identity or corporate structure in any manner which might make any financing
statement filed hereunder seriously misleading, unless it shall have (i) given
the Lender at least fifteen (15) days' prior written notice thereof, and (ii)
certified to the Lender that all filings reflecting such new name, identity or
structure have been made which are necessary or appropriate to preserve the
perfection of the security interests described herein.
(l) Limitations on Consignment. The Company will not at any time
place Inventory with a value which, in the aggregate, exceeds $100,000, on
consignment with any Person without the Lender's prior written consent, which
consent may not be unreasonably withheld, provided however, that the Lender may
withhold consent if unable to obtain a fully perfected first priority interest
the Collateral to be consigned. If at any time during the term of
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this Agreement, any Inventory is placed by the Company on consignment with any
Person ("Consignee"), with the prior written consent of the Lender, the Company
shall, prior to the delivery of any such consigned Inventory: (i) provide the
Lender with all consignment agreements and other instruments and documentation
to be used in connection with such consignment, all of which agreements,
instruments and documentation shall be acceptable in form and substance to the
Lender, (ii) prepare, execute and file appropriate financing statements with
respect to any consigned Inventory showing the Consignee as debtor, the Company
as secured party and the Lender as assignee of secured party, (iii) prepare,
execute and file appropriate financing statements with respect to any consigned
Inventory showing the Company as debtor and the Lender as secured party, (iv)
after all financing statements referred to in clauses (ii) and (iii) above shall
have been filed, conduct a search of all filings made against the Consignee in
all jurisdictions in which the Inventory to be consigned is to be located while
on consignment, and deliver to the Lender copies of the results of all such
searches, and (v) notify, in writing, all creditors of the Consignee which are
or may be holders of security interests in the Inventory to be consigned that
the Company expects to deliver certain Inventory to the Consignee, all of which
Inventory shall be described in such notice by item or type.
(m) Covenants Regarding Patents, Trademarks. The Company shall notify
the Lender immediately if it knows or has reason to know that any Patent or any
registration relating to any Trademark which is material to the conduct of the
Company's business may become abandoned, canceled or declared invalid, or if any
Trademark or the invention disclosed in any of the Patents is dedicated to the
public domain, or of any material adverse determination in any proceeding in the
United States Patent and Trademark Office or in any United States court
regarding the Company's ownership of any Patent or Trademark which is material
to the conduct of the Company's business, its right to register the same, or to
keep and maintain the same. If the Company, either itself or through any agent,
employee, licensee or designee, applies for a Patent or files an application for
the registration of any Trademark with the United States Patent and Trademark
Office or in any analogous office or agency in any other country or any
political subdivision thereof, or otherwise obtains rights in any Patent or
Trademark, the Company will promptly inform the Lender, and, upon request of the
Lender, execute and deliver any and all agreements, instruments, documents and
papers as the Lender may request to evidence the Lender's security interest in
such Patent or Trademark and the General Intangibles used in connection
therewith, including, without limitation, in the case of Trademarks, the
goodwill of the Company's business connected with the use thereof or symbolized
thereby. Consistent with the Company's past business practice, the Company will
take all reasonably necessary actions permitted by applicable law (i) to
prosecute each Patent or Trademark application which is material to the conduct
of the company's business; (ii) to attempt to obtain the broadest Patent or
registration of a Trademark therefrom and (iii) to maintain each Patent and
Trademark registration which is material to the conduct of the Company's
business, including, without limitation, with respect to Patents, payments of
required maintenance fees, and, with respect to Trademarks, filing of
applications for renewal, affidavits of use and affidavits of incontestability.
In the event that the Company fails to take any of such actions, the Lender may
do so in the Company's name or, if an Event of Default has occurred and is
continuing in the Lender's name,
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and all expenses incurred by the Lender in connection therewith shall be paid by
the Company in accordance with Section 9 hereof. Consistent with the Company's
past business practices, the Company shall use its best efforts to detect
infringers of the Patents and Trademarks which are material to its business. In
the event that any of the Patents or Trademarks is infringed or, in the case of
any Trademark, diluted by a third party, the Company shall (i) notify the Lender
promptly after it learns thereof and (ii) unless the Company shall reasonably
determine that such Patent or Trademark is not material to the conduct of the
Company's business, to promptly take appropriate action to enjoin such
infringement or, in the case of any Trademark, dilution and to seek any and all
damages for such infringement or dilution or shall take such other actions
(including entering into licenses or covenants not to sue) as the Company in the
exercise of its business judgment shall reasonably deem appropriate under the
circumstances to protect the Patents or Trademarks. In the event that the
Company fails to take any such actions the Lender may do so in the Company's
name or, if an Event of Default has occurred and is continuing, in the Lender's
name, and all expenses incurred by the Lender in connection therewith shall be
paid by the Company in accordance with Section 9 hereof.
(n) Covenants Regarding Contracts. The Company shall use its
reasonable efforts to ensure that all Contracts relating to the Accounts with
respect to which the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, permit the assignment by the
Company to the Lender of such Contract and any Accounts arising thereunder.
6 Insurance. (a) The Company shall at its sole cost and expense
provide and maintain in full force and effect for the benefit of the Lender,
insurance with respect to the Collateral and all parts thereof, as required
under, and on the terms and conditions set forth in, Section 5.04 of the Credit
Agreement, which terms and conditions are hereby incorporated herein by
reference as fully as if fully set forth herein.
(b) The Company hereby (i) directs all insurers under such policies of
insurance maintained hereunder and under the Credit Agreement to pay all
proceeds payable thereunder directly to the Lender, and (ii) irrevocably makes,
constitutes and appoints the Lender (and all officers, employees or agents
designated by the Lender) as the Company's true and lawful attorney (and agent-
in-fact) for the purpose of making, settling and adjusting claims under such
policies of insurance if the proceeds of such claims are to be applied to the
Obligations pursuant to the last sentence of this Section 6(b), endorsing the
name of the Company on any check, draft, instrument or other item of payment for
the proceeds of such policies of insurance which are to be applied to the
Obligations pursuant to the last sentence of this Section 6(b), and for making
all determinations and decisions with respect to such policies of insurance
which relate to proceeds to be applied to the Obligations. The Company shall
promptly notify the Lender in writing of any payment it receives of insurance
proceeds in respect of damaged or destroyed Collateral in excess of $150,000.
(c) If any insurance required to be provided hereunder shall expire,
be withdrawn, become void by breach of any condition thereof by the Company, or
become void or
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questionable by reason of the failure or impairment of the capital of any
insurer, or if for any other reason whatsoever any such insurance shall become
unsatisfactory to the Lender in its reasonable credit judgment, the Company
immediately shall obtain new or additional insurance which shall be satisfactory
to the Lender in its reasonable credit judgment. The Company shall not take out
any separate or additional insurance which is contributing in the event of loss
unless it is properly endorsed and otherwise satisfactory to the Lender in all
respects.
(d) In the event the Company at any time or times hereafter shall fail
to obtain or maintain any of the policies of insurance required above or to pay
any premium in whole or in part relating thereto, the Lender, without waiving or
releasing any obligations or default by the Company hereunder, may at any time
or times thereafter (but shall not be obligated to) obtain and maintain such
policies of insurance and pay such premium and take any other action with
respect thereto which the Lender deems advisable. All sums so disbursed by the
Lender, including attorneys' fees, court costs, expenses and other charges
relating thereto, shall be payable, on demand, by the Company to the Lender in
accordance with Section 9 hereof.
7 Collections. The Lender may at any time, on or after the
Acceleration Date, open the Company's mail and collect any and all amounts due
from Account Debtors and notify Account Debtors of the Company, parties to the
Contracts of the Company, obligors of Instruments of the Company and obligors in
respect of Chattel Paper of the Company that the Accounts and the right, title
and interest of the Company in and under such Contracts, Instruments and Chattel
Paper have been assigned to the Lender and that payments shall be made directly
to the Lender or to a lockbox designated by the Lender and upon the request of
the Lender, the Company will deposit any and all payments received on account of
any Government Receivables directly to the Lender or to a lockbox designated by
the Lender. Upon the request of the Lender on or after the Acceleration Date,
the Company will so notify such Account Debtors, parties to such Contracts,
obligors of such Instruments and obligors in respect of such Chattel Paper. The
Lender may at any time, in its own name or in the name of the Company,
communicate with such Account Debtors, parties to such Contracts, obligors of
such Instruments and obligors in respect of such Chattel Paper to verify with
such Persons to the Lender's satisfaction the existence, amount and terms of any
such Accounts, Contracts, Instruments or Chattel Paper.
8 Lender's Appointment as Attorney-in-Fact. On the Closing Date,
the Company shall execute and deliver to the Lender a power of attorney (the
"Power of Attorney") substantially in the form attached hereto as Exhibit A.
The power of attorney granted pursuant to the Power of Attorney is a power
coupled with an interest and shall be irrevocable until the Commitment
Termination Date. The powers conferred on the Lender under the Power of
Attorney are solely to protect the Lender's interest in the Collateral and shall
not impose any duty upon the Lender to exercise any such powers. The Lender
agrees that (a) it shall not exercise any power or authority granted under the
Power of Attorney unless the Lender first declares the Note, including without
limitation, principal, accrued interest and costs of collection and all other
Obligations immediately due and payable, and (b) the Lender shall account for
any moneys
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received by the Lender in respect of any foreclosure on or disposition of the
Collateral pursuant to the Power of Attorney provided that the Lender shall not
have any duty as to any Collateral, and the Lender shall be accountable only for
amounts it actually receives as a result of the exercise of such powers. THE
LENDER OR ITS RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL NOT BE RESPONSIBLE TO THE COMPANY FOR ANY ACT OR FAILURE
TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES TO
THE EXTENT CAUSED BY THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, NOR FOR
ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.
9 Performance by Lender of the Company's Obligations. If the
Company fails to perform or comply promptly with any of its agreements contained
herein and the Lender, as provided for by the terms of this Agreement, shall
itself perform or comply, or otherwise cause performance or compliance, with
such agreement, the expenses of the Lender incurred in connection with such
performance or compliance, together with interest thereon at the highest rate
then applicable under the Credit Agreement, shall be payable by the Company to
the Lender on demand and shall constitute Obligations secured hereby.
10 Rights and Remedies Upon Default. (a) If an Event of Default
shall occur and be continuing, the Lender may exercise in addition to all other
rights and remedies granted to it in this Agreement and in any other Loan
Document, all rights and remedies of a secured party under the UCC. Without
limiting the generality of the foregoing, the Company expressly agrees that on
or after the Acceleration Date, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon the Company or any other Person
(all and each of which demands, advertisements and/or notices are hereby
expressly waived to the maximum extent permitted by the UCC and other applicable
law), may forthwith enter upon the premises of the Company where any Collateral
is located through self-help, without judicial process, without first obtaining
a final judgment or giving the Company notice and opportunity for a hearing on
the Lender's claim or the Lender's action, and without paying rent, and collect,
receive, assemble, process, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give an option or
options to purchase, or sell or otherwise dispose of and deliver said Collateral
(or contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange or broker's board or at any of the
Lender's offices or elsewhere at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The Lender
shall have the right upon any such public sale or sales, and, to the extent
permitted by applicable law, upon any such private sale or sales, to purchase
the whole or any part of said Collateral so sold, free of any right or equity of
redemption, which equity of redemption the Company hereby releases. Such sales
may be adjourned and continued from time to time with or without notice. The
Lender shall have the right to conduct such sales on the Company's premises or
elsewhere and shall have the right to use the Company's premises without charge
for such sales for such time or times as the Lender deems necessary or
advisable. The Company further agrees, at the Lender's request on or after the
Acceleration Date, to assemble the Collateral and make it
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available to the Lender at places which the Lender shall select, whether at the
Company's premises or elsewhere. Until the Lender is able to effect a sale,
lease, or other disposition of Collateral hereunder, the Lender shall have the
right to use or operate the Collateral, or any part thereof, to the extent that
it deems appropriate for the purpose of preserving Collateral or its value or
for any other purpose deemed appropriate by the Lender. The Lender shall have no
obligation to the Company to maintain or preserve the rights of the Company as
against third parties with respect to the Collateral while the Collateral is in
the possession of the Lender. The Lender may, if it so elects, seek the
appointment of a receiver or keeper to take possession of Collateral and to
enforce any of the Lender's remedies with respect to such appointment without
prior notice or hearing. The Lender shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, as provided
in Section 10(d) hereof, the Company remaining liable for any deficiency
remaining unpaid after such application, and only after so paying over such net
proceeds and after the payment by the Lender of any other amount required by any
provision of law, including Section 9-504(1)(c) of the UCC, need the Lender
account for the surplus, if any, to the Company. To the maximum extent permitted
by applicable law, the Company waives all claims, damages, and demands against
the Lender arising out of the repossession, retention or sale of the Collateral
except such as arise out of the gross negligence or wilful misconduct of the
Lender. The Company agrees that the Lender need not give more than ten (10)
days' notice (which notification shall be deemed given when given in the manner
provided in Section 13 hereof) of the time and place of any public sale or of
the time after which a private sale may take place, and that such notice is
reasonable notification of such matters. The Company shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all Obligations, the Company also being liable for the
reasonable fees and expenses of any attorneys employed by the Lender to collect
such deficiency.
(b) The Company also agrees to pay all costs of the Lender, including,
without limitation, the expenses and reasonable attorneys' fees, incurred in
connection with the enforcement of any of its rights and remedies hereunder.
(c) The Company hereby waives presentment, demand, protest or any
notice (to the maximum extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization upon
all or any part of the Collateral shall be distributed by the Lender in the
following order of priorities:
(i) first, to the Lender in an amount sufficient to pay in full
the reasonable expenses of the Lender in connection with such sale,
disposition or other realization, including all expenses, liabilities and
advances incurred or made by the Lender in connection therewith, including,
without limitation, reasonable attorney's fees actually incurred by the
Lender;
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(ii) second, to the Lender in an amount equal to the then unpaid
principal of and accrued interest and prepayment premiums, if any, on the
Obligations;
(iii) third, to the Lender, in an amount equal to any other
Obligations which are then unpaid; and
(iv) finally, upon payment in full of all of the Obligations, to
pay to the Company, or its representatives or as a court of competent
jurisdiction otherwise may direct, any surplus then remaining from such
Proceeds.
11 Limitation on the Lender's Duties. The powers conferred on the
Lender hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for exercising
reasonable care in the custody and preservation of Collateral in its possession
or possession of its agents or nominees and the accounting for moneys actually
received by it hereunder, the Lender shall have no duty as to any Collateral or
any income thereon or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to the Collateral. The
Lender shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which the Lender accords its own property.
12 Term of Agreement; Reinstatement; Assignment. This Agreement and
the Liens granted hereunder shall remain in full force and effect until (x) the
Obligations have been paid and performed in full and the Credit Agreement has
been terminated, (y) the cash collateralization in full of all contingent
obligations and liabilities (other than contingent indemnification obligations
which have not yet been asserted) and (z) the expiration or termination of the
Commitment. Further, this Agreement and the Liens granted hereunder shall
remain in full force and effect and continue to be effective should any petition
be filed by or against the Company for liquidation or reorganization, should the
Company become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of the
Company's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Obligations and the
cash collateral for any such contingent obligations and liabilities, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations, whether as
a "voidable preference," "fraudulent conveyance," or otherwise, all as though
such payment or performance had not been made. In the event that any payment or
performance or any such cash collateral, or any part thereof, is rescinded,
reduced, restored or returned, the Obligations shall be reinstated and deemed
reduced only by such amount paid and not so rescinded, reduced, restored or
returned.
13 Security Interest Absolute. All rights of the Lender and security
interests hereunder, and all obligations of the Company hereunder, shall be
absolute and unconditional irrespective of:
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(i) any lack of validity or enforceability of the Loan
Documents, the other Security Documents or any other agreement or
instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations, or any other amendment
or waiver of or any consent to any departure from the Loan Documents,
including, without limitation, any increase in the Obligations resulting
from the extension of additional credit to the Company or otherwise;
(iii) any taking, exchange, release or non-perfection of any
other collateral, or any taking, release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the Obligations;
(iv) any manner of application of collateral, or proceeds
thereof, to all or any of the Obligations, or any manner of sale or other
disposition of any collateral for all or any part of the Obligations or any
other assets of the Company;
(v) any change, restructuring or termination of the corporate
structure or existence of the Company; or
(vi) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Company or a third party
pledgor.
14 Use and Protection of Patent and Trademark Collateral.
Notwithstanding anything to the contrary contained herein, unless an Event of
Default has occurred and is continuing, the Lender shall from time to time
execute and deliver, upon the written request of the Company, any and all
instruments, certificates or other documents, in the form so requested,
necessary or appropriate in the judgment of the Company to permit the Company to
continue to exploit, license, use, enjoy and protect the Patents and Trademarks.
15 Amendments; Consents. No amendment, modification, supplement,
termination, or waiver of any provision of this Agreement, and no consent to any
departure by the Company therefrom, may in any event be effective unless in
writing signed by the Lender, and then only in the specific instance and for the
specific purpose given.
16 Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other party any other communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be delivered in the manner and
to the addresses set forth in Section 9.03 of the Credit Agreement.
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17 Severability; Time of Essence. Every provision of this Agreement
is intended to be severable. If any term or provision of this Agreement or any
other document delivered in connection herewith shall be unenforceable in any
respect, the enforceability of the remaining provisions shall not thereby by
affected. Time is of the essence of this Agreement.
18 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND ALL OTHER DOCUMENTS CONTEMPLATED HEREBY, AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF FLORIDA
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF).
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF FLORIDA OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF FLORIDA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND THE COMPANY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS.
(c) Nothing herein shall affect the right of the Lender to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Company in any other jurisdiction.
19 Expenses. The Company shall pay all reasonable costs, expenses,
taxes and fees incurred (i) by the Lender in connection with the negotiation,
preparation, execution and delivery of this Agreement, the term sheet and
Commitment Letter relating to this Agreement, and all certificates, opinions and
other documents relating to these transactions, including, without limitation,
the disbursements and professional fees of King & Spalding, counsel to the
Lender; (ii) by the Lender in connection with the perfection, registration,
maintenance, administration, custody and preservation of the Collateral,
including, without limitation, with respect to any and all stamp, intangible or
other taxes that may be payable or determined in the future to be payable in
connection with the Loan Documents, this Agreement, the Security Documents, and
all other documents executed or delivered in connection therewith, and relating
to releases and consents; and (iii) by the Lender in connection with or after
the occurrence of any Event of Default or
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acceleration pursuant to Section 8.02 of the Credit Agreement, including,
without limitation, in connection with (a) the negotiation, preparation,
execution and delivery of any waiver, amendment or consent by the Lender
relating to the Loan Documents or the Security Documents, (b) the negotiation of
any restructuring or workout transaction, and the preparation, execution and
delivery of any documents prepared in connection therewith, and (c) enforcement
or foreclosure with respect to the Loan Documents or the Security Documents, in
all such cases such costs, expenses, taxes and fees shall include, without
limitation, the disbursements and reasonable professional fees actually incurred
of counsel to the Lender. To the extent that any such fees and expenses are
subject to value added taxes, such taxes will be paid by the Company. To the
extent reimbursement is sought pursuant to this Section or any other document
executed pursuant hereto, the Lender shall submit to the Company a statement of
expenses to be paid by the Company. Such expenses shall be due and payable
within thirty (30) days of the date of the original statement to the extent that
the Lender is entitled to such reimbursement.
20 Indemnity. The Company agrees to protect, indemnify and save
harmless the Lender, and all directors, officers, employees and agents of the
Lender, from and against any and all (i) claims, demands and causes of action of
any nature whatsoever brought by any Person not a party to this Agreement and
arising from or related or incident to this Agreement or any other Loan
Document, (ii) costs and expenses incident to the defense of such claims,
demands and causes of action, including, without limitation, reasonable
attorneys' fees, and (iii) liabilities, judgments, settlements, penalties and
assessments arising from such claims, demands and causes of action, provided
such claims, costs and liabilities are not the result of the gross negligence or
willful misconduct of the Lender. The indemnity contained in this Section shall
survive the termination of this Agreement.
21 Further Indemnification. The Company agrees to pay, and to save
the Lender harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all excise, sales or other similar taxes which
may be payable or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated by this Agreement.
22 Benefit of the Agreement. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, provided that the Company may not assign or
transfer any of its interest hereunder without the prior written consent of the
Lender, and no such assignment or transfer of any such obligations shall relieve
the Company of its obligations hereunder unless the Lender shall have consented
to such release in a writing specifically referring to the obligation from which
the Company is to be released. Without limiting the generality of the
foregoing, the Lender may assign or otherwise transfer all or any portion of its
rights and obligations under this Agreement, to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to the Lender herein or otherwise, subject, however, to Section 9.08 of
the Credit Agreement (concerning assignments and participations).
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23 Entire Agreement. This Agreement and the other Loan Documents
executed and delivered contemporaneously herewith, together with the exhibits
and schedules attached hereto and thereto, constitute the entire understanding
of the parties with respect to the subject matter hereof, and any other prior or
contemporaneous agreements, whether written or oral, with respect thereto;
provided, however, that the indemnities of the Company in favor of the Lender
contained in the Commitment Letter shall survive the execution and delivery of
this Agreement. The execution of this Agreement and the other Loan Documents by
the Company was not based upon any facts or materials provided by the Lender,
nor was the Company induced to execute this Agreement or any other Loan Document
by any representation, statement or analysis made by the Lender.
24 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same instrument.
-23-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security Agreement to be
executed and delivered by its duly authorized officer on the date first set
forth above.
OMEGA PROTEIN CORPORATION,
a Nevada corporation
Address: By:
Omega Protein Corporation -------------------------------------
1717 St. James Place, Suite 550 Name:
Houston, Texas 77056 ------------------------------
Telecopier No.: (713) 940-6280 Title:
Confirmation No.: (713) 940-6100 -----------------------------
Attest:
---------------------------------
Name:
----------------------------
Title:
---------------------------
OMEGA PROTEIN, INC.
a Virginia corporation
Address: By:
Omega Protein, Inc. -------------------------------------
1717 St. James Place, Suite 550 Name:
Houston, Texas 77056 -----------------------------------
Telecopier No.: (713) 940-6280 Title:
Confirmation No.: (713) 940-6100 ----------------------------------
Attest:
---------------------------------
Name:
--------------------------------
Title:
-------------------------------
[SIGNATURE PAGE TO SECURITY AGREEMENT (COMPANY)]
<PAGE>
Accepted and Acknowledged by:
SUNTRUST BANK, SOUTH FLORIDA,
NATIONAL ASSOCIATION
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
[SIGNATURE PAGE TO SECURITY AGREEMENT (COMPANY)]
<PAGE>
POWER OF ATTORNEY
This Power of Attorney is executed and delivered by OMEGA PROTEIN
CORPORATION, INC., a Nevada corporation, and OMEGA PROTEIN, INC., a Virginia
corporation (collectively, the "Company") to SUNTRUST BANK, SOUTH FLORIDA,
NATIONAL ASSOCIATION, a national banking association (hereinafter referred to as
"Attorney"), pursuant to the Security Agreement, dated as of August 11, 1998, by
the Company in favor of the Attorney. No person to whom this Power of Attorney
is presented, as authority for the Attorney to take any action or actions
contemplated hereby, shall be required to inquire into or seek confirmation from
the Company as to the authority of the Attorney to take any action described
below, or as to the existence of or fulfillment of any condition to this Power
of Attorney, which is intended to grant to the Attorney unconditionally the
authority to take and perform the actions contemplated herein, and the Company
irrevocably waives any right to commence any suit or action, in law or equity,
against any Person which acts in reliance upon or acknowledges the authority
granted under this Power of Attorney. The power of attorney granted hereby is
coupled with an interest, and may not be revoked or canceled by the Company
without the Attorney's written consent.
The Company hereby irrevocably constitutes and appoints the Attorney
(and all officers, employees or agents designated by the Attorney), with full
power of substitution, as the Company's true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of the Company and
in the name of the Company or in its own name, from time to time in the
Attorney's discretion, to, on or after the Acceleration Date, take any and all
appropriate action and to execute and deliver any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
the Security Documents and, without limiting the generality of the foregoing,
the Company hereby grants to the Attorney the power and right, on behalf of the
Company, without notice to or assent by the Company, and at any time, to do the
following: (a) change the mailing address of the Company, open a post office box
on behalf of the Company, open mail for the Company, and ask, demand, collect,
give acquittances and receipts for, take possession of, endorse any invoices,
freight or express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, and notices in connection with any
property of the Company; (b) effect any repairs to any asset of the Company, or
continue to obtain any insurance and pay all or any part of the premiums
therefor and costs thereof, and make, settle and adjust all claims under such
policies of insurance, and make all determinations and decisions with respect to
such policies; (c) pay or discharge any taxes, liens, security interests, or
other encumbrances levied or placed on or threatened against the Company or its
property; (d) defend any suit, action or proceeding brought against the Company
if the Company does not defend such suit, action or proceeding or if the
Attorney believes that the Company is not pursuing such defense in a manner that
will maximize the recovery to the Attorney, and settle, compromise or adjust any
suit, action, or proceeding described above and, in connection therewith, give
such discharges or releases as the Attorney may deem appropriate; (e) file or
prosecute any claim, litigation, suit or proceeding in any court of competent
jurisdiction or before any arbitrator, or take any other action otherwise deemed
appropriate by the Attorney for the purpose of collecting any and all such
moneys due to the Company whenever payable and to
<PAGE>
enforce any other right in respect of the Company's property; (f) cause the
certified public accountants then engaged by the Company to prepare and deliver
to the Attorney at any time and from time to time, promptly upon the Attorney's
request, the following reports: (a) a reconciliation of all accounts; (2) an
aging of all accounts, (3) trial balances, (4) test verifications of such
accounts as the Attorney may request, and (5) the results of each physical
verification of inventory; (g) communicate in its own name with any party to any
Contract with regard to the assignment of the right, title and interest of the
Company in and under the Contracts and other matters relating thereto; and (h)
execute, in connection with sale provided for in any Security Document, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral and to otherwise direct such sale or resale, all as
though the Attorney were the absolute owner of the property of the Company for
all purposes, and to do, at the Attorney's option and the Company's expense, at
any time or from time to time, all acts and other things that the Attorney
reasonably deems necessary to perfect, preserve, or realize upon the Company's
property or assets and Attorney's Liens thereon, all as fully and effectively as
the Company might do. The Company hereby ratifies, to the extent permitted by
law, all that said the Attorney shall lawfully do or cause to be done by virtue
hereof.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, this Power of Attorney is executed by the Company,
and the Company has caused its seal to be affixed pursuant to the authority of
its board of directors this 11th day of August, 1998.
Signed, sealed and delivered OMEGA PROTEIN CORPORATION, a Nevada
on this 11th day of August, 1998. corporation
By:
Name:
Title:
Unofficial Witness Attest:
---------------------------------
Name:
Title:
Notary Public
Commission Expiration Date:
OMEGA PROTEIN, INC., a Virginia
corporation
By:
-------------------------------------
Name:
Title:
Attest:
---------------------------------
Name:
Title:
[CORPORATE SEAL]
[SIGNATURE PAGE TO POWER OF ATTORNEY]
<PAGE>
Accepted by:
SUNTRUST BANK, SOUTH FLORIDA,
NATIONAL ASSOCIATION
By:
-------------------------------
Name:
Title:
[SIGNATURE PAGE TO POWER OF ATTORNEY]
<PAGE>
SCHEDULE 1
TO
SECURITY AGREEMENT
LOCATIONS OF INVENTORY AND STATUS
---------------------------------
<PAGE>
SCHEDULE 2
TO
SECURITY AGREEMENT
LOCATIONS OF BOOKS AND RECORDS
------------------------------
<PAGE>
SCHEDULE 3
TO
SECURITY AGREEMENT
PREVIOUS COMPANY NAMES AND TRADE NAMES
--------------------------------------
<PAGE>
SCHEDULE 4
TO
SECURITY AGREEMENT
UCC FINANCING STATEMENTS
------------------------
<PAGE>
SCHEDULE 4(e)
TO
SECURITY AGREEMENT
TITLE XI FINANCING COLLATERAL
-----------------------------
<PAGE>
SCHEDULE 5
TO
SECURITY AGREEMENT
ACCOUNTS
--------
<PAGE>
EXHIBIT 10.11
REVOLVING CREDIT AGREEMENT
AMONG
OMEGA PROTEIN CORPORATION AND
OMEGA PROTEIN, INC.
BORROWERS,
AND
SUNTRUST BANK, SOUTH FLORIDA,
NATIONAL ASSOCIATION, AS LENDER
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Article I - Definitions.......................................................... 1
Section 1.01. Definitions.................................................. 1
Section 1.02. Calculations; Accounting Terms............................... 16
Section 1.03. Other Definitional Provisions................................ 16
Article II - Amount and Terms of Advances
Section 2.01. Commitment and Note.......................................... 17
Section 2.02. Method of Borrowing Under the Commitment..................... 17
Section 2.03. Letter of Credit Subfacility................................. 18
Section 2.04. Notice of Issuance of Letter of Credit; Agreement to Issue... 19
Section 2.05. Payment of Amounts drawn under Letters of Credit............. 18
Section 2.06. Prepayment of Borrowings Under the Commitment................ 20
Section 2.07. Voluntary Reduction of the Commitment........................ 20
Section 2.08. Termination of the Commitment................................ 21
Section 2.09. Use of Proceeds.............................................. 21
Section 2.10. Fees......................................................... 21
Section 2.11. Interest..................................................... 21
Section 2.12. Interest Periods............................................. 22
Section 2.13. Extension of Commitment...................................... 23
Section 2.14. Increased Costs.............................................. 23
Section 2.15. Capital Adequacy............................................. 25
Section 2.16. Funding Losses............................................... 25
Section 2.17. Making of Payments........................................... 26
Section 2.18. Default Rate of Interest..................................... 26
Section 2.19. Calculation of Interest...................................... 26
Section 2.20. Payments Free of Taxes....................................... 26
Section 2.21. Interest Rate Not Ascertainable, etc......................... 27
Section 2.22. Illegality................................................... 27
Section 2.23. Letter of Credit Obligations Absolute........................ 27
Article III - Conditions to Borrowings........................................... 28
Section 3.01. Conditions Precedent to Initial Advance...................... 29
Section 3.02. Conditions Precedent to Each Advance......................... 31
Article IV - Representations and Warranties...................................... 33
Section 4.01. Corporate Status of Company; Status of Subsidiaries.......... 33
Section 4.02. Corporate Power and Authority................................ 33
Section 4.03. Compliance with Other Instruments............................ 33
Section 4.04. Enforceable Obligations...................................... 34
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.05. Governmental Authorizations.................................. 34
Section 4.06. Intellectual Property........................................ 34
Section 4.07. Outstanding Indebtedness..................................... 34
Section 4.08. Insurance Coverage........................................... 35
Section 4.09. Title to Properties.......................................... 35
Section 4.10. No Burdensome Restrictions................................... 35
Section 4.11. No Material Violation of Law................................. 35
Section 4.12. No Default Under Agreements.................................. 35
Section 4.13. No Equity Investments........................................ 35
Section 4.14. Financial Statements......................................... 36
Section 4.15. Litigation................................................... 36
Section 4.16. Taxes........................................................ 36
Section 4.17. Margin Regulations........................................... 36
Section 4.18. ERISA........................................................ 36
Section 4.19. Compliance With Environmental Laws........................... 37
Section 4.20. Possession of Material Patents, Trademarks, Etc.............. 38
Section 4.21. Subsidiaries................................................. 38
Section 4.22. Disclosure................................................... 38
Section 4.23. Year 2000 Compliant.......................................... 38
Section 4.24. Bank Accounts................................................ 39
Section 4.25. Solvency..................................................... 39
Article V - Affirmative Covenants................................................ 39
Section 5.01. Use of Proceeds.............................................. 39
Section 5.02. Reporting Covenants.......................................... 40
Section 5.03. Maintenance of Properties.................................... 41
Section 5.04. Maintenance of Insurance..................................... 41
Section 5.05. Maintenance of Books; Inspection of Property and Records..... 41
Section 5.06. Existence and Status......................................... 42
Section 5.07. Taxes and Claims............................................. 42
Section 5.08. Compliance with Laws, Etc.................................... 42
Section 5.09. ERISA........................................................ 42
Section 5.10. Litigation................................................... 43
Section 5.11. Notice of Events of Default.................................. 43
Section 5.12. Stockholder Reports, etc..................................... 43
Section 5.13. Future Guarantors............................................ 43
Section 5.14. Ownership of Guarantors...................................... 44
Section 5.15. Bank Accounts................................................ 44
Article VI - Negative Covenants.................................................. 44
Section 6.01. Limitation on Liens and Security Interests................... 44
Section 6.02. Compliance with ERISA........................................ 46
Section 6.03. Sale and Leaseback........................................... 46
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
Section 6.04. Transactions with Affiliates................................. 46
Section 6.05. Guaranties................................................... 47
Section 6.06. Limitations on Payment Restrictions.......................... 47
Section 6.07. Merger; Joint Ventures; Sale of Assets; Acquisitions......... 47
Section 6.08. Dividends; Loans, Advances................................... 49
Section 6.09. Nature of Business........................................... 50
Section 6.10. Sale of Subsidiaries......................................... 50
Section 6.11. Negative Pledges............................................. 50
Section 6.12. Modification of Corporate Name, etc.......................... 50
Article VII - Financial Covenants................................................ 51
Section 7.01. Minimum Consolidated Tangible Net Worth...................... 51
Section 7.02. Total Liabilities to Consolidated Tangible Net Worth......... 51
Section 7.03. Leverage Ratio............................................... 51
Section 7.04. Fixed Charge Coverage Ratio.................................. 51
Article VIII - Events of Default and Remedies.................................... 51
Section 8.01. Events of Default............................................ 51
Section 8.02. Remedies on Default.......................................... 53
Article IX - Miscellaneous....................................................... 54
Section 9.01. Survival..................................................... 54
Section 9.02. Amendments; Consents......................................... 54
Section 9.03. Notices...................................................... 55
Section 9.04. Severability, Time of Essence................................ 56
Section 9.05. Governing Law; Submission to Jurisdiction.................... 57
Section 9.06. Expenses..................................................... 57
Section 9.07. Indemnity.................................................... 58
Section 9.08. Benefit of the Agreement..................................... 58
Section 9.09. Subordination of Indebtedness................................ 59
Section 9.10. Maximum Interest Rate........................................ 59
Section 9.11. Entire Agreement............................................. 59
Section 9.12. Set-Off...................................................... 60
Section 9.13. Counterparts................................................. 60
Section 9.14. Replacement Note............................................. 60
Section 9.15. Release...................................................... 60
</TABLE>
iii
<PAGE>
REVOLVING CREDIT AGREEMENT
--------------------------
THIS REVOLVING CREDIT AGREEMENT (this "Agreement"), dated as of
August 11, 1998 (the "Agreement") by and among (a) OMEGA PROTEIN CORPORATION, a
Nevada corporation ("Omega Protein Corporation") and (b) OMEGA PROTEIN, INC., a
Virginia corporation ("Omega Protein, Inc.") ("Omega Protein Corporation and
Omega Protein, Inc. are collectively, the "Company"), (b) SUNTRUST BANK, SOUTH
FLORIDA, NATIONAL ASSOCIATION, a national banking association ("SunTrust" or the
"Lender").
W I T N E S S E T H :
---------------------
WHEREAS, the Company has requested and the Lender has agreed to commit
to a revolving credit facility and a letter of credit facility in favor of the
Company on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, for and in consideration of the sum of $10.00 in hand
paid by SunTrust to the Company, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.01. Definitions. In addition to the other terms defined
herein, the following terms used herein shall have the meanings herein specified
(such meanings to be equally applicable to both the singular and plural forms
of the terms defined):
"Account Party" shall mean the Company or any Guarantor in whose
account a Letter of Credit is to be or has been issued.
"Acceleration Date" shall mean that date on which the Lender declares
the Note, including without limitation, principal, accrued interest and
costs of collection (including, without limitation, reasonable attorney's
fees if collected by or through an attorney at law or in bankruptcy
receivership or other judicial proceedings) and all other Obligations
immediately due and payable, without presentment, demand, protest or any
other notice of any kind.
<PAGE>
"Additional Guarantor" shall have the meaning assigned to such term in
Section 5.13(a).
"Advance" shall mean any advance by the Lender under the Commitment.
"Affiliate" shall mean, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, such first Person. A
Person shall be deemed to control another Person if such first Person
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Revolving Credit Agreement, as originally
executed and as hereafter amended, restated, renewed, extended,
supplemented or otherwise modified from time to time.
"Applicable Law" shall mean, anything in Section 9.05 notwithstanding,
(i) all applicable common law and principles of equity and (ii) all
applicable provisions of all (a) constitutions, statutes, rules,
regulations and orders of governmental bodies, (b) Governmental Approvals,
and (c) orders, decisions, judgments and decrees of all courts and
arbitrators.
"Applicable LC Fee Percentage" shall mean that percentage published in
the SunTrust Standard Fee Schedule from time to time.
"Applicable Margin" shall mean the percentage designated below based
on the Leverage Ratio of the Consolidated Companies, measured quarterly,
effective in the next fiscal quarter immediately following the date of
delivery of the Compliance Certificate to the Lender:
----------------------------------------------------------------
Leverage Ratio Applicable Margin
(LIBOR Advance)
----------------------------------------------------------------
Less than 1.0:1.0 1.35%
----------------------------------------------------------------
Greater than or 1.45%
equal to 1.0:1.0
and less than
2.00:1.0
----------------------------------------------------------------
Greater than or 1.5%
equal to 2.00:1.0
----------------------------------------------------------------
2
<PAGE>
For purposes of the foregoing, (i) the Applicable Margin as of the Closing
Date is 1.35% and shall remain 1.35% through and including September 30,
1998 (by way of example, as of the first day of the fourth fiscal quarter
of the Company, the Applicable Margin shall be calculated based upon the
Leverage Ratio of the Company reported in the Compliance Certificate
delivered by the Company for the third fiscal quarter of such year); and
(ii) if the Company fails to provide the Compliance Certificate and related
financial statements required under Section 5.02 within the applicable time
period set forth therein, the Applicable Margin shall be adjusted to 1.50%
on the first day of the following fiscal quarter until such Compliance
Certificate and related financial statements are delivered.
"Asset Value" shall mean, with respect to any property or asset of the
Company or any of its Subsidiaries as of any particular date, an amount
equal to the greater of (i) the then book value of such property or asset
as established in accordance with GAAP, and (ii) the then fair market value
of such property or asset as determined in good faith by the board of
directors of the Company or such Subsidiary.
"Assignment Agreement" shall mean an agreement in the form of
Exhibit A.
"Availability" shall mean, with respect to the Commitment, at any
time, the amount by which the Commitment exceeds all Advances and Letter of
Credit Obligations outstanding under the Commitment.
"Bankruptcy Law" shall mean laws governing bankruptcy, suspension of
payments, reorganization, arrangement, adjustment of debts, relief of
debtors, dissolution, or other similar laws relating to the enforcement of
creditors' rights generally.
"Borrowing" shall mean the incurrence by the Company under the
Commitment of Advances of one type concurrently having the same Interest
Period or the continuation or conversion of an existing Borrowing or
Borrowings in whole or in party.
"Business Day" shall mean a day of the year other than Saturday,
Sunday or any other day on which the Lender is required to close.
"Capital Expenditures" shall mean, for any period, expenditures made
by the Company and its Subsidiaries to acquire or construct fixed assets,
property, plant and equipment (including renewals, improvements and
replacements, but excluding repairs) during such period that, in conformity
with GAAP, are required to be included in or reflected on the consolidated
balance sheet as a capital asset of the Company or its Subsidiaries,
including all capitalized lease obligations for such period.
"Capital Stock" shall mean, with respect to any Person, Capital Stock
of such Person, regardless of class or designation, and all warrants,
options, purchase rights,
3
<PAGE>
conversion or exchange rights, voting rights, calls or claims of any
character with respect thereto.
"CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act (42 U.S.C. (S) 9601 et seq.).
A "Change in Control" shall be deemed to have occurred (a) with
respect to Omega Protein Corporation if at any time either (i) the board of
directors of Omega Protein Corporation is composed of less than 60% of the
directors of Omega Protein Corporation immediately before the Closing Date
or (ii) the Parent ceases to beneficially own and control thirty percent
(30%) of the issued and outstanding stock of Omega Protein Corporation and
(b) with respect to Omega Protein, Inc., if Omega Protein Corporation
ceases to beneficially own and control at least one hundred percent (100%)
of each class of issued and outstanding stock of Omega Protein, Inc.
"Closing Date" shall mean August 11, 1998.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and the rulings issued
thereunder.
"Collateral" shall have the meaning ascribed to such term in the
Security Agreement.
"Collateral Access Agreement" shall mean any landlord waiver,
landlord confirmation, mortgagee waiver, bailee letter or other similar
acknowledgment agreement of any warehouseman, or processor in possession of
Inventory substantially in the form of Exhibit B-1 or Exhibit B-2 attached
hereto.
"Commitment" shall mean, for the Lender at any time, the aggregate
revolving credit facility established by the Lender in favor of the Company
pursuant to Section 2.01, including, without duplication, the Letter of
Credit Subfacility, as the same may be increased or decreased from time to
time as a result of any reduction thereof, any assignment thereof pursuant
to Section 9.08, or any amendment thereof pursuant to Section 9.02.
"Commitment Fee" shall have the meaning set forth in Section 2.10(b).
"Commitment Letter" means that certain Letter Agreement, dated as of
December 31, 1997, executed by the Lender and accepted and agreed to by the
Company.
"Commitment Termination Date" shall have the meaning set forth in
Section 2.01.
"Company" shall mean, collectively, Omega Protein, Inc. and Omega
Protein Corporation.
4
<PAGE>
"Company Security Agreement" shall mean that certain Security
Agreement (Company), dated as of the date hereof, substantially in the form
of Exhibit C attached hereto, executed by the Company in favor of the
Lender, as hereafter amended, restated, supplemented or otherwise modified
from time to time.
"Company Trademark Security Agreement" shall mean that certain
Trademark Security Agreement (Company), dated as of the date hereof,
executed by the Company in favor of the Lender, as hereafter amended,
restated, supplemented or otherwise modified from time to time.
"Computer Equipment" shall mean all computers, software and
electronic data-processing and other office equipment now owned or
hereafter acquired by the Company or any Guarantor in which the Company or
any Guarantor now has or hereafter acquires any rights and wherever
located, and any and all additions, substitutions and replacements of any
of the foregoing, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto, provided however that Computer Equipment shall not include any
computers, software, electronic data processing, telecommunications and
other office equipment relating solely to the processing of information for
the payroll, human resources, engineering and plant operations departments
of the Company.
"Consolidated Companies" shall mean Omega Protein Corporation and all
of its directly or indirectly, wholly and majority owned Subsidiaries.
"Consolidated EBIT" shall mean, for any fiscal period of the
Consolidated Companies, an amount equal to the sum of (a) Consolidated Net
Income (Loss), plus (b) to the extent deducted in determining Consolidated
Net Income (Loss), (i) provisions for taxes based on income of the Company
and its Subsidiaries determined on a consolidated basis in accordance with
GAAP, (ii) Interest Expense, and (iii) extraordinary items determined
according to GAAP.
"Consolidated Net Income (Loss)" shall mean, for any fiscal period of
the Consolidated Companies, the net income (or loss) of the Consolidated
Companies determined on a consolidated basis for such period (taken as a
single accounting period), in accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean, as of the date of
determination, the total shareholders' equity of the Consolidated
Companies, determined in accordance with GAAP less intangibles, which shall
include, without limitation, goodwill.
5
<PAGE>
"Contractual Obligations" of any Person shall mean any provision of
any security issued by such Person or of any agreement, instrument or
undertaking under which such Person is obligated or by which it or any of
its property is bound.
"Contribution Agreement" shall mean that certain Contribution
Agreement, dated as of the date hereof, executed by the Company and each of
the Guarantors, substantially in the form of Exhibit D attached hereto, as
hereafter amended, restated, supplemented or otherwise modified from time
to time.
"Contributing Guarantors" shall mean, collectively, each Subsidiary of
the Company that is a party to the Contribution Agreement as of the Closing
Date, together with all other Subsidiaries that hereafter execute the
Contribution Agreement, and their respective successors and permitted
assigns.
"Default" shall mean any event that, with the giving of notice, or
lapse of time, or both, would constitute an Event of Default.
"EBITDA" shall mean, for any fiscal period of the Consolidated
Companies, an amount equal to the sum of Consolidated EBIT plus (i)
depreciation and amortization expenses to the extent deducted in
determining such Consolidated EBIT as determined on a consolidated basis in
accordance with GAAP, and (ii) the historical Consolidated EBITDA of any
Person for such period which accrued prior to the date such Person became a
Subsidiary of Omega Protein Corporation or was merged into or consolidated
with the Consolidated Companies or such Person's assets were acquired by
the Consolidated Companies (and the underlying records of such Person shall
be audited to the extent the Company is required pursuant to Regulation S-X
of the SEC to present audited financial information for such Person in
documents filed by it with the SEC). If audited financial records are not
available for acquired companies, pro-forma financial statements (subject
to review and acceptance by the Lender) will be substituted.
"Environmental Laws" shall mean all federal, state, local and foreign
statutes and codes or regulations, rules or ordinances issued, promulgated,
or approved thereunder, now or hereafter in effect (including, without
limitation, those with respect to asbestos or asbestos containing material
or exposure to asbestos or asbestos containing material), relating to
pollution or protection of the environment and relating to public health
and safety, relating to (i) emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial toxic or
hazardous constituents, substances or wastes, including without limitation,
any Hazardous Substance (as such term is defined under CERCLA), petroleum
including crude oil or any fraction thereof, any petroleum product or other
waste, chemicals or substances regulated by any Environmental Law into the
environment (including without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), or (ii) the manufacture,
processing, distribution, use, generation, treatment, storage, disposal,
transport or handling of any Hazardous Substance (as such term is defined
under
6
<PAGE>
CERCLA), petroleum including crude oil or any fraction thereof, any
petroleum product or other waste, chemicals or substances regulated by any
Environmental Law, and (iii) underground storage tanks and related piping,
and emissions, discharges and releases or threatened releases therefrom,
such Environmental Laws to include, without limitation (i) the Clean Air
Act (42 U.S.C. (S) 7401 et seq.), (ii) the Clean Water Act (33 U.S.C.
(S) 1251 et seq.), (iii) the Resource Conservation and Recovery Act
(42 U.S.C. (S) 6901 et seq.), (iv) the Toxic Substances Control Act
(15 U.S.C. (S) 2601 et seq.), (v) CERCLA and (vi) the Oil Pollution Act
of 1990.
"Equipment" shall mean any "equipment," as such term is defined in
Section 9-109(2) of the UCC, now owned or hereafter acquired by the Company
or in which the Company now has or hereafter acquires any rights and
wherever located, and, in any event, shall include, without limitation,
all machinery, equipment, molds, furnishings, fixtures, and computers and
other electronic data-processing and other office equipment now owned or
hereafter acquired by the Company or in which the Company now has or
hereafter acquires any rights and wherever located, and any and all
additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto, provided however, that
Equipment shall not include Computer Equipment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
and all rules and regulations promulgated pursuant thereto, as the same may
from time to time be supplemented or amended.
"ERISA Affiliate" shall mean any trade or business (whether
incorporated or unincorporated) which together with the Company is treated
as a single employer under Section 414(b), (c), (m) or (o) of the Code.
"Event of Default" shall have the meaning set forth in Article VIII.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute thereto.
"Executive Officer" shall mean each of the executive officers of the
Company and its Subsidiaries and any Person hereafter holding the following
office or offices which, individually or collectively, are assigned
substantially similar duties: Chairman, Chief Executive Officer,
President, Chief Financial Officer, Executive Vice President, Chief
Operating Officer, and Vice President of Administration.
"Existing Letters of Credit" shall mean, collectively, the letters of
credit described on Schedule 1.01(a) which were issued by SunTrust for the
account of the Company or any Guarantor prior to the Closing Date.
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"Fees" shall mean, collectively, the Upfront Fee, the Commitment Fee
and the Letter of Credit Fee.
"Fixed Charge Coverage Ratio" shall mean, for any period of the
Consolidated Companies, the ratio of (a) (1) EBITDA for the trailing four-
quarter period ending on the last day of such period, plus (2) Rent Expense
for the trailing four-quarter period on the last day of such period, minus
(3) Net Capital Expenditures made by the Consolidated Companies during the
trailing four-quarter period ending on the last date of such period, to (b)
Fixed Charges for the trailing four-quarter period ending on the last day
of such period.
"Fixed Charges" shall mean the sum of (i) Interest Expense for such
period, plus (ii) current maturities of long-term indebtedness of the
Consolidated Companies and its Subsidiaries, plus (iii) minimum rent
expenses under operating leases for the Consolidated Companies for such
period, plus (iv) capital lease payments, plus (v) any cash dividends paid
by the Consolidated Companies, determined on a consolidated basis in
accordance with GAAP.
"Funded Debt" shall mean, as of the date of calculation, all
indebtedness for borrowed money of the Consolidated Companies determined on
a consolidated basis, including, without limitation, all current maturities
of indebtedness for borrowed money and all obligations under the Loan
Documents and the Note, purchase money mortgages, capitalized leases,
outstandings under asset securitization vehicles, long-term debt,
conditional sales contracts and similar title retention debt instruments,
including any current maturities of such indebtedness, which by its terms
matures more than one year from the date of any calculation thereof and/or
which is renewable or extendable at the option of the obligor to a date
beyond one year from such date.
"GAAP" shall mean generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession in the United States of America, which are
applicable to the circumstances as of the date of determination.
"Governmental Approval" shall mean any order, permission,
authorization, consent, approval, license, franchise, permit or validation
of, exemption by, registration or filing with, or report or notice to, any
governmental agency or unit, or any public commission, board or authority.
"Guarantor Security Agreement" shall mean that certain Security
Agreement (Guarantors), dated as of the date hereof, executed by each
Guarantor in favor of the Lender, as hereafter amended, restated,
supplemented or otherwise modified from time to time.
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"Guarantors" shall mean, collectively, each Subsidiary of the Company
that has executed a Guaranty Agreement as of the Closing Date, together
with all other Subsidiaries that hereafter execute a Guaranty Agreement,
and their respective successors and permitted assigns. "Guarantor" shall
mean any of the Guarantors and Additional Guarantors from time to time
party to the Guaranty Agreement.
"Guaranty Agreement" shall mean that certain Guaranty Agreement, dated
as of the date hereof, executed by each of the Guarantors in favor of the
Lender, substantially in the form of Exhibit E attached hereto, as
hereafter amended, restated, supplemented or otherwise modified from time
to time.
"Guaranty Documents" shall mean, collectively, the Guaranty Agreement,
and each other guaranty agreement, security agreement, pledge agreement, or
other security or collateral document guaranteeing or securing the
Obligations, as the same may be amended, restated, or supplemented from
time to time, and the Contribution Agreement executed by each of the
Guarantors, as the same may be amended, restated or supplemented from time
to time.
"Guaranty Obligations" shall mean the obligation of the Guarantors to
the Lender as set forth in the Guaranty Agreement.
"Hazardous Substance" shall have the meaning assigned to that term in
CERCLA.
"Indebtedness" shall mean (i) indebtedness for borrowed money or for
the deferred purchase price of property or services (other than trade
accounts payable on customary terms in the ordinary course of business),
(ii) financial obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) financial obligations as lessee under leases
which shall have been or should be, in accordance with GAAP, recorded as
capital leases, (iv) financial obligations as the issuer of Capital Stock
redeemable in whole or in part at the option of any Person other than such
issuer, at a fixed and determinable date or upon the occurrence of an event
or condition not solely within the control of such issuer, (v) all
obligations (contingent or otherwise) with respect to interest rate and
currency leasing agreements, (vi) reimbursement obligations (contingent or
otherwise) with respect to amounts under letters of credit, bankers
acceptances and similar instruments, (vii) financial obligations under
purchase money mortgages, (viii) financial obligations under asset
securitization vehicles, (ix) conditional sale contracts and similar title
retention instruments with respect to property acquired, and (x)
obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
financial obligations of others of the kinds referred to in clauses (i)
through (ix) above, except to the extent such guaranties are limited to a
lesser amount.
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"Interest Expense" shall mean, for any fiscal period of the
Consolidated Companies, total interest expense (including, without
limitation, interest expense attributable to capitalized leases in
accordance with GAAP) in respect of all Indebtedness of the Company and its
Subsidiaries, on a consolidated basis, for such period.
"Interest Period" shall mean (i) as to any LIBOR Advance, the interest
period selected by the Company pursuant to Section 2.12(a), and (ii) as to
any Prime Rate Advance, the interest period requested by the Company and
agreed to by the Lender pursuant to Section 2.12(b).
"Investment" shall mean, when used with respect to any Person, any
direct or indirect advance, loan or other extension of credit (other than
the creation of receivables in the ordinary course of business) or capital
contribution by such Person (by means of transfers of property to others or
payments for property or services for the account or use of others, or
otherwise) to any Person, or any direct or indirect purchase or other
acquisition by such Person of, or of a beneficial interest in, Capital
Stock, partnership interests, bonds, notes, debentures or other securities
issued by any other Person.
"Lender" shall have the meaning set forth in the first paragraph of
this Agreement.
"Lending Office" shall mean the office of the Lender specified as the
Lending Office on the signature page hereof, or such other location as to
which the Lender shall have given written notice to the other parties
hereto.
"Letter of Credit Application" shall mean an "Application and
Agreement for Irrevocable Standby Letter of Credit" or an "Application and
Security Agreement for Commercial Letter of Credit" duly executed and
delivered by the Company or any Guarantor substantially in the form of
Exhibit M-1 or Exhibit M-2 attached hereto.
"Letter of Credit Fee" shall have the meaning set forth in
Section 2.10(c).
"Letter of Credit Obligations" shall mean, with respect to Letters of
Credit, as at any date of determination, the sum of (a) the maximum
aggregate amount which at such date of determination is available to be
drawn by the beneficiaries thereof (assuming the conditions for drawing
thereunder have been met) under all Letters of Credit then outstanding,
plus (b) the aggregate amount of all drawings under Letters of Credit
honored by the Lender not theretofore reimbursed by the Company.
"Letter of Credit Subfacility" shall mean the $5,000,000 letter of
credit facility established by the Lender pursuant to which the Lender will
issue Letters of Credit for the account of an Account Party pursuant to
Sections 2.03 and 2.04 hereof.
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"Letters of Credit" shall mean any Existing Letter of Credit or
hereafter issued letter of credit issued pursuant to Article II hereof by
the Lender for the account of the Company or any Guarantor pursuant to the
Commitment.
"Leverage Ratio" shall mean, as of any date of determination, the
ratio of (i) Funded Debt as of such date to (ii) EBITDA for the trailing
four-quarter period ending on such date.
"LIBOR" shall mean, for any Interest Period, the offered rates for
deposits in U.S. dollars for a period comparable to the Interest Period
appearing on the Reuters Screen LIBOR Page as of 11:00 a.m., London time,
on the day that is two London banking days prior to the Interest Period.
If at least two such rates appear on the Reuters Screen LIBOR Page, the
rate for that Interest Period will be the arithmetic mean of such rates,
and in either case as such rates may be adjusted for any applicable reserve
requirements.
"LIBOR Advance" shall mean any advance made to the Company by the
Lender at an interest rate equal to LIBOR plus the Applicable Margin for
such advance.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien, assignment or charge of any kind or description and
shall include, without limitation, any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof including any lease or similar arrangement with
a public authority executed in connection with the issuance of industrial
development revenue bonds or pollution control revenue bonds, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code (or comparable law) of any jurisdiction naming the owner of
the asset to which such lien applies as a debtor (other than a filing which
does not evidence an outstanding secured obligation, or a commitment to
make advances or to incur any other obligation of any kind).
"Loan Documents" shall mean this Agreement, each Exhibit and Schedule
to this Agreement, the Note, all Letter of Credit Applications, the
Guaranty Documents, the Security Documents, and each other document,
instrument, certificate and opinion executed and delivered in connection
with the foregoing, each as amended, restated, supplemented or otherwise
modified from time to time as provided in Section 9.02.
"Margin Regulations" shall mean Regulation G, Regulation T,
Regulation U and Regulation X of the Board of Governors of the Federal
Reserve System, as the same may be in effect from time to time.
"Materially Adverse Effect" shall mean a materially adverse change in
the operations, business, property or assets of, or in the condition
(financial or otherwise) of, the Company and its Subsidiaries, taken as a
whole, or such a change which materially reduces the ability of the Company
or any Guarantor to perform under the terms of this Agreement or the Loan
Documents.
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"Material Subsidiary" shall mean any Subsidiary of the Company or any
Guarantor, now or hereafter existing which either (i) has assets comprising
five percent (5%) or more of the assets of the Consolidated Companies or
(ii) has revenues comprising ten percent (10%) or more of the revenues of
the Consolidated Companies.
"Maximum Permissible Rate" shall mean, with respect to interest
payable on any amount, the rate of interest on such amount that, if
exceeded, could, under Applicable Law, result in (i) civil or criminal
penalties being imposed on the Lender or (ii) the Lender being unable to
enforce payment of (or if collected, to retain) all or part of such amount
or the interest payable thereon.
"Minimum Consolidated Tangible Net Worth" shall have the meaning set
forth in Section 7.01 hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA as to which the Company, any Subsidiary or any
ERISA Affiliate is obligated to make, has made, or will be obligated to
make contributions on behalf of participants who are or were employed by
any of them.
"Net Capital Expenditures" shall mean Capital Expenditures, for any
period, minus any financing received by the Consolidated Companies during
the trailing four quarter period to support Capital Expenditures for such
period.
"Net Worth" shall mean, at any date, the net worth of the Consolidated
Companies and its Subsidiaries, determined in accordance with GAAP as
determined on such date.
"Note" shall mean a revolving credit note by the Company payable to
the order of the Lender in substantially the form of Exhibit F hereto,
evidencing the maximum aggregate principal indebtedness of the Company to
the Lender under the Commitment, either as originally executed or as it may
be from time to time supplemented, modified, amended, renewed or extended.
"Notice of Borrowing" shall have the meaning set forth in
Section 2.02(a) hereof, and shall be substantially in the form of Exhibit G
attached hereto.
"Notice of Continuation/Conversion" shall have the meaning set forth
in Section 2.02(b) hereof and shall be substantially in the form of Exhibit
H attached hereto.
"Obligations" shall mean all amounts owing to Lender pursuant to the
terms of this Agreement, the Note and any other Loan Document, including
without limitation, all Advances (including all principal and interest
payments due thereunder), all Letter of Credit Obligations, Fees, expenses,
indemnification and reimbursement payments, indebtedness, liabilities, and
obligations of the Company and its Subsidiaries, covenants and duties of
the
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Company to the Lender of every kind, nature and description, direct or
indirect, absolute or contingent, due or not due, in contract or tort,
liquidated or unliquidated, arising under this Agreement or under the other
Loan Documents, by operation of law or otherwise, now existing or hereafter
arising or whether or not for the payment of money or the performance or
the nonperformance of any act, including, but not limited to, all debts,
liabilities and obligations owing by the Company to others which the Lender
may have obtained by assignment or otherwise, and all damages which the
Company may owe to the Lender by reason of any breach by the Company of any
representation, warranty, covenant, agreement or other provision of this
Agreement or of any other Loan Document.
"Other Claim" shall have the meaning set forth in Section 5.07 hereof.
"Parent" shall mean Zapata Corporation, a Delaware corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Permitted Liens" shall mean those Liens expressly permitted by
Section 6.01.
"Person" shall mean an individual, corporation, partnership, trust,
limited liability company or unincorporated organization, a government or
any agency or political subdivision thereof.
"Plan" shall mean any employee benefit plan, program, arrangement,
practice or contract, maintained by or on behalf of the Company or an ERISA
Affiliate, which provides benefits or compensation to or on behalf of
employees or former employees, whether formal or informal, whether or not
written, including but not limited to the following types of plans:
(i) Executive Arrangements - any bonus, incentive compensation,
stock option, deferred compensation, commission, severance, "golden
parachute", "rabbi trust", or other executive compensation plan,
program, contract, arrangement or practice;
(ii) ERISA Plans - any "employee benefit plan" as defined in
ERISA, including, but not limited to, any defined benefit pension
plan, profit sharing plan, money purchase pension plan, savings or
thrift plan, stock bonus plan, employee stock ownership plan,
Multiemployer Plan, or any plan, fund, program, arrangement or
practice providing for medical (including post-retirement medical),
hospitalization, accident, sickness, disability, or life insurance
benefits;
(iii) Other Employee Fringe Benefits - any stock purchase,
vacation, scholarship, day care, prepaid legal services, severance pay
or other fringe benefit plan, program, arrangement, contract or
practice.
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"Prime Rate" shall mean the rate which SunTrust designates from time
to time as its prime lending rate, as in effect from time to time, (any
changes in such rates to be effective as of the date of any change in such
rate). The SunTrust prime lending rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any
customer. SunTrust may make commercial loans or other loans at rates of
interest at, above, or below the SunTrust prime lending rate.
"Prime Rate Advance" shall mean any advance made to the Company by the
Lender at an interest rate equal to the Prime Rate less 0.75%.
"Protein Finance Company" shall mean Protein Finance Company, a
Delaware corporation.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time, and any
regulation successor thereto.
"Rent Expense" shall mean all expenses for the rental of all property,
real or personal, by the Company and any of its Subsidiaries, determined in
accordance with GAAP.
"Rolling Stock" shall mean engine operated equipment now owned or
hereafter acquired by the Company or any of its Subsidiaries, including,
aircraft, rough terrain cranes, forklifts, manlifts, dump trailers, wheel
loaders, skid steer loaders, skip loaders and utility wheel loaders.
"Security Agreement" shall mean, collectively, the Company Security
Agreement and the Guarantor Security Agreement.
"Security Documents" shall mean, collectively the Company Security
Agreement, the Company Trademark Security Agreement, the Guarantor Security
Agreement, all UCC financing statements and fixture filings naming the
Company or any of its Subsidiaries as debtor and the Lender as secured
party, and all filings in the U.S. Patent and Trademark Office which are
required to be made under the Loan Documents.
"Subsidiary" of any Person shall mean any corporation, partnership or
other Person of which a majority (more than fifty percent (50%)) of all the
outstanding Capital Stock (including director's qualifying shares) or other
securities or ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions is, at the time as of which any such determination is being made,
directly or indirectly owned by such Person, or by one or more of the
Subsidiaries of such Person, and which corporation, partnership or other
Person is consolidated with such Person for financial reporting purposes.
Unless otherwise specified, "Subsidiaries" and "Subsidiary" shall mean the
Subsidiaries and a Subsidiary, respectively, of the Company.
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"SunTrust" shall mean SunTrust Bank, South Florida, National
Association, a national association.
"SunTrust Standard Fee Schedule" shall mean that International
Services Fee Schedule published by the Lender from time to time subject to
modification without notice.
"Supplemental Documents" shall mean the supplements to the following
documents: the Guaranty Agreement, the Contribution Agreement, and the
Guarantor Security Agreement as such supplements are described in
Section 5.13(a) and are more specifically described and shown in each
respective document.
"Tax" shall mean, with respect to any Person, any federal, state or
foreign tax, assessment, customs duties, or other governmental charge, levy
or assessment (including any withholding tax) upon such Person or upon such
Person's assets, revenues, income or profits, other than income and
franchise taxes imposed upon the Lender by the jurisdictions (or any
political subdivision thereof) in which the Lender has its principal office
or office from which its Advances are made, or in which the Lender is
incorporated.
"Tax Sharing Agreement" shall mean that certain Tax Sharing Agreement
by and among the Protein Finance Company, the Company, and any Subsidiary
of the Company from time to time party thereto.
"Title XI Financing" shall mean that line of credit and borrowings of
long-term debt which are guaranteed by the U.S. government under a program
offered through the National Marine Fisheries Service pursuant to Title XI
of the Marine Act of 1936.
"Total Liabilities" shall mean all liabilities on the balance sheet of
the Consolidated Companies as determined in accordance with GAAP.
"United States" or "U.S." means the United States of America, its
fifty (50) States and the District of Columbia.
"Upfront Fee" shall have the meaning set forth in Section 2.10(a).
"U.S. Dollar" "Dollar" and "$" shall mean lawful money of the United
States of America.
"Vessels" shall mean all fishing vessels now owned or hereafter
acquired by the Company and any of its Subsidiaries, including, without
limitation, purse boats.
SECTION 1.02. Calculations; Accounting Terms. Calculations of all
financial data herein shall be on a consolidated basis for the Company and all
Subsidiaries; and all accounting terms used herein shall, unless otherwise
expressly indicated, be in reference to the Consolidated
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Companies, on a consolidated basis, which may be accounted for in accordance
with the equity investment method (to the extent such method is in accordance
with GAAP), and shall have the meanings ascribed thereto under and be
interpreted in accordance with GAAP. All calculations and determinations under
Article VII shall be made in accordance with accounting principles consistent
with those followed in the preparation of the annual or interim financial
statements, as applicable, referred to in Section 5.02.
SECTION 1.03. Other Definitional Provisions.
(a) Except as otherwise specified herein, all references herein (A)
to any Person, other than the Company or any Subsidiary, shall be deemed to
include such Person's successors, transferees and assignees, (B) to the Company
or any Subsidiary, shall be deemed to include such Person's successors, (C) to
any Applicable Law specifically defined or referred to herein shall be deemed
references to such Applicable Law as the same may be amended or supplemented
from time to time, and (D) to any contract defined or referred to herein shall
be deemed references to such contract (and, in the case of any instrument, any
other instrument issued in substitution therefor) as the terms thereof may have
been or may be amended, supplemented, waived or otherwise modified from time to
time.
(b) When used in this Agreement, the words "herein", "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any provision of this Agreement, and "Section", "Subsection",
"Schedule" and "Exhibit" shall refer to Sections and Subsections of, and
Schedules and Exhibits to, this Agreement unless otherwise specified.
(c) Whenever the context so requires, the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
(d) All terms defined in this Agreement shall have the defined
meanings when used in any Note or, except as otherwise expressly stated therein,
any certificate, opinion or other Loan Document.
SECTION 1.04. Captions. Article and Section captions in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
ARTICLE II
AMOUNT AND TERMS OF ADVANCES
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SECTION 2.01. Commitment and Note. Subject to and upon the terms and
conditions set forth in this Agreement, the Lender establishes until August 11,
2000, unless otherwise extended pursuant to Section 2.13 below (August 11, 2000,
or such later date as the Commitment has been extended pursuant to Section 2.13,
is hereinafter referred to as the "Commitment Termination Date") a revolving
credit facility in favor of the Company in the aggregate principal at any one
time outstanding not to exceed TWENTY MILLION DOLLARS ($20,000,000), as the same
may be reduced from time to time pursuant to the terms hereof. Within the
limits of the Commitment, the Company may borrow, repay and reborrow under the
terms of this Agreement; provided, however, that (i) the aggregate principal
amount of each Borrowing shall not be less than $500,000, (ii) all of the
Company's representations and warranties are true and correct on and as of the
date of each Borrowing, (iii) the Company may neither borrow nor reborrow should
there exist an Event of Default, or such would result from the Borrowing, and
(iv) the aggregate outstanding amount of Advances plus Letter of Credit
Obligations, after giving effect to each Borrowing shall not exceed the
Commitment. At no time shall the number of Borrowings outstanding under this
Article II exceed ten (10); provided that, for the purpose of determining the
number of Borrowings outstanding, all Borrowings consisting of Prime Rate
Advances under the Commitment shall be considered as one Borrowing. Borrowings
under the Commitment shall be made through Advances by the Lender. All Advances
by the Lender shall be evidenced by a single Note payable to the Lender in the
form of Exhibit F attached hereto with appropriate insertions. The Note shall
be dated the date hereof, shall be payable to the order of the Lender in the
principal amount of $20,000,000, shall bear interest as provided for in this
Agreement and shall mature on the Commitment Termination Date or sooner should
the principal and accrued interest thereon be declared immediately due and
payable as provided for hereinafter.
SECTION 2.02. Method of Borrowing Under the Commitment. (a) The
Company shall give the Lender written or telephonic notice (promptly confirmed
in writing) of any requested Borrowing under the Commitment, substantially in
the form of Exhibit G attached hereto (a "Notice of Borrowing"), specifying (i)
the amount of the Borrowing, (ii) the date the proposed Borrowing is to be made
(which shall be a Business Day), (iii) whether the Borrowing will consist of
Prime Rate Advances or LIBOR Advances, and (iv) in the case of a Borrowing
consisting of LIBOR Advances, the duration of the initial Interest Period
Applicable thereto. Each Notice of Borrowing shall be given to the Lender (x)
in the case of Prime Rate Advances, not later than 11:00 a.m. (Ft. Lauderdale,
Florida time) the same Business Day of such requested Borrowing or (y) in the
case of LIBOR Advances, at least three Business Days before the date such
requested Borrowing is to be made (which shall be a Business Day). The Lender
shall be entitled to rely on any telephonic Notice of Borrowing which it
believes in good faith to have been given by an Executive Officer of the
Company, and any Advances made by the Lender based on such telephonic notice
shall, when deposited by the Lender to the Company's Account No. 417006231174 at
SunTrust, be Advances for all purposes hereunder. Lender shall make each
Advance, if it received proper notification as specified above, available in the
Company's Account by 4:00 p.m. on the date such requested Borrowing is to be
made.
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(b) Whenever the Company desires to convert all or a portion of an
outstanding Borrowing consisting of Prime Rate Advances into one or more
Borrowings consisting of LIBOR Advances, or to continue a Borrowing consisting
of LIBOR Advances for a new Interest Period, it shall give the Lender written
notice or telephonic notice (promptly confirmed in writing) at least three
Business Days before the date of such conversion, specifying each such Borrowing
to be converted into or continued as LIBOR Advances. Such notice, substantially
in the form of Exhibit H attached hereto (a "Notice of Continuation/Conversion")
shall be given prior to 11:00 a.m. (Ft. Lauderdale, Florida time) on the date
specified. Each such Notice of Continuation/Conversion shall be irrevocable and
shall specify the aggregate principal amount of the Advances to be converted or
continued, the date of such conversion or continuation and the Interest Period
applicable thereto. If, upon the expiration of any Interest Period in respect
of any Borrowing, the Company shall have failed to deliver the Notice of
Continuation/Conversion, the Company shall be deemed to have elected to convert
or continue such Borrowing to a Borrowing consisting of Prime Rate Advances. So
long as any Event of Default shall have occurred and be continuing, no Borrowing
may be converted into or continued as (upon expiration of the current Interest
Period) LIBOR Advances unless the Lender shall have otherwise consented in
writing. No conversion of any Borrowing of LIBOR Advances shall be permitted
except on the last day of the Interest Period in respect thereof.
SECTION 2.03. Letter of Credit Subfacility. Subject to, and upon the
terms and conditions set forth herein, the Company may request, in accordance
with the provisions of this Section 2.03 and Section 2.04 and the other terms of
this Agreement, that on and after the Closing Date but prior to the Commitment
Termination Date, the Lender issue a Letter of Credit or Letters of Credit for
the account of the Company or any Guarantor; provided that the Company or such
Guarantor executes and delivers to the Lender a Letter of Credit Application,
provided further that (i) no Letter of Credit shall have an expiration date that
is later than the earlier of (x) one year after the date of issuance thereof or
(y) the Commitment Termination Date (provided that a Letter of Credit may
provide that it is extendible for consecutive one year periods if such period
does not end after the Commitment Termination Date); (ii) the Company shall not
request that the Lender issue any Letter of Credit, if, after giving effect to
such issuance, the sum of the aggregate Letter of Credit Obligations plus the
aggregate outstanding principal amount of the Advances would exceed the
Commitment; and (iii) the Company shall not request that the Lender issue any
Letter of Credit if after giving effect to such issuance, the aggregate Letter
of Credit Obligations would exceed the Letter of Credit Subfacility. To the
extent of any conflict between the terms of this Agreement and any Letter of
Credit Application, this Agreement shall control, including, but not limited to
all fees to be paid to Lender under this Agreement.
SECTION 2.04. Notice of Issuance of Letter of Credit; Agreement to
Issue.
(a) Whenever the Company desires the issuance of a Letter of Credit,
it shall, in addition to any application and documentation procedures reasonably
required by the Lender for the issuance of such Letter of Credit, deliver to the
Lender a written notice no later than 11:00 AM (local time for the Lender) at
least two (2) Business Days in advance of the proposed date of issuance. Each
such notice shall specify (i) the Account Party, (ii) the proposed date of
issuance (which shall
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be a Business Day); (iii) the face amount of the Letter of Credit; (iv) the
expiration date of the Letter of Credit; and (v) the name and address of the
beneficiary with respect to such Letter of Credit and shall attach a precise
description of the documentation and a verbatim text of any certificate to be
presented by the beneficiary of such Letter of Credit which would require the
Lender to make payment under the Letter of Credit, provided that the Lender may
require reasonable changes in any such documents and certificates in accordance
with its customary letter of credit practices, and provided further, that no
Letter of Credit shall require payment against a conforming draft to be made
thereunder on the same Business Day that such draft is presented if such
presentation is made after 11:00 AM (Fort Lauderdale, Florida time). In
determining whether to pay any draft under any Letter of Credit, the Lender
shall be responsible only to determine that the documents and certificate
required to be delivered under its Letter of Credit have been delivered, and
that they comply on their face with the requirements of the Letter of Credit.
(b) The Lender agrees, subject to the terms and conditions set forth
in this Agreement, to issue for the account of such Account Party a Letter of
Credit in a face amount equal to the face amount requested under paragraph (a)
above, following its receipt of a notice required by Section 2.04(a).
(c) As of the Closing Date, each of the Existing Letters of Credit
shall be deemed to have been issued by the Lender in accordance with the terms
hereof.
SECTION 2.05. Payment of Amounts drawn under Letters of Credit.
(a) In the event of any request for a drawing under any Letter of
Credit by the beneficiary thereof, the Lender shall notify the Company on or
before the date on which the Lender intends to honor such drawing, and the
Company and the Account Party (if other than the Company) jointly and severally
agree to reimburse the Lender on the day on which such drawing is honored in an
amount, in same day funds, equal to the amount of such drawing.
(b) Notwithstanding any provision of this Agreement to the contrary,
to the extent that any Letter of Credit or portion thereof remains outstanding
on the Commitment Termination Date, for any reason whatsoever, the Company and
the Guarantors hereby agree that the beneficiary or beneficiaries thereof shall
be deemed to have made a drawing of all available amounts pursuant to such
Letters of Credit on the Commitment Termination Date which amount shall be held
by the Lender, in an interest bearing account, as cash collateral for its
remaining obligations pursuant to such Letters of Credit.
(c) As between the Company, any Account Party and the Lender, the
Company and such Account Party assume all risk of the acts and omissions of, or
misuse of, the Letters of Credit issued by the Lender, by the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation
of the foregoing, the Lender shall not be responsible (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
such Letters of Credit, even if it should in fact
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prove to be in any or all respects insufficient, inaccurate, fraudulent or
forged or otherwise invalid; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof
in whole or in part which may prove to be invalid or ineffective for any reason;
(iii) for failure of the beneficiary of any such Letter of Credit to comply
fully with the conditions required in order to draw upon such Letter of Credit;
(iv) for errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex, telecopy or otherwise; (v)
for good faith errors in interpretation of technical terms; (vi) for any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing under any such Letter of Credit or the proceeds thereof; (vii) for the
misapplication by the beneficiary of any such Letter of Credit; and (viii) for
any consequences arising from causes beyond the control of the Lender; provided
however that the Lender shall assume the risk of the acts and omissions of, the
Letters of Credit issued by the Lender which result directly from the Lender's
gross negligence or willful misconduct.
SECTION 2.06. Prepayment of Borrowings Under the Commitment.
(a) The Company shall have the right to prepay Borrowings under the
Commitment, in whole at any time or in part from time to time, without premium
or penalty (but, in the case of LIBOR Advances, subject to the funding
indemnification provisions of Section 2.16), provided that (i) the Company gives
the Lender prior written notice of such prepayment, specifying the date such
prepayment will occur (which shall be a Business Day), (x) in the case of any
Prime Rate Advance, at least one Business Day in advance of such date or (y) in
the case of any LIBOR Advance during an Interest Period, at least three Business
Days in advance of such date, (ii) each partial prepayment shall be in an amount
of at least $500,000, and (iii) such prepayments include interest accrued, on
the principal amount prepaid, to the prepayment date.
(b) The Company, when providing notice of prepayment pursuant to this
Section 2.06, may designate the specific Borrowing or Borrowings which are to be
prepaid. In the absence of a designation by the Company, the Lender shall make
such designation in its sole discretion. All voluntary prepayments shall be
applied to the payment of interest before application to principal.
SECTION 2.07. Voluntary Reduction of the Commitment. Upon at least
five (5) Business Days' prior written notice (or telephonic notice promptly
confirmed in writing) to the Lender, which notice shall specify (1) the amount
by which the Commitment is to be terminated and (2) the date such termination is
to occur, the Company shall have the right, without premium or penalty, to
terminate the Commitment, in whole or in part, provided that (a) any partial
termination pursuant to this Section 2.07 shall be in an amount of at least
$1,000,000 and integral multiples of $500,000, (b) the amount of the Commitment
shall not be reduced to an amount less than $10,000,000, and (c) any such
termination shall apply to permanently reduce the Commitment. If the sum of (i)
the aggregate principal amount of Advances plus (ii) the Letter of Credit
Obligations exceeds the amount of the Commitment as so reduced, the Company
shall immediately repay Borrowings under the Commitment by an amount equal to
such excess, together with accrued but unpaid interest on such excess.
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SECTION 2.08. Termination of the Commitment. The unpaid principal
balance and all accrued and unpaid interest on the Note will be due and payable
upon the first of the following dates or events to occur: (i) the Acceleration
Date; or (ii) upon the expiration of the Commitment on the Commitment
Termination Date.
SECTION 2.09. Use of Proceeds. The proceeds of each Borrowing under
the Commitment will be used by the Company solely for general corporate purposes
including working capital and fixed asset capital expenditures.
SECTION 2.10. Fees.
(a) On the Closing Date, the Company shall pay to SunTrust $50,000
(the "Upfront Fee"), which fee is a one time fee and shall be fully earned and
nonrefundable when paid.
(b) The Company shall pay to the Lender, (subject to the last
sentence hereof), a commitment fee (the "Commitment Fee") for the period
commencing on the Closing Date to and including the Commitment Termination Date,
computed at a rate of one-eighth of a percent (0.125%) multiplied by the average
daily unused portion of the Commitment of the Lender, such fee being payable
quarterly in arrears through the last day of each calendar quarter and due not
later than the 5th of the month immediately following the last day of such
calendar quarter, unless such day is not a Business Day, in which case such fee
is payable on the next Business Day following the 5th of such calendar quarter,
commencing on September 30, 1998, and ending on the Commitment Termination Date.
The Commitment Fee is a per annum fee and will be calculated on the basis of a
360-day year for the actual number of days elapsed. For purposes of calculating
the Commitment Fee, outstanding Letter of Credit Obligations shall not be usage
of the Commitment.
(c) The Company agrees to pay upon the issuance or negotiation of
each letter of credit, to the Lender, a letter of credit fee equal to the
Applicable LC Fee Percentage as set forth in SunTrust Standard Fee Schedule (the
"Letter of Credit Fee").
(d) The Company hereby authorizes the Lender to withdraw an amount
equal to the fees which are due and payable under clauses (a) or (b) above from
any of its accounts with the Lender if not paid on the due date for such fees.
The Lender shall give the Company notice of any such withdrawals, provided,
however, that failure by the Lender to give the Company notice shall not prevent
the Lender from making any such withdrawals under this Section.
SECTION 2.11. Interest.
(a) Interest Rate. For each Borrowing, subject to the limitations set
forth in Section 2.01, the Company shall be entitled to select between the
following two options to establish the rate of interest at which the unpaid
principal amount of the Note shall accrue:
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(i) Prime Rate Advances - interest shall accrue at the Prime
Rate less 0.75%; or
(ii) LIBOR Advances - interest shall accrue at LIBOR plus the
Applicable Margin.
Provided that the Company shall not select an interest rate based on LIBOR
for an Interest Period which extends beyond the Expiration Date.
(b) Payment of Interest. Interest shall be payable to the Lender in
arrears as follows:
(i) Prime Rate Advances - on the first day of each calendar
month.
(ii) LIBOR Advances - on the last day of the Interest Period
(subject to Section 2.12(c)(iii)), provided however, that
if the Interest Period for any LIBOR Advance is 6 months,
payment shall be made (x) on the last day of each three
month period prior to the expiration of the Interest
Period, and if such day is not a Business Day then on the
next Business Day, and (y) at the expiration of the
Interest Period.
SECTION 2.12. Interest Periods.
(a) In connection with the making or continuation of, or conversion
into, each Borrowing of LIBOR Advances, the Company shall select an Interest
Period to be applicable to such LIBOR Advance, which Interest Period shall be
either a 1, 2, 3 or 6 month period.
(b) In connection with the making of each Prime Rate Advance the
Interest Period shall end on a date not later than the Commitment Termination
Date.
(c) Notwithstanding paragraphs (a) or (b) above:
(i) The initial Interest Period for any Borrowing of LIBOR
Advances shall commence on the date of such Borrowing (including the date
of any conversion from a Borrowing consisting of Prime Rate Advances) and
each Interest Period occurring thereafter in respect of a continuation of
such Borrowing shall commence on the day on which the immediately preceding
Interest Period expires;
(ii) If any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period in respect of
LIBOR Advances would otherwise expire on a day that is not a Business Day
but is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding
Business Day;
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(iii) Any Interest Period in respect of LIBOR Advances which
begins on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period shall, subject to part
(iv) below, expire on the last Business Day of such calendar month; and
(iv) No Interest Period with respect to the Advances shall
extend beyond the Commitment Termination Date.
SECTION 2.13. Extension of Commitment. No earlier than 180 days but
no later than 120 days prior to the then applicable Commitment Termination Date,
the Company may request that the Commitment Termination Date be extended by the
Lender for an additional two (2) year period. The Lender may agree or not
agree to such extension in the exercise of its sole discretion; provided,
however, that the Lender shall inform the Company no later than 90 days prior to
the then applicable Commitment Termination Date of the Lender's decision as to
whether to extend the Commitment Termination Date. Notwithstanding anything
herein to the contrary, the Commitment Termination Date may only be extended, in
the aggregate, for up to one additional two-year period pursuant to this
Section 2.13. If the Lender agrees, in its sole discretion, to extend the
Commitment Termination Date, then the applicable Commitment Termination Date
shall automatically be so extended two years from such date, upon written notice
thereof being delivered by the Lender, to the Company and completion by the
Company and its Subsidiaries of any conditions to such extension required by the
Lender.
SECTION 2.14. Increased Costs.
(a) If, by reason of (x) after the date hereof, the introduction of
or any change (including, without limitation, any change by way of imposition or
increase of reserve requirements) in or in the interpretation of any law or
regulation, or (y) the compliance with any guideline or request from any central
bank or other governmental authority or quasi-governmental authority exercising
control over banks or financial institutions generally (whether or not having
the force of law):
(i) Lender shall be subject to any tax, duty or other charge with
respect to its LIBOR Advances or Letter of Credit Obligations or its
obligation to make LIBOR Advances or issue letters of credit, or the basis
of taxation of payments to Lender of the principal of or interest on its
LIBOR Advances or on its obligation to issue Letters of Credit shall have
changed (except for changes in the tax on the overall net income of, or any
franchise tax on, the Lender or its Lending Office imposed by the
jurisdiction in which the Lender's principal executive office is located);
or
(ii) any reserve (including, without limitation, any imposed by the
Board of Governors of the Federal Reserve System), special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, the Lender's Lending Office shall be imposed or
deemed applicable or any other condition
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affecting its LIBOR Advances or Letter of Credit Obligations or its
obligation to make LIBOR Advances or issue Letters of Credit shall be
imposed on the Lender, its Lending Office or the London interbank market;
and as a result thereof there shall be any increase in the cost to the Lender of
agreeing to make or making, funding or maintaining LIBOR Advances (excepts to
the extent already included in the determination of LIBOR for LIBOR Advances) or
Letters of Credit, or there shall be a reduction in the amount received or
receivable by the Lender or its Lending Office, then the Company shall from time
to time, upon written notice from and demand by the Lender on the Company, pay
to the Lender for the account of the Lender within five Business Days after the
date of such notice and demand, additional amounts sufficient to indemnify the
Lender against such increased cost. A certificate as to the amount of such
increased cost, submitted to the Company by the Lender in good faith and
accompanied by a statement prepared by the Lender describing in reasonable
detail the basis for and calculation of such increased cost, shall, except for
manifest error, be final, conclusive and binding for all purposes. In the event
that the Company shall pay the increased cost accrued through the date of
payment as required under this Section 2.14(a), plus any funding losses as
described in Section 2.16, then the Company shall have the right to convert the
relevant LIBOR Advance to a Prime Rate Advance and the Lender shall be deemed to
have given its consent thereto, as required hereunder. The Lender will
promptly notify the Company of any such adoption, change or compliance of which
it has knowledge which will entitle the Lender to compensation pursuant to the
Section, however, the failure to give notice shall not affect the Lender's right
to such compensation.
(b) If the Lender shall determine that at any time, because of the
circumstances described in clauses (x) or (y) in Subsection 2.14(a) or any other
circumstances beyond the Lender's reasonable control arising after the date of
this Agreement affecting the Lender or the London interbank market or the United
States secondary certificate of deposit market or the Lender's position in such
markets, LIBOR, as determined by the Lender, will not adequately and fairly
reflect the cost to the Lender of funding its LIBOR Advances, then, and in any
such event:
(i) the Lender shall forthwith give notice (by telephone confirmed
in writing) to the Company;
(ii) the Company's right to request and the Lender's obligation to
make or permit portions of the Advances to remain outstanding past the last
day of the then current Interest Periods as LIBOR Advances shall be
immediately suspended; and
(iii) the Lender shall make an Advance as part of the requested
Borrowing of LIBOR Advances, as the case may be, as a Prime Rate Advance,
which such Prime Rate Advance shall, for all other purposes, be considered
part of such Borrowing.
SECTION 2.15. Capital Adequacy. If, after the date of this Agreement,
the Lender shall have determined that the adoption of any applicable law, rule
or regulation regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof by any
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governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender with any
request or directive regarding capital adequacy not currently in effect or fully
applicable as of the Closing Date (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the Lender's capital as a consequence
of its obligations hereunder to a level below that which the Lender could have
achieved but for such adoption, change or compliance (taking into consideration
the Lender's policies with respect to capital adequacy) by an amount deemed by
the Lender in its sole discretion to be material, then, from time to time,
promptly upon demand by the Lender, the Company shall pay the Lender such
additional amount or amounts as will compensate the Lender for such reduction. A
certificate of the Lender claiming compensation under this Section 2.15 and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive absent manifest error. In determining any such amount, the Lender
may use any reasonable averaging and attribution methods. The Lender will
promptly notify the Company of any such adoption, change or compliance of which
it has knowledge which will entitle the Lender to compensation pursuant to this
Section, but the failure to give such notice shall not affect the Lender's right
to such compensation provided the Lender gives such notice within 90 days after
an officer of the Lender having responsibility for the administration of this
Agreement shall have received actual notice of such adoption, change or
compliance.
SECTION 2.16. Funding Losses. The Company shall compensate the
Lender, upon its written request to the Company (which request shall set forth
the basis for requesting such amounts in reasonable detail and which request
shall be made in good faith and, absent manifest error, shall be final,
conclusive and binding upon all of the parties hereto), for all losses, expenses
and liabilities (including, without limitation, any interest paid by the Lender
to lenders of funds borrowed by it to make or carry its LIBOR Advances, in
either case to the extent not recoverable by the Lender in connection with a re-
employment of such funds and including loss of anticipated profits, which the
Lender may sustain): (i) if for any reason (other than a default by the Lender)
a borrowing of, or conversion to or continuation of, LIBOR Advances to the
Company does not occur on the date specified therefor in a Notice of Borrowing
or Notice of Continuation/Conversion (whether or not withdrawn), (ii) if any
repayment (including mandatory prepayments and any conversions) of any LIBOR
Advances by the Company occurs on a date which is not the last day of an
Interest Period applicable thereto, or (iii) if, for any reason, the Company
defaults in its obligation to repay its LIBOR Advances when required by the
terms of this Agreement, provided however, that the Company shall not be
required to pay any penalty or fee for any losses, expenses and liabilities
incurred by the Lender (i) as a result of Lender's determination that the making
or continuance of a LIBOR Advance has become unlawful by compliance by the
Lender in good faith with any applicable law, governmental rule, regulation,
guideline or order as further described in Section 2.22 hereto, or (ii) as a
result of Lender's determination that adequate and fair means do not exist for
ascertaining the applicable interest rate as described in Section 2.21 hereto.
SECTION 2.17. Making of Payments.
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(a) The Fees and all payments of principal of, or interest on, the
Note shall be made in immediately available funds free and clear of any
defenses, set-offs, counterclaims or withholdings or deductions for taxes to the
Lender at its principal office in Ft. Lauderdale, Florida, for the Lender's
account. All such payments shall be made not later than 1:00 p.m. (Ft.
Lauderdale, Florida time) and funds received after that hour shall be deemed to
have been received by the Lender on the next following Business Day.
(b) Subject to Subsection 2.12(c)(ii), whenever any payment to be
made hereunder or under any Note shall be stated to be due on a day which is not
a Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest thereon shall
be payable at the applicable rate during such extension.
SECTION 2.18. Default Rate of Interest. On the Acceleration Date, to
the extent permitted by law, all unpaid amounts hereunder shall, on such date
and thereafter, accrue an interest rate of Prime Rate plus an additional two
percent (2.0%) per annum until payment in full. Interest accruing pursuant to
this Section 2.18 will be due and payable upon demand.
SECTION 2.19. Calculation of Interest. Interest payable on the Note,
including interest payable as provided in Section 2.18, shall be calculated as
follows:
(a) Prime Rate Advances - Interest shall be calculated on the basis
of a 365-day year and paid for actual number of days elapsed.
(b) LIBOR Advances - Interest shall be calculated on the basis of a
360-day year and paid for the actual number of days elapsed.
SECTION 2.20. Payments Free of Taxes. All payments made by the
Company under this Agreement and the Note shall be made free and clear of, and
without deduction for, any Tax. To the extent that the Company is obligated by
Applicable Law to make any deduction or withholding on account of any Tax from
any amount payable to the Lender under this Agreement or the Note, the Company
shall (1) make such deduction or withholding and pay the same to the relevant
governmental authority and (2) pay such additional amount to the Lender as is
necessary to result in the Lender receiving a net after-tax (or after-assessment
or after-charge) amount equal to the amount to which the Lender would have been
entitled under this Agreement or the Note absent such deduction or withholding.
SECTION 2.21. Interest Rate Not Ascertainable, etc. In the event that
the Lender, in the case of LIBOR, shall have determined (which determination
shall be made in good faith and, absent manifest error, shall be final,
conclusive and binding upon all parties) that on any date for determining LIBOR
for any Interest Period, by reason of any changes arising after the date of this
Agreement affecting the London interbank market or the Lender's position in such
market, adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of LIBOR then, and in
any such event, the Lender shall forthwith give notice (by
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telephone confirmed in writing) to the Company of such determination and a
summary of the basis for such determination. Until the Lender notifies the
Company that the circumstances giving rise to the suspension described herein no
longer exist, the obligations of the Lender to make or permit portions of the
Advances to remain outstanding past the last day of the then current Interest
Periods as LIBOR Advances shall be suspended, and such affected Advances shall
bear the same interest as Prime Rate Advances.
SECTION 2.22. Illegality.
(a) In the event that the Lender shall have determined (which
determination shall be made in good faith and, absent manifest error, shall be
final, conclusive and binding upon all parties) at any time that the making or
continuance of any LIBOR Advance has become unlawful by compliance by the Lender
in good faith with any applicable law, governmental rule, regulation, guideline
or order (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful), then, in any such event, the Lender shall
give prompt notice (by telephone confirmed in writing) to the Company of such
determination and a summary of the basis for such determination.
(b) Upon the giving of the notice to the Company referred to in
subsection (a) above, (i) the Company's right to request and the Lender's
obligation to make LIBOR Advances shall be immediately suspended, and the Lender
shall make an Advance as part of the requested Borrowing of LIBOR Advances as a
Prime Rate Advance, and (ii) if the affected LIBOR Advance or Advances are then
outstanding, the Company shall immediately, or if permitted by applicable law,
no later than the date permitted thereby, upon at least one Business Day's
written notice to the Lender, convert each such Advance into a Prime Rate
Advance with an Interest Period ending on the date on which the Interest Period
applicable to the affected LIBOR Advances expires.
(c) Notwithstanding any other provision contained in this Agreement,
Lender shall not be obligated to issue any Letter of Credit if the issuance of
such Letter of Credit shall have become unlawful or prohibited by compliance by
Lender in good faith with any law, governmental rule, request, order,
injunction, judgment or decree (whether or not having the force of law).
SECTION 2.23. Letter of Credit Obligations Absolute. The obligation
of each Account Party to reimburse the Lender for drawings made under Letters of
Credit issued for the account of the Account Party shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, including without limitation, the following
circumstances:
(a) Any lack of validity or enforceability of any Letter of Credit;
(b) The existence of any claim, set-off, defense or other right which
the Company or any Subsidiary or Affiliate of the Company may have at any time
against a beneficiary or any transferee of any Letter of Credit (or any Persons
or entities for whom any such beneficiary or
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transferee may be acting), or any other Person, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated transaction
(including without limitation any underlying transaction between the Company or
any of its Subsidiaries and Affiliates and the beneficiary for which such Letter
of Credit was procured);
(c) Any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect;
(d) Payment by the Lender under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit;
(e) Any other circumstance or happening whatsoever which is similar
to any of the foregoing; or
(f) the fact that a Default or an Event of Default shall have
occurred and be continuing;
provided however, that the Account Party shall not be obligated to reimburse the
Lender for drawings made under the Letters of Credit if the payment of such
drawing by the Lender results directly from Lender's gross negligence or wilful
misconduct.
ARTICLE III
CONDITIONS TO BORROWINGS
------------------------
The obligation of the Lender to make an Advance to the Company
hereunder is subject to the satisfaction of the following conditions:
SECTION 3.01. Conditions Precedent to Initial Advance. At the time
of the making by the Lender of its initial Advance hereunder, unless otherwise
waived or consented to by the Lender,
(1) all obligations of the Company to the Lender incurred prior thereto
(including, without limitation, the Company's obligation to reimburse the
fees and disbursements of counsel to the Lender in accordance with this
Agreement), together with the fees described in the Commitment Letter,
shall have been paid in full;
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(2) the Lender shall have received the following, each dated as of the
Closing Date, in form and substance satisfactory to the Lender:
(a) A duly executed original of this Agreement.
(b) A duly completed and executed original of a Note payable to the
order of the Lender in the principal amount of the Lender's
Commitment.
(c) A duly executed original of the Guaranty Agreement and the
Contribution Agreement.
(d) A duly executed original of the Company Security Agreement and
the Guarantor Security Agreement, together with such UCC
financing statements and UCC amendments recorded in such
jurisdictions as the Lender deems necessary or desirable to
perfect the security interests granted thereunder and under the
Company Trademark Security Agreement.
(e) Certified Requests for Information or Copies (Form UCC-11) or
equivalent reports, listing all effective financing statements
which name the Company or any of its Subsidiaries as debtor,
together with copies of such other financing statements (none of
which shall cover the Collateral purported to be covered by the
Company Security Agreement, the Guarantor Security Agreement and
the Company Trademark Security Agreement), other than financing
statements in favor of the Lender.
(f) Completion of and receipt of lien searches in all relevant
jurisdictions revealing no liens on any assets of the Company or
any Guarantor except Permitted Liens and liens to be terminated
on the Closing Date.
(g) A duly executed original of the Company Trademark Security
Agreement, together with such filings in the United States Patent
and Trademark Office as the Lender deems necessary or desirable
to perfect the security interests granted under the Company
Trademark Security Agreement.
(h) Duly executed originals of any fixture filings and amendments to
existing fixture filings recorded in such jurisdictions as the
Lender deems necessary or desirable to perfect the security
interests granted thereunder.
(i) Duly executed originals of any Collateral Access Agreements
required by
(j) Evidence satisfactory to the Lender that all other actions
necessary or desirable to perfect and protect the security
interests created by the Security Documents have been taken.
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(k) Certificates of insurance issued by the Company's insurers,
describing in reasonable detail the insurance maintained by the
Company, together with appropriate evidence showing that the
Lender has been named as loss payee or additional insured, as its
interest may appear, on all insurance policies insuring property
of the Company and its Subsidiaries.
(l) Certificates signed by the Chief Executive Officer or the Chief
Financial Officer of each of the Company and the Guarantors as to
the solvency of such Company or Guarantor.
(m) Payment of all fees required to be paid on or prior to the
Closing Date.
(n) A duly executed original of the Closing Certificate, in the form
attached hereto as Exhibit I.
(o) Copies of the organizational papers of each of the Company and
the Guarantors, certified as true and correct by the Secretary of
State of the State in which the Company or such Guarantor is
incorporated, and certificates from the Secretaries of State of
the States in which the Company or such Guarantor is incorporated
and of each state in which the Company or such Guarantor is
legally required to qualify to transact business as a foreign
corporation, certifying the Company's or Guarantor's good
standing as a corporation in such States.
(p) Copies of the bylaws of each of the Company and the Guarantors of
resolutions of the Board of Directors of each of the Company and
the Guarantors approving this Agreement, the Note and the
Borrowings hereunder, the Security Documents and all other Loan
Documents to which the Company or such Guarantor is a party and
of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement,
the Note, the Security Documents and all other Loan Documents to
which the Company or such Guarantor is a party, in each case
certified as true and correct by the Secretary or an Assistant
Secretary of the Company or such Guarantor.
(q) A favorable written opinion of Woods, Oviatt, Gilman, Sturman &
Clarke LLP, General Counsel for the Company and the Guarantors,
substantially in the form of Exhibit J attached hereto, and
covering such additional matters relating to the transactions
contemplated hereby as the Lender may reasonably request,
addressed to the Lender.
(r) Certified copy of the Tax Sharing Agreement.
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(s) Certified copies of all consents, approvals, authorizations,
registrations or filings required to be made or obtained by the
Company or the Guarantors in connection with the transactions
contemplated hereby and by the other Loan Documents, including,
without limitation consent from the United States Government
pursuant to the Title XI Financing.
(t) Acknowledgment as to appointment of a local agent in Florida.
(u) Evidence satisfactory to the Lender that all primary operating
accounts related to the operation and management of the Company
and its Subsidiaries have been transferred to, or otherwise
established, with the Lender.
(3) all corporate and other proceedings taken or to be taken in connection
with the transactions contemplated hereby and all Loan Documents and other
documents incident thereto or delivered in connection therewith shall be
satisfactory in form and substance to the Lender.
SECTION 3.02. Conditions Precedent to Each Advance. At the time of
the making by the Lender of each Advance hereunder (including the initial
Advances), (a) the following statements shall be true:
(i) The representations and warranties contained in Article IV
hereof are true and correct in all respects on and as of the date of such
Borrowing as though made on and as of such date, except insofar as such
representations and warranties speak only as of a prior date or reflect
transactions and events after the Closing Date, as permitted by the Loan
Documents;
(ii) No Default or Event of Default exists or would result from such
Borrowing or from the application of the proceeds therefrom;
(iii) Since the date of the most recent consolidated financial
statements of the Company described in Section 4.14 or delivered to the
Lender pursuant to Section 5.02, there shall have been no change which has
had or could reasonably be expected to have a Materially Adverse Effect;
(iv) There shall be no action or proceeding instituted or pending
before any court or other governmental authority or threatened (i) which
reasonably could be expected to have a Materially Adverse Effect, or (ii)
seeking to prohibit or restrict the ownership or operation of any portion
of the business or assets of the Company or any of its Subsidiaries, or to
compel the Company or any of its Subsidiaries to dispose of or hold
separate all or any portion of its businesses or assets, where such portion
or portions of such business(es) or
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assets, as the case may be, constitute a material portion of the total
businesses or assets of the Company or its Subsidiaries; and
(v) The Advances to be made and the use of proceeds thereof shall
not contravene, violate or conflict with, or involve the Lender in a
violation of, any Applicable Law.
(b) each Notice of Borrowing given by the Company in accordance with
Section 2.02(a) hereof and the acceptance by the Company of the proceeds of any
Borrowing shall constitute a representation and warranty by the Company, made as
of the time of the making of such Borrowing that the conditions specified in
Section 3.02(a) have been fulfilled as of such time unless a notice to the
contrary specifically captioned "Disclosure Statement" is received by the Lender
from the Company prior to 5:00 p.m. (Ft. Lauderdale, Florida time) on the
Business Day immediately preceding the date of the making of such Borrowing. To
the extent that the Lender agrees to make such Borrowing after receipt of a
Disclosure Statement in accordance with the preceding sentence, the
representations and warranties pursuant to the preceding sentence will be deemed
made as modified by the contents of such Disclosure Statement and repeated, as
so modified, as at the time of the making of such Borrowing. Any such
modification shall be effective only for the occasion on which the Lender elects
to make an Advance on such Borrowing, and unless expressly agreed by the Lender
in writing to the contrary in accordance with Section 9.02, shall not be deemed
a waiver or modification of any condition to the making of any future Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company and the Subsidiaries represent and warrant as follows:
SECTION 4.01. Corporate Status of Company; Status of Subsidiaries.
The Company and each Subsidiary is a corporation, duly organized, validly
existing and in good standing under the laws of the jurisdictions of their
respective incorporation and have the corporate power and authority to own their
respective property and assets and to transact the businesses in which they
respectively are engaged or presently propose to engage and are duly qualified
and in good standing as foreign corporations in all states where failure to be
so qualified and in good standing could have a Materially Adverse Effect. The
Company and each of its Subsidiaries have the power to own their respective
properties and to carry on their respective businesses as now being conducted.
The Company is adequately capitalized for the purpose of conducting its
business, was not formed solely for the purpose of acting as agent for, or as an
instrumentality of, any Subsidiary.
SECTION 4.02. Corporate Power and Authority. Each of the Company and
the Guarantors has the corporate power and has taken all necessary corporate
action (including, without
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limitation, any consent of stockholders required by law or by its certificate of
incorporation or bylaws) to authorize it, to execute, deliver and carry out the
terms and provisions of and to incur its obligations under this Agreement, the
Note, any Letter of Credit Applications, the Security Documents and the other
Loan Documents to which it is a party. This Agreement, the Note, the Security
Documents and the other Loan Documents have been duly authorized, executed and
delivered by the Company and the Guarantors party thereto.
SECTION 4.03. Compliance with Other Instruments. The execution,
delivery and performance by the Company and any Guarantors party thereto, as the
case may be, of this Agreement, the Note, any Letter of Credit Applications, the
Security Documents and the other Loan Documents to which it is a party, (a) will
not contravene any provision of Applicable Law, rule, regulation, judgment,
order or ruling, (b) will not conflict with, be inconsistent with, or result in
any breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of any Lien
upon any of the property or assets of the Company or any of its Subsidiaries
pursuant to the terms of any indenture, mortgage, deed to secure debt, deed of
trust, or any other agreement or instrument to which the Company or any of its
Subsidiaries is a signatory or by which it is bound or to which it may be
subject, (c) will not violate any provision of the certificate of incorporation
(or equivalent thereof) or bylaws (or equivalent thereof) of the Company or any
of its Subsidiaries or other document governing the constitution or conduct of
affairs of any Subsidiary of the Company, (d) will not require any Governmental
Approval that affects the operation of the Company and the Guarantors and which
would have a Materially Adverse Effect were it not obtained, and that has not
been obtained as of the Closing Date and (e) will not result in the creation of
any Lien upon the assets or properties of the Company and its Subsidiaries
except Permitted Liens and those contemplated by the Security Documents.
Neither the Company nor any of its Subsidiaries is a party to, or otherwise
subject to any provision contained in, any instrument evidencing Indebtedness of
the Company or any of its Subsidiaries, any agreement relating thereto or any
other contract or agreement (including its charter) which limits the amount of,
or otherwise imposes restrictions on the incurring of, Indebtedness of the type
to be evidenced by the Note other than the Title XI Financing.
SECTION 4.04. Enforceable Obligations. This Agreement, the Note, any
Letter of Credit Application, the Security Documents and the other Loan
Documents constitute the legal, valid and binding obligation of the Company and
the Guarantors party thereto, enforceable in accordance with their terms, except
as the enforceability thereof may be limited by Bankruptcy Law and by general
principles of equity.
SECTION 4.05. Governmental Authorizations. The Company and its
Subsidiaries are in good standing with respect to all governmental
authorizations, consents, approvals, orders, licenses and other actions required
by any governmental or non-governmental authority or Person, except where the
failure to maintain such good standing will not have a Materially Adverse Effect
on the Company and its Subsidiaries.
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SECTION 4.06. Intellectual Property. Each of the Company and its
Subsidiaries owns or has the right to use all patents, trademarks, service
marks, trade names, copyrights, licenses and other rights, free from burdensome
restrictions, which are material for the operation of its business as presently
conducted. Nothing has come to the attention of the Company, any of its
Subsidiaries or any of their respective directors and officers to the effect
that (i) any product, process, method, substance, part or other material
presently contemplated to be sold by or employed by the Company or any of its
Subsidiaries in connection with its business may infringe any patent, trademark,
service mark, trade name, copyright, license or other right owned by any other
Person, (ii) there is no pending or threatened claim or litigation against or
affecting the Company or any of its Subsidiaries contesting its right to sell or
use any such product, process, method, substance, part or other material or
(iii) there is not pending or proposed any patent, invention, device,
application or principle or any statute, law, rule, regulation, standard or code
which would prevent, inhibit or render obsolete the production or sale of any
products of, or substantially reduce the projected revenues of, or otherwise
have a Materially Adverse Effect on the Company or any of its Subsidiaries.
SECTION 4.07. Outstanding Indebtedness. Except for (i) Indebtedness
existing on the Closing Date and set forth in Schedule 4.07 and (ii)
Indebtedness permitted by Section 6.01, neither the Company nor any of its
Subsidiaries, on a consolidated basis, has outstanding any Indebtedness. There
exists no default under the provisions of any instrument evidencing or securing
any Indebtedness of the Company or any of its Subsidiaries or of any agreement
otherwise relating thereto which has had or would reasonably be expected to have
a Materially Adverse Effect.
SECTION 4.08. Insurance Coverage. Each property of the Company or
any of its Subsidiaries is insured for the benefit of the Company or a
Subsidiary of the Company in amounts deemed adequate by the Company's management
in its reasonable business judgment and not materially less than those amounts
customary in the industry in which the Company and its Subsidiaries operate
against risks usually insured against by Persons operating businesses similar to
those of the Company or its Subsidiaries in the localities where such properties
are located, and the Lender has been named loss payee or additional insured, as
its interest may appear, on all such policies. Attached as Schedule 4.08 hereto
are certificates evidencing such insurance.
SECTION 4.09. Title to Properties. Each of the Company and its
Subsidiaries has (i) good and marketable fee simple title to its respective real
properties (other than real properties it leases from others), including such
real properties reflected in the financial statements referred to in Section
4.14, subject to no Lien of any kind except Permitted Liens, and (ii) good title
to all of its other respective properties and assets (other than properties and
assets which it leases from others), including the other properties and assets
reflected in the financial statements referred to in Section 4.14. With the
exception of the Company's lease of the Hammond, Louisiana office space, each of
the Company and its Subsidiaries enjoys peaceful and undisturbed possession in
all leases necessary for the operation of its respective properties and assets,
none of which contains any unusual or burdensome provisions that would adversely
affect or impair the operation of such properties and assets, and all such
leases are valid and subsisting and in full force and effect. For purposes of
this Section 4.09 the Company's month to month leases on warehouse space in (i)
Dubuque, Iowa, (ii)
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Gunterville, Alabama, (iii) St. Louis, Missouri and (iv) Avondale, Louisiana,
shall constitute valid and subsisting leases, provided that the Company shall
have other warehouse options in the event they are no longer able to utilize any
one of the warehouses they currently use.
SECTION 4.10. No Burdensome Restrictions. Neither the Company nor
any of its Subsidiaries is a party to any contract or agreement that would
result in any burdensome restrictions that might reasonably be expected to have
a Materially Adverse Effect on the Company or any of its Subsidiaries,
including, but not limited to, any collective bargaining agreements.
SECTION 4.11. No Material Violation of Law. Neither the Company nor
any of its Subsidiaries has any notice of any violation of any law, statute,
order, regulation or judgment entered against it by any court that may
reasonably be expected to have a Materially Adverse Effect.
SECTION 4.12. No Default Under Other Agreements. Neither the Company
nor any of its Subsidiaries is in default under any material agreement to which
it is a party.
SECTION 4.13. No Equity Investments. Neither the Company nor any of
its Subsidiaries possesses investments in any equity or other long-term
investments in any Person, except investments permitted by Section 6.08 or
listed on Schedule 4.13 attached hereto.
SECTION 4.14. Financial Statements. The audited consolidated
financial statements of the Company dated September 30, 1997, and the related
consolidated statements of income (including supporting footnote disclosures),
with the opinion of Coopers & Lybrand, L.L.P., the unaudited consolidated
quarterly financial statements of the Company dated March 31, 1998 (subject to
year end adjustments and supporting footnote disclosures), and the related
consolidated statements of income (including supporting footnote disclosures),
all heretofore furnished to the Lender, are all true and correct in all material
respects and present fairly the consolidated financial condition at the date of
said financial statements and the results of operations for the fiscal period
then ending of the Company. The Company as of such date did not have any
significant liabilities, contingent or otherwise, including liabilities for
Taxes or any unusual forward or long-term commitments which were not disclosed
by or reserved against in the financial statements referred to above or in the
notes thereto, and at the present time there are no material unrealized or
anticipated losses from any unfavorable commitments of the Company or any of its
Subsidiaries. All such financial statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods involved. Since
March 31, 1998, there has been no material adverse change in the operations,
business, property or assets of, or in the condition (financial or otherwise)
of, the Company.
SECTION 4.15. Litigation. Except as disclosed on Schedule 4.15
attached hereto, there are no actions, suits, investigations or proceedings
pending or threatened against or affecting the Company or any of its
Subsidiaries or any of their properties or rights by or before any court,
arbitrator or administrative or governmental body that would have a Materially
Adverse Effect on the Company or any of its Subsidiaries.
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SECTION 4.16. Taxes. Each of the Company and its Subsidiaries has
filed or caused to be filed all declarations, reports and tax returns including,
in the case of the Company and each Subsidiary located in the United States, all
federal and state income tax returns which it is required by law to file, and
has paid all Taxes which are shown as being due and payable on such returns or
on any assessments made against it or any of its properties. The accruals and
reserves on the books of the Company and its Subsidiaries in respect of Taxes
are adequate in all material respects for all periods. Neither the Company nor
any of its Subsidiaries has any knowledge of any unpaid adjustment, assessment
or any penalties or interest of significance, or any basis therefor, by any
taxing authority for any period, except those being contested in good faith and
by appropriate proceedings which effectively stay the enforcement of any Lien
and the attachment of a penalty.
SECTION 4.17. Margin Regulations. No part of the proceeds of any of
the Advances will be used for any purpose which violates, or which would be
inconsistent or not in compliance with, the provisions of the applicable Margin
Regulations.
SECTION 4.18. ERISA. Except as disclosed on Schedule 4.18 attached
hereto:
(a) Identification of Plans. (i) Neither the Company nor any ERISA
Affiliate maintains or contributes to, or has maintained or contributed to,
any Plan that is an ERISA Plan, and (ii) neither the Company nor any of its
Subsidiaries maintains or contributes to, or has maintained or contributed
to, any Plan that is an Executive Arrangement;
(b) Compliance. Each Plan has at all times been maintained, by its
terms and in operation, in accordance with all Applicable Laws, except such
noncompliance (when taken as a whole) that will not have a Materially
Adverse Effect;
(c) Liabilities. Neither the Company nor any of its Subsidiaries is
currently nor has in the last 6 years been obligated to make contributions
(directly or indirectly) to a Multiemployer Plan, nor is it currently nor
will it become subject to any liability (including withdrawal liability),
tax or penalty whatsoever to any Person whomsoever with respect to any Plan
including, but not limited to, any tax, penalty or liability arising under
Title I or Title IV or ERISA or Chapter 43 of the Code, except such
liabilities (when taken as a whole) as will not have a Materially Adverse
Effect; and
(d) Funding. The Company and each ERISA Affiliate has made full and
timely payment of all amounts (i) required to be contributed under the
terms of each Plan and Applicable Law and (ii) required to be paid as
expenses of each Plan. No Plan has an "amount of unfunded benefit
liabilities" (as defined in Section 4001(a)(18) of ERISA).
SECTION 4.19. Compliance With Environmental Laws.
(a) The Company and its Subsidiaries are not in violation of, and do
not presently have outstanding any liability under, have not been notified that
they are or may be liable under and
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do not have knowledge of any liability or potential liability (including any
liability relating to matters set forth in Part A. of Schedule 4.19) except as
set forth in Part A. of Schedule 4.19, under any applicable Environmental Laws
which violation, liability or potential liability could reasonably be expected
to have a Materially Adverse Effect.
(b) Except as set forth in Part B. of Schedule 4.19, neither the
Company nor any of its Subsidiaries has received a written request for
information under any Environmental Laws stating or suggesting that the Company
or any of its Subsidiaries has or may have liability thereunder or written
notice that any such Person has been identified as a potentially responsible
party under any Environmental Laws, or any comparable state law, or any public
health or safety or welfare law, nor has any such Person received any written
notification that any Hazardous Substance that it or any of its respective
predecessors in interest has generated, stored, treated, handled, transported,
or disposed of, has been released or is threatened to be released at any site at
which any Person intends to conduct or is conducting a remedial investigation or
other action pursuant to any Environmental Laws.
(c) Except as set forth in Part C. of Schedule 4.19, each of the
Company and its Subsidiaries has obtained all permits, licenses or other
authorizations required for the conduct of their respective operations under all
applicable Environmental and Asbestos Laws and each such authorization is in
full force and effect.
(d) Except as set forth in Part D. of Schedule 4.19, each of Company
and its Subsidiaries complies in all material respects with all laws and
regulations relating to equal employment opportunity and employee safety in all
jurisdictions in which it is presently doing business, and the Company will use
its reasonable best efforts to comply, and to cause each of its Subsidiaries to
comply, with all such laws and regulations which may be legally imposed in the
future in jurisdictions in which the Company or any of its Subsidiaries may then
be doing business.
SECTION 4.20. Possession of Material Patents, Trademarks, Etc. Each
of the Company and its Subsidiaries possesses all patents, trademarks, licenses,
and other intellectual property rights that are necessary in any material
respect for the ownership, maintenance and operation of its properties and
assets and they are possessed free from any burdensome restrictions. To the
Company's knowledge, there are no infringements of such patents, trademarks,
licenses, and other intellectual property rights that could have a Materially
Adverse Effect on the Company or any of its Subsidiaries.
SECTION 4.21. Subsidiaries. Schedule 4.21 attached hereto correctly
sets forth the name of each Subsidiary of the Company, the jurisdiction of such
Subsidiary's incorporation or organization and the ownership of all issued and
outstanding Capital Stock of such Subsidiary. All the outstanding shares of the
Capital Stock of each such Subsidiary have been validly issued and are fully
paid and nonassessable and all such outstanding shares, except as noted on such
Schedule 4.21, are owned of record and beneficially by the Company or a wholly-
owned Subsidiary of the Company free of any Lien or claim.
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SECTION 4.22. Disclosure. Neither this Agreement, any Loan Document
nor any other document, certificate or statement furnished to the Lender by or
on behalf of the Company or any Guarantor in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein not misleading, if,
in either case, such fact is material to an understanding of the financial
condition, business, prospects or property of the Company, or the ability of the
Company to fulfill its obligations under any Loan Documents to which it is a
party.
SECTION 4.23. Year 2000 Compliant. The operating systems for the
Company's and its Subsidiaries' computers and all software applications that run
on such computers are Year 2000 Compliant or will be Year 2000 Compliant no
later than December 31, 1998, except where a failure to be Year 2000 Compliant
will not have a Materially Adverse Effect. "Year 2000 Compliant" means that
neither the performance nor functionality of the operating systems for the
Company's and its Subsidiaries' computers and all software applications that run
on such computers is affected by dates prior to, during, spanning or after
January 1, 2000, and shall include, but not be limited to (a) accurately
processing (including, but not limited to calculating, comparing and sequencing)
date and time data from, into, and between the years 1999 and 2000 and leap year
calculations, (b) functioning without error, interruption or decreased
performance relating to such date and time data, (c) accurately processing such
date and time data when used in combination with other technology, if the other
technology properly exchanges date and time data, (d) accurate date and time
data century recognition, (e) calculations that accurately use same century and
multi-century formulas and date and time values, (f) date and time data
interface values which reflect the correct century, and (g) processing, storing,
receiving and outputting all date and time data in a format that accurately
indicates the century of the date and time data.
SECTION 4.24. Bank Accounts. All primary operating accounts related
to the operation and management of the Company and its Subsidiaries have been
transferred or otherwise established with the Lender.
SECTION 4.25. Solvency. The Company and Guarantors hereby
acknowledge receipt of fair consideration and reasonably equivalent value for
the incurrence of the obligations hereunder. Each of the Company and the
Guarantors (i) represents and warrants that, (A) after giving effect to the
incurrence of such obligations and its obligations under any Letter of Credit
applications, and (B) taking into account its rights as Contributing Guarantors,
the present fair salable value of its assets exceeds its liabilities in that it
retains sufficient capital to reasonably anticipate needs and risks of its
ongoing business, and (iii) represents and warrants that, (A) after giving
effect to the incurrence of such obligations and its obligations under any
Letter of Credit applications, and (B) and taking into account its rights as
Contributing Guarantors, it has not incurred, nor is it obligated for, debts
beyond its ability to pay such debts as they mature, and that the present fair
salable value of its assets is greater than that needed to pay its probable
existing debts as they become due.
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Each Guarantor further represents and warrants that because of the
provision of loans, advances and other corporate services by the Company to the
Guarantors, the Guarantors are materially interested in the financial success of
the Company and will materially benefit from the Company's entering into this
Agreement, for which its guaranty is a condition precedent.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
So long as the Note shall remain unpaid or the Lender shall have a
Commitment hereunder, unless the Lender shall otherwise consent in writing:
SECTION 5.01. Use of Proceeds. The proceeds of all Borrowings will
be used by the Company as provided in Section 2.09. None of the proceeds of any
Borrowing shall be used, directly or indirectly, to purchase or carry, or to
reduce or retire or refinance any credit incurred to purchase or carry, any
"margin security" or "margin stock" (within the meaning of the regulations of
the Board of Governors of the Federal Reserve System) or to extend credit to
others for the purpose of purchasing or carrying any such "margin security" or
"margin stock" or for any other purpose that might deem this transaction as a
"purpose credit" (within the meaning of the regulations of the Board of
Governors of the Federal Reserve System). If requested by the Lender, the
Company will furnish to the Lender statements in conformity with the
requirements of Federal Reserve Form U-1 referred to in Regulation U.
SECTION 5.02. Reporting Covenants.
(a) The Company will furnish to the Lender:
(i) as soon as available and in any event no later than one hundred
twenty (120) days after the end of each fiscal year of the Consolidated
Companies, an audited consolidated balance sheet of the Consolidated
Companies as of the close of such fiscal year, and the related audited
consolidated statements of income and cash flow of the Consolidated
Companies for such fiscal year, all in reasonable detail and with (1) an
unqualified opinion of Coopers & Lybrand, L.L.P. or such other independent
certified public accountant of recognized standing selected by Omega
Protein Corporation and satisfactory to the Lender representing that, in
addition to other facts, the financial statements are unqualified and were
prepared in accordance with GAAP, and (2) a compliance certificate from the
Chief Financial Officer of Omega Protein Corporation stating whether a
Default or Event of Default exists;
(ii) as soon as available and in any event within 60 days after the
end of each fiscal quarter of Omega Protein Corporation, quarterly
unaudited financial statements of the Consolidated Companies, together with
a certificate in the form of Exhibit L hereto (the "Compliance
Certificate") by the Chief Financial Officer of Omega Protein Corporation
(with supporting details) stating that (1) the financials were prepared in
accordance with GAAP
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(subject to customary year-end audit adjustments), (2) that the covenants
described in Article VII have been met, and (3) whether a Default or Event
of Default exists;
(iii) on a quarterly basis, concurrent with the delivery of the
Compliance Certificate, a report which shall set forth each action,
proceeding or claim, of which the Company or any of its Subsidiaries has
notice, which is commenced or asserted against the Company, and in which
the amount claimed or the potential liability is $250,000 or more.
In each case, such financial statements shall include balance sheets,
income statements, statements of cash flows for the Company, and any other
information deemed necessary by the Lender in its discretion.
(b) The Company will furnish to the Lender, with reasonable promptness,
notice of certain other events, including the occurrence or existence of any
Default or Event of Default, any citation for a material violation of
environmental laws or regulations, important matters relating to funding of
employee benefit plans, or such other information as the Lender may reasonably
request.
SECTION 5.03. Maintenance of Properties. The Company shall, and
shall cause each of its Subsidiaries to, maintain, preserve, protect and keep,
or cause to be maintained, preserved, protected and kept, its properties and
every part thereof in good repair, working order and condition, and from time to
time will make or cause to be made all needful and proper repairs, renewals,
replacements, extensions, additions, betterments, and improvements thereto, so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times other than those which the failure to
maintain would in the aggregate, have no Materially Adverse Effect; provided,
however, that the Company and each Subsidiary shall not be under any obligation
to repair or replace any such properties which have become obsolete or have
become unsuitable or inadequate for the purpose for which they are used.
SECTION 5.04. Maintenance of Insurance. The Company shall, and shall
cause each of its Subsidiaries to, (i) maintain liability and worker's
compensation insurance with financially sound and reputable insurers, and also
maintain adequate insurance on its properties against such hazards and in at
least such amounts as is customary in the business, and (ii) name the Lender as
loss payee or additional insured, as its interest may appear, on each of such
insurance policies. At the request of the Lender, the Company will forthwith
deliver an officer's certificate specifying the details of such insurance in
effect.
SECTION 5.05. Maintenance of Books; Inspection of Property and
Records.
(a) The Company shall, and shall cause each of its Subsidiaries to, keep
proper books of record and account containing complete and accurate entries in
all material respects of all of their respective financial and business
transactions and prepare or cause to be prepared its annual statements and
reports in accordance with GAAP. The Company shall, and shall cause each of its
Subsidiaries to, permit any Person designated by the Lender to visit and inspect
any of its properties, corporate books and financial records, to make copies and
take extracts therefrom, and to discuss its
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accounts, affairs, and finances with the principal officers of the Company and
such Subsidiary during reasonable business hours, all at such times as the
Lender may reasonably request; provided, however, that any time following the
occurrence and continuance of a Default or an Event of Default, no prior notice
to the Company and such Subsidiary shall be required. The Company shall, and
shall cause each of its Subsidiaries to, prepare or cause to be prepared its
interim statements and reports in accordance with GAAP, subject to usual and
customary year end audit adjustments and footnote disclosures.
(b) So long as the chief executive office of the Company and its
Subsidiaries remains at 1514 Martens Drive, Hammond, Louisiana, 70401, the
Company shall maintain, at 1717 St. James Place, Suite 550, Houston, Texas,
77056, a complete and accurate duplicate copy of all books and records which in
any material respect concern the Collateral and which shall be subject to review
by the Lender, at any time, with five (5) days prior notice.
SECTION 5.06. Existence and Status. The Company shall, and shall
cause each of its Subsidiaries to, maintain its corporate existence, its
rights, franchises and licenses (for the scheduled duration thereof), its
patents, trademarks, trade names, service marks and other intellectual property
rights necessary or desirable in the normal conduct of its business, its good
standing in its state of incorporation and its qualification and good standing
as a foreign corporation in all jurisdictions where its ownership of property or
its business activities cause such qualification to be required and the failure
to do so could have a Materially Adverse Effect.
SECTION 5.07. Taxes and Claims.
(a) The Company shall, and shall cause each of its Subsidiaries to, pay
and discharge (i) all Taxes prior to the date on which penalties attach thereto,
and (ii) all claims (including, without limitation, claims for labor, materials,
supplies or services) (collectively "Other Claims") which, if unpaid, might
become a Lien having a Materially Adverse Effect upon any of its property;
provided, however, that the Company and its Subsidiaries shall not be required
to pay and discharge any such Tax or Other Claim so long as the legality or
amount thereof shall be promptly contested in good faith and by appropriate
proceedings which effectively stay the enforcement of any Lien and the
attachment of a penalty and the Company or such Subsidiary, as the case may be,
shall have set aside appropriate reserves therefor in accordance with GAAP.
(b) Anything contained in this Agreement and or in the Note and/or in any
other agreement executed in connection with this Agreement to the contrary
notwithstanding, Lender agrees that Company will not be liable to reimburse
Lender for the annual Intangible Personal Property Tax imposed upon the Lender
under Florida Law as a result of Lender's ownership of the Note, the Agreement
and the other agreements executed in connection with the Note.
SECTION 5.08. Compliance with Laws, Etc. The Company shall, and shall
cause each of its Subsidiaries to, comply with all Applicable Law (including,
without limitation, the Environmental Laws and Employee Benefit Laws) and
Contractual Obligations applicable to or
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binding on any of them where the failure to comply with such Applicable Law and
Contractual Obligations would reasonably be expected to have a Materially
Adverse Effect.
SECTION 5.09. ERISA. The Company shall, and shall cause each of its
Subsidiaries to, deliver to the Lender:
(i) Promptly after the discovery of the occurrence thereof with
respect to any Plan, or any trust established thereunder, notice of (A) a
"reportable event" described in Section 4043 of ERISA and the regulations
issued from time to time thereunder (other than a "reportable event" not
subject to the provisions for 30-day notice to the PBGC under such
regulations), or (B) any other event which could subject the Company or any
ERISA Affiliate to any material tax, penalty or liability under Title I or
Title IV of ERISA or Chapter 43 of the Code;
(ii) At the same time and in the same manner as such notice must be
provided to the PBGC, or to a Plan participant, beneficiary or alternative
payee, any notice required under Section 101(d), 302(f)(4), 303(e), 307(e),
4041(b)(1)(A) or 4041(c)(1)(A) of ERISA or Section 412(f) of the Code with
respect to any Plan; and
(iii) Upon the request of the Lender, (A) true and complete copies
of any and all documents, government reports and determination or opinion
letters (if any) for any Plan, or (B) a current statement of withdrawal
liability for each Multiemployer Plan.
SECTION 5.10. Litigation. The Company shall give prompt written
notice to the Lender of (a) any judgment entered by a court, tribunal,
administrative agency or arbitration panel in which the amount of liability is
$250,000 or more in excess of insurance coverage, or in which the aggregate
amount of liability is $500,000 or more in excess of insurance coverage, and (b)
any disputes which may exist between the Company or any of its Subsidiaries and
any governmental or regulatory body, in which the amount in controversy is
$250,000 or more and which may materially and adversely affect the normal
business operations of the Company or any of its Subsidiaries or any of their
respective properties and assets.
SECTION 5.11. Notice of Events of Default. The Company shall deliver
to the Lender within five (5) days after any Executive Officer obtains any
knowledge of any condition, event or act which creates or causes a Default or an
Event of Default, a certificate signed by an officer of the Company specifying
the nature thereof, the period of existence thereof and what action the Company
or such Subsidiary proposes to take with respect thereto.
SECTION 5.12. Stockholder Reports, etc. Contemporaneously with the
sending or filing thereof, the Company will provide to the Lender copies of all
proxy statements, financial statements, and reports which the Company sends to
its stockholders, and copies of all regular, periodic, and special reports, and
all statements which the Company files with the Securities and
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Exchange Commission or any governmental authority which may be substituted
therefor, or with any national securities exchange.
SECTION 5.13. Future Guarantors.
(a) Subject to any prohibitions or limitations as to power or
authority imposed by law applicable to any such Subsidiary, the Company and the
Guarantors shall (1) cause each Person incorporated or otherwise organized in
the United States that hereafter becomes a Material Subsidiary (an "Additional
Guarantor") to become a Guarantor under the Guaranty Agreement and to create a
security interest in favor of the Lender in all of its assets (to the extent
required by the Guarantor Security Agreement), to the Lender upon the creation
of such Additional Guarantor by executing and delivering to the Lender the
Supplemental Documents, and (2) cause each Person incorporated or otherwise
organized in the United States that hereafter becomes a Material Subsidiary to
become a party to the Contribution Agreement by executing a supplement to
Contribution Agreement, provided however, that the Company and the Guarantors
may exempt such Person from complying with the requirements of this subsection
to the extent that no more than $10,000,000 is invested in such Person and no
more than $15,000,000 is invested in all such Persons.
(b) The Additional Guarantor shall also deliver to the Lender,
simultaneously with the Supplemental Documents, (1) Certified Requests for
Information or Copies (Form UCC-11) or equivalent reports, showing that there
are no effective financing statements which name the Additional Guarantor as
debtor and (2) an opinion rendered by legal counsel to such Additional Guarantor
and the Person required to pledge the shares of stock of the Additional
Guarantor under the Security Documents to the Lender, addressing the types of
matters set forth in Exhibit C and Exhibit D hereof and such other matters as
the Lender may reasonably request, addressed to the Lender.
SECTION 5.14. Ownership of Guarantors. The Company and its
Subsidiaries that own Guarantors shall maintain their percentage ownership of
such Guarantors existing as of the date hereof and shall not decrease its
ownership percentage in each Additional Guarantor pursuant to Section 5.13 after
the date hereof, as such ownership exists at the time such Additional Guarantor
becomes a Guarantor hereunder.
SECTION 5.15. Bank Accounts. All primary operating accounts related
to the operation and management of the Company and its Subsidiaries which have
been transferred to or established with the Lender as of the Closing Date, shall
remain with the Lender. Any primary operating accounts related to the operation
and management of the Company and its Subsidiaries, established after the
Closing Date, shall be established with the Lender.
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ARTICLE VI
NEGATIVE COVENANTS
------------------
So long as the Note shall remain unpaid or the Lender shall have a
Commitment hereunder, without the written consent of the Lender (unless
otherwise provided herein):
SECTION 6.01. Limitation on Liens and Security Interests. The
Company shall not, and shall not permit any of its Subsidiaries to, create,
incur, assume or suffer to exist, any Lien or other encumbrance of any kind on
any of its properties or assets wherever located, including assets hereafter
acquired, except
(a) Liens existing on the date hereof and described on Schedule 6.01;
(b) Liens in favor of the Lender;
(c) Liens for Taxes not yet payable or being contested in good faith
and by appropriate proceedings;
(d) deposits or pledges to secure payments of workmen's compensation,
unemployment insurance, old age pension and other social security
obligations;
(e) mechanics', carriers', workmen's, repairmen's, landlord's, or
other Liens arising in the ordinary course of business securing obligations
which are not overdue for a period longer than 60 days, or which are being
contested in good faith by appropriate proceedings;
(f) pledges or deposits to secure performance in connection with
bids, tenders, contracts (other than contracts for the payment of money) or
leases made in the ordinary course of the business of the Company or any of
its Subsidiaries;
(g) deposits to secure, or in lieu of, surety and appeal bonds to
which the Company or a Subsidiary of the Company is a party;
(h) deposits in connection with the prosecution or defense of any
claim in any court or before any administrative commission or agency;
(i) Liens arising out of judgments or awards with respect to which
the Company or a Subsidiary of the Company at the time shall in good faith
be diligently prosecuting an appeal or proceedings for review and with
respect to which it shall have secured a stay of execution pending such
appeal or proceedings for review;
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(j) zoning restrictions, easements, licenses, reservations and
restrictions on the use of real property or minor irregularities thereto
that do not materially detract from the use thereof or the assets of the
Company;
(k) Liens incurred on pledges or deposits in the ordinary course of
business in connection with workers' compensation, unemployment insurance,
old age or Social Security benefits; and
(l) Liens incurred on (i) any real estate now owned or hereafter
acquired by the Consolidated Companies or by any of them, (ii) Vessels, (iii)
Rolling Stock and (iv) Equipment.
SECTION 6.02. Compliance with ERISA. The Company shall not take or
fail to take, or permit any of its Subsidiaries or ERISA Affiliates to take or
fail to take, any action with respect to a Plan including, but not limited to,
(i) establishing any Plan, (ii) amending any Plan, (iii) terminating or
withdrawing from any Plan, or (iv) incurring an "amount of unfunded benefit
liabilities", as defined in Section 4001(a)(18) of ERISA, or any withdrawal
liability under Title IV of ERISA, where such action or failure could have a
Materially Adverse Effect, result in a Lien on the property of the Company or
any of its Subsidiaries or require the Company or any of its Subsidiaries to
provide any security, except Permitted Liens.
SECTION 6.03. Sale and Leaseback. The Company shall not, and shall
not permit any of its Subsidiaries to, enter into any transaction with any other
Person whereby such other Person leases assets sold or otherwise transferred to
it by the Company or such Subsidiary, provided however, that the Company or any
of its Subsidiaries may enter into such a sale and leaseback transaction
involving (i) any real estate now owned or hereafter acquired by the
Consolidated Companies or by any of them, (ii) Vessels, (iii) Rolling Stock or
(iv) Equipment (collectively, the "Excluded Assets"), so long as the book value
of such Excluded Assets sold and leased back in any calendar year does not
exceed twenty percent (20%) of the book value of all Excluded Assets as of the
first day of such calendar year.
SECTION 6.04. Transactions with Affiliates. The Company shall not,
and shall not permit any of its Subsidiaries to:
(a) Enter into any transaction or series of related transactions
which in the aggregate would be material, whether or not in the ordinary
course of business, with any Affiliate of the Company or any of its
Subsidiaries (but excluding any affiliate which is the Company or a
Guarantor), other than on terms and conditions substantially as favorable
to the Company or such Subsidiary as would be obtained by the Company or
such Subsidiary at the time in a comparable arm's-length transaction with a
Person other than an affiliate (an "Affiliate Transaction"), provided that
in order to consummate any Affiliate Transaction, the Company or any of its
Subsidiaries must provide fifteen (15) days notice to Lender and obtain
Lender's consent, which consent shall not be unreasonably withheld.
Affiliate Transactions shall expressly exclude (i) transactions with
Affiliates for the specific purposes of research and
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development and product development, and (ii) transactions between Protein
Finance Company and any of the Company or its Subsidiaries pursuant to the
Tax Sharing Agreement.
(b) Convey or transfer to any other Person (including the Company or
any of its Subsidiaries) any real property, buildings, or fixtures used in
the manufacturing or production operations of the Company or any of its
Subsidiaries, or convey or transfer to the Company or any of its
Subsidiaries any other assets (excluding conveyances or transfers in the
ordinary course of business) if at the time of such conveyance or transfer
any Default or Event of Default exists or would exist as a result of such
conveyance or transfer.
SECTION 6.05. Guaranties. The Company shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume, guarantee, suffer to
exist or otherwise become liable on or with respect to, directly or indirectly,
any guaranties other than:
(i) endorsements of instruments for deposit or collection in
the ordinary course of business;
(ii) guarantees of Indebtedness owed by the Company or any
Subsidiary to the Company or any other Subsidiary;
(iii) guarantees of obligations of the Company or any
Subsidiary to a third party incurred in the ordinary course of
business;
provided however, that the Company or any of its Subsidiaries may incur
obligations relating to a guaranty of Title XI Financing for any other of the
Company or its Subsidiaries.
SECTION 6.06. Limitations on Payment Restrictions. The Company shall
not, and shall not permit any of its Subsidiaries to, create or otherwise cause
or suffer to exist or become effective, any consensual encumbrance or
restriction on the ability of the Company or any of its Subsidiaries (i) to pay
dividends or make any other distributions on stock of any Subsidiaries, (ii) pay
any indebtedness owed to the Company or any of its Subsidiaries, or (iii)
transfer any of its property or assets to the Company or any of its Subsidiaries
except any consensual encumbrance or restriction existing under the Loan
Documents.
SECTION 6.07. Merger; Joint Ventures; Sale of Assets; Acquisitions. The
Company shall not, and shall not permit any of its Subsidiaries to:
(a) merge or consolidate with any other Person, except the foregoing
restrictions shall not be applicable to:
(i) mergers or consolidations of (x) any Subsidiary with any
other Subsidiary which is a Guarantor or (y) any Subsidiary with the
Company; or
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(ii) mergers or consolidations with any other Person so long as
the surviving corporation is the Company or such Guarantor, and such
merger or consolidation does not result in a Default or Event of
Default under this Agreement; provided however that so long as no
Default or Event of Default has occurred or will be caused by such
merger the Company or any Guarantor may merge or consolidate with
another Person such that the Company or such Guarantor is not the
surviving corporation if it first obtains consent in writing from the
Lender. Consistent with such request for consent, the Company shall
provide Lender with an information package with such information as
Lender shall request and shall complete such other Supplemental
Documents as Lender shall request.
(b) purchase, lease or otherwise acquire for cash, stock or other
consideration, the stock of any Person or all or any substantial portion of
the assets of any Person unless no Default or Event of Default shall occur
or be continuing as a result of such transaction, provided however that if
such stock, assets or other consideration have an aggregate fair market
value in excess of $35,000,000 in any one instance, the Company shall
provide the Lender written notice within thirty (30) days after the
consummation of such transaction, of the terms and provisions relating to
such transaction, including, without limitation, in an information package
providing the following:
(i) a detailed listing of the assets purchased in the
transaction;
(ii) a Compliance Certificate, substantially in the form of
Exhibit L attached hereto, by the Chief Financial Officer of Omega
Protein Corporation (with supporting details) stating that (1) the
covenants described in Article VII have been met (with supporting
calculations), and (2) that no Default or Event of Default exists;
(iii) a copy of the Form 8K report required by the Securities
Act of 1934;
(iv) any other information reasonably requested by the Lender,
including, without limitation, any historical financial statements and
a pro forma financial statement showing the impact of the acquisition
on the Company's income statement and balance sheet.
(c) enter into a partnership or joint venture with any other Person
unless no Default or Event of Default shall occur or be continuing as a
result of such transaction, provided however, that if such transaction has
an aggregate fair market value in excess of $35,000,000 in any one
instance, the Company shall provide the Lender written notice within thirty
(30) days after the consummation of such transaction, including without
limitation, in an information package providing the following:
(i) a detailed listing of any assets transferred in the
transaction;
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(ii) a Compliance Certificate, substantially in the form of
Exhibit L attached hereto, by the Chief Financial Officer of Omega
Protein Corporation (with supporting details) stating that (1) the
covenants described in Article VII have been met (with supporting
calculations), and (2) that no Default or Event of Default exists.
(iii) any other information reasonably requested by the Lender,
including, without limitation, a pro forma financial statement showing
the impact of entering into the joint venture or partnership on the
Company's income statement and balance sheet.
(d) sell, lease, transfer or otherwise dispose of any assets, except
that this Section 6.07 shall not prohibit any disposition of (i) inventory
sold in the ordinary course of business, (ii) any sales of real estate or
Equipment for not less than fair consideration, and (iii) certain other
sales to be agreed upon in writing by the Company and the Lender.
SECTION 6.08. Dividends; Loans, Advances; Investments.
(a) In any fiscal year of the Company, the Company shall not pay or
declare dividends in excess of fifty percent (50%) of its Consolidated Net
Income.
(b) The Company shall not, and shall not permit any of the Guarantors
to, make, permit or hold any Investments, loans or advances (not including
accounts receivable) to any Person, other than the following (which shall
collectively be "Permitted Investments"):
(i) Investments in Subsidiaries existing on the Closing Date or
approved by the Lender;
(ii) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency
thereof, in each case supported by the full faith and credit of the
United States and maturing within one year from the date of creation
thereof;
(iii) commercial paper maturing within one year from the date of
creation thereof rated investment grade (Triple B+ or higher) by a
nationally recognized credit rating agency;
(iv) time deposits maturing within one year from the date of
creation thereof with, including certificates of deposit issued by the
Lender, not to exceed $1,000,000 in any one instance or $5,000,000 in
the aggregate, and any office located in the United States of any bank
or trust company which is organized under the laws of the United
States or any state thereof and has total assets aggregating at least
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$500,000,000, including without limitation, any such deposits in
Eurodollars issued by a foreign branch of any such bank or trust
company;
(iv) Investments made by Plans;
(v) advances made by the Company or any of its Subsidiaries to
its employees during the ordinary course of business, and loans made
by the Company to its employees to allow such employees to purchase
stock of the Company (such loans to be evidenced by a promissory note
and pledged to the Lender pursuant to the terms of the Security
Documents); provided that the aggregate total of such advances made by
the Company to its employees under this Subsection shall not exceed
$1,000,000 at any time;
(vi) deposits made by the Company in connection with
acquisitions of other business entities;
(vii) advances made by the Company or any of its Subsidiaries to
the Protein Finance Company pursuant to the Tax Sharing Agreement;
(viii) notes purchased by the Company in an amount not to exceed
$500,000 in any one instance, or $1,000,000 in the aggregate; and
(ix) Investments in the stock or assets of other Persons
permitted under Section 6.07(b) or (c).
SECTION 6.09. Nature of Business. The Company shall not and shall
not permit any Material Subsidiary (including Persons becoming Material
Subsidiaries after the Closing Date) to, engage in any business or businesses
other than the harvesting, processing and distribution of animal protein and
byproducts thereof and other lines of business substantially related thereto;
provided, however, that nothing herein contained shall prevent the Company or
any of its Subsidiaries (i) from expanding the location of its business or
businesses in or outside the United States, (ii) from ceasing or omitting to
exercise any rights, licenses, permits, or franchises which in good faith in the
judgment of the Company or such Subsidiary can no longer be profitably
exercised, or (iii) from engaging in a business or businesses that are ancillary
to those engaged in by the Company or such Subsidiary on the date hereof.
SECTION 6.10. Sale of Subsidiaries. The Company shall not, and shall
not permit any of its Subsidiaries to, sell or otherwise dispose of any shares
of Capital Stock of or other ownership interest in any Subsidiary of the Company
except in connection with any acquisition, merger or consolidation permitted by
Section 6.07, or permit any Subsidiary of the Company to issue any additional
shares of its Capital Stock or other incidents of ownership, except on a pro
rata basis to all its stockholders, partners or owners, as the case may be and
provided that any such additional shares of Capital Stock or other incidents of
ownership issued to the Company, any Guarantor or Additional Guarantor are
pledged to the Lender.
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SECTION 6.11. Negative Pledges. The Company shall not, and shall not
permit any of its Subsidiaries to, agree or covenant with any Person to restrict
in any way its ability to grant any Lien on its assets in favor of the Lender,
except that this Section 6.11 shall not apply to (i) any covenants contained in
this Agreement or the Security Documents, and (ii) covenants and agreements made
in connection with Liens described in Section 6.01(l), but only if such covenant
or agreement applies solely to the specific machinery, Equipment or real estate
to which such Lien relates.
SECTION 6.12. Modification of Corporate Name, etc. Neither the
Company nor any Subsidiary shall modify its corporate name or fiscal year unless
the Company or such Subsidiaries provides fifteen (15) days advance written
notice to the Lender.
ARTICLE VII
FINANCIAL COVENANTS
-------------------
So long as the Note shall remain unpaid or the Lender shall have any
Commitment hereunder, without the consent of the Lender:
SECTION 7.01. Minimum Consolidated Tangible Net Worth. The Company
shall at all times maintain a Consolidated Tangible Net Worth of not less than
the sum of (i) its Consolidated Tangible Net Worth as of September 30, 1997 plus
(ii) 50% of the cumulative Consolidated Net Income earned after September 30,
1997, plus (iii) the aggregate net proceeds received by the Company and its
Subsidiaries from the sale or issuance of any shares, interests, warrants,
participations, or other equity instruments occurring after September 30, 1997,
minus (iv) the aggregate amount of all cash and non-cash consideration paid by
the Company and its Subsidiaries in connection with any redemption or retirement
of any shares, interests, warrants, participations or other equity instruments
of the Company and its Subsidiaries occurring after September 30, 1997.
SECTION 7.02. Total Liabilities to Consolidated Tangible Net Worth.
The Company shall not permit the ratio of Total Liabilities to Consolidated
Tangible Net Worth to exceed 1.50 to 1.00.
SECTION 7.03. Leverage Ratio. The Company shall not permit its
Leverage Ratio to exceed 2.75 to 1.00.
SECTION 7.04. Fixed Charge Coverage Ratio. The Company shall not
permit the Fixed Charge Coverage Ratio to be less than 1.50 to 1.0.
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ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
------------------------------
SECTION 8.01. Events of Default. Any one or more of the following
shall constitute an Event of Default hereunder:
(a) The Company shall fail to pay any principal amount owing when due
pursuant to this Agreement or the Note; or
(b) The Company shall fail to pay any interest, fees, or any other
amounts owing pursuant to this Agreement or the Note within ten (10)
Business Days of the due date thereof; or
(c) The Company shall fail to perform or observe any covenant or
agreement contained in this Agreement, other than any such term referred to
in any other subsection of this Article VIII, and such Default shall not
have been remedied or waived within thirty days (30) after the earlier of
(x) an Executive Officer becomes aware of such failure or (y) the Lender
gives notice to the Company as provided under Section 9.03; or
(d) The Company shall fail to perform or observe any covenant or
agreement contained in Section 5.02, Article IV or Article VII; or
(e) There shall occur any default in the performance or observance of
any agreement or covenant or breach of any representation or warranty
contained in any of the other Loan Documents (other than this Agreement)
which shall not be cured to the Lender's satisfaction within the applicable
cure period set forth in such Loan Document, or, if there is no applicable
cure period set forth in such Loan Document, within the earlier of (i) a
period of thirty (30) days from the date that the Company knew of the
occurrence of such default, or (ii) a period of thirty (30) days after
written notice of such default is given to the Company; or
(f) Any representation, warranty or statement made by or on behalf of
the Company or any Guarantor to the Lender in this Agreement, the Company
Security Agreement, the Company Trademark Security Agreement, the
Guarantor Security Agreement or any other Loan Document shall be in any
respect incorrect, false or misleading as of the time at which such
representation or warranty was given, or any representation, warranty or
statement made by or on behalf of the Company or any Guarantor to the
Lender in any other Loan Document or in any financial statement, report or
certificate furnished pursuant to this Agreement shall be in any material
respect incorrect, false or misleading as of the time at which such
representation, warranty or statement was made; or
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(g) Any Guarantor terminates or repudiates its Guaranty or the
Guaranty shall be declared unenforceable or no longer in full force and
effect; or
(h) The Company or any of its Subsidiaries fails to make any payment
as and when such payment is due upon any Indebtedness having an aggregate
unpaid principal balance in excess of $1,000,000, other than Indebtedness
owing or arising pursuant to this Agreement and the Note, or any other
default, event or condition shall have occurred or exist with respect to
any such other Indebtedness, or under any agreement or instrument
evidencing, securing or related to such other Indebtedness, the effect of
which is to cause, or to permit the holder or owner of such Indebtedness to
cause, such Indebtedness or any portion thereof, to become due prior to its
stated maturity date or prior to its regularly scheduled dates of payment;
or
(i) The Company or any Guarantor makes an assignment for the benefit
of its creditors or files a voluntary petition seeking relief under any
provision of any bankruptcy, reorganization, arrangement, insolvency or
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect; or
(j) Any involuntary petition is filed against the Company or any
Guarantor under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and such petition shall remain
undismissed for a period of sixty (60) days or the Company approves,
consents or acquiesces thereto; or
(k) The Company incurs any liability or is exposed to any potential
liability under any employee benefit plan that has or would have a
Materially Adverse Effect; or
(l) Final judgment for the payment of money in excess of $1,000,000
(not fully covered by insurance) or otherwise having a Materially Adverse
Effect shall have been rendered against the Company or any of its
Subsidiaries and the same shall have remained unpaid, unstayed on appeal,
undischarged, or undismissed for a period of sixty (60) days, or such
longer period as may be permitted by Applicable Law, during which execution
may not be made, provided no judgment Lien has attached or continues to
attach to the assets of the Company or such Subsidiary during such longer
period; or
(m) The Company shall not own the percentage of the outstanding
Capital Stock of each Subsidiary that it (i) currently owns or (ii) owns at
such date the Person becomes a Subsidiary hereunder; or
(n) The loss, termination, cancellation or other material impairment
of any governmental license, certificate, and/or permit by the Company or
any Subsidiary which is necessary for the Company or such Subsidiary to
continue to operate; or
(o) A Change of Control shall occur.
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SECTION 8.02. Remedies on Default.
(a) Upon the occurrence and during the continuation of an Event of
Default (other than an Event of Default described in Section 8.01(i) or (j)),
Lender may, in its sole discretion, (x) terminate all obligations of the Lender
to the Company, including, without limitation, the Commitment and all
obligations to make Advances under this Agreement, and (y) declare the Note,
including, without limitation, principal, accrued interest and costs of
collection (including, without limitation, reasonable attorneys' fees if
collected by or through an attorney at law or in bankruptcy, receivership or
other judicial proceedings) and all other Obligations immediately due and
payable, without presentment, demand, protest or any other notice of any kind,
all of which are expressly waived.
(b) Upon the occurrence of an Event of Default under Section 8.01(i)
or (j) all obligations of the Lender to the Company, including, without
limitation, the Commitment, shall terminate automatically and the Note,
including, without limitation, principal, accrued interest and costs of
collection (including, without limitation, reasonable attorneys' fees if
collected by or through an attorney at law or in bankruptcy, receivership or
other judicial proceedings) and all other Obligations shall be immediately due
and payable, without presentment, demand, protest, or any other notice of any
kind, all of which are expressly waived.
(c) Upon the occurrence of an Event of Default and acceleration of
the Note as provided in (a) or (b) above, the Lender may pursue any remedy
available under this Agreement, the Note, the Security Documents or any other
Loan Document, or available at law or in equity, all of which shall be
cumulative.
(d) Regardless of how the Lender may treat the payments for the
purpose of its own accounting, for the purpose of computing the Company's
obligations hereunder and under the Note, no application of the payments will
cure any Event of Default or prevent acceleration, or continued acceleration, of
amounts payable under the Loan Documents or prevent the exercise, or continued
exercise, of rights or remedies of the Lender hereunder or under applicable law.
ARTICLE IX
MISCELLANEOUS
-------------
SECTION 9.01. Survival. All covenants, agreements, warranties and
representations made herein, in the other Loan Documents, or in any certificates
or other documents delivered in connection with this Agreement by or on behalf
of the Company or any Guarantor shall survive the advances of money made by the
Lender to the Company hereunder and the delivery of this Agreement and the other
Loan Documents, and all such covenants, agreements, warranties and
representations shall be binding upon and inure to the benefit of the Company,
the Guarantors, the Lender, and their
53
<PAGE>
respective successors and assigns, whether or not so expressed, provided,
however, that the Company may not assign or transfer any of its rights under
this Agreement without the prior written consent of the Lender.
SECTION 9.02. Amendments; Consents. No amendment, modification,
supplement, termination, or waiver of any provision of this Agreement or any
other Loan Document, and no consent to any departure by the Company, any
Guarantor or any Subsidiary of the Company therefrom, may in any event be
effective unless in writing signed by the Lender, and then only in the specific
instance and for the specific purpose given.
SECTION 9.03. Notices. All notices, consents, demands and other
communications provided for hereunder, unless otherwise provided, shall be in
writing and mailed, sent by facsimile transmission or delivered to the parties
hereto addressed as follows or at such other address as shall be designated by
any party in a written notice to the other party hereto:
If to the Company:
Omega Protein Corporation
1717 St. James Place, Suite 550
Houston, Texas 77056
Attn: Robert W. Stockton
Telecopier No.: (713) 940-6280
Confirmation No.: (713) 940-6100
Omega Protein Corporation
1514 Martins Drive
Hammond, Louisiana 70401
Attn: Clark Haner
Telecopier No.: (504) 345-9393
Phone No.: (504-345-5553)
with a copy to:
Woods, Oviatt, Gilman, Sturman & Clarke LLP
44 Exchange Street
Rochester, New York 14614
Attn: Gary F. Amendola, Esq.
Telecopier No.: (716) 454-3968
Confirmation No.: (716) 454-5370
54
<PAGE>
If to the Lender:
SunTrust Bank, South Florida, National Association
501 E. Las Olas Blvd.
Ft. Lauderdale, Florida 33301
Attn: Corporate Banking Department
Ms. Sandra N. Tozzie
Telecopier No.: (954) 765-7301
Confirmation No.: (954) 765-7334
with a copy to:
King & Spalding
191 Peachtree St.
Atlanta, Georgia 30303
Attn: G. Lemuel Hewes, Esq.
Telecopier No.: 404-572-5149
Confirmation No.: 404-572-4862
All notices that are sent by facsimile transmission or are hand
delivered shall be deemed to be delivered upon receipt. All notices which are
mailed shall be mailed first class certified mail--return receipt requested,
postage prepaid, and shall be deemed delivered upon actual receipt or three days
after being deposited in the mail, whichever shall occur first.
The parties hereto agree that their signatures by facsimile shall be
effective and binding upon them as though executed in ink on paper, and that the
parties shall exchange original ink signatures promptly following any such
delivery by facsimile.
SECTION 9.04. Severability; Time of Essence. Every provision of this
Agreement and the other Loan Documents are intended to be severable. If any
term or provision of this Agreement or the Loan Documents, or any other document
delivered in connection herewith shall be unenforceable in any respect, the
enforceability of the remaining provisions shall not thereby be affected. Time
is of the essence of this Agreement and the other Loan Documents.
SECTION 9.05. GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL OTHER DOCUMENTS
CONTEMPLATED HEREBY, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
UNDER THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH AND GOVERNED BY THE LAW OF THE STATE OF FLORIDA (WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAW PRINCIPLES THEREOF).
55
<PAGE>
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF FLORIDA OR
OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF FLORIDA, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY,
AND THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
(c) Nothing herein shall affect the right of the Lender to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Company in any other jurisdiction.
SECTION 9.06. Expenses. The Company shall pay all reasonable costs,
expenses, taxes and fees incurred (i) by the Lender in connection with the
negotiation, preparation, execution and delivery of this Agreement, the term
sheet and Commitment Letter relating to this Agreement, and all certificates,
opinions and other documents relating to these transactions, including, without
limitation, the disbursements and professional fees of King & Spalding, counsel
to the Lender and (ii) by the Lender in connection with or after the occurrence
of any Event of Default or acceleration under Section 8.02 of the Credit
Agreement, including, without limitation, in connection with (a) the
negotiation, preparation, execution and delivery of any waiver, amendment or
consent by the Lender relating to the Loan Documents or the Security Documents,
(b) the negotiation of any restructuring or workout transaction, and the
preparation, execution and delivery of any documents prepared in connection
therewith, and (c) enforcement or foreclosure with respect to the Loan Documents
or the Security Documents, in all such cases such costs, expenses, taxes and
fees shall include, without limitation, the disbursements and reasonable
professional fees actually incurred of counsel to any Lender. To the extent
that any such fees and expenses are subject to value added taxes, such taxes
will be paid by the Company. To the extent reimbursement is sought pursuant to
this Section or any other document executed pursuant hereto, the Lender shall
submit to the Company a statement of expenses to be paid by the Company. Such
expenses shall be due and payable within fifteen (15) days of the date of the
original statement to the extent that the Lender is entitled to such
reimbursement.
SECTION 9.07. Indemnity. The Company agrees to protect, indemnify
and save harmless the Lender, and all directors, officers, employees and agents
of the Lender, from and against any and all (i) claims, demands and causes of
action of any nature whatsoever brought by any Person not a party to this
Agreement and arising from or related or incident to this Agreement or any other
Loan Document, (ii) costs and expenses incident to the defense of such claims,
demands and causes of action, including, without limitation, reasonable
attorneys' fees, and (iii) liabilities, judgments, settlements, penalties and
assessments arising from such claims, demands and causes of action,
56
<PAGE>
provided such claims, costs and liabilities are not the result of the gross
negligence or willful misconduct of the Lender. The indemnity contained in this
Section shall survive the termination of this Agreement.
SECTION 9.08. Benefit of the Agreement.
(a) This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto, provided that the Company may not assign or transfer any of its interest
hereunder without the prior written consent of the Lender, and no such
assignment or transfer of any such obligations shall relieve the Company of its
obligations hereunder unless the Lender shall have consented to such release in
a writing specifically referring to the obligation from which the Company is to
be released.
(b) The Lender may make, carry or transfer Advances or Letter of
Credit Obligations at, to or for the account of, any of its branch offices or
the office of an Affiliate of the Lender. The Lender may assign all or any
portion of its rights in this Agreement and the Note issued to it to a Federal
Reserve Bank; provided that no such assignment shall release the Lender from any
of its obligations hereunder.
(c) The Lender may assign or delegate all or a portion of its
interests, rights and obligations under this Agreement and the other Loan
Documents (including all or a portion of any of its Commitment, Letter of Credit
Obligations and the Advances at the time owing to it and the Note held by it) to
another financial or lending institution or entity; provided, however, that (i)
the Company must give its prior written consent to such assignment (which
consent shall not be unreasonably withheld) unless such assignment is to an
Affiliate of the assigning Lender or unless a Default or an Event of Default has
occurred and is continuing, (ii) such assignment or delegation is complete or is
in minimum increments of $1,000,000, and (iii) the parties to each such
assignment shall execute and deliver to the Lender an Assignment Agreement, and,
together with a Note subject to such assignment and, unless such assignment is
to an Affiliate of the Lender, a processing and recordation fee of $3,000. The
Company shall not be responsible for such processing and recordation fee or any
costs or expenses incurred by the Lender in connection with such assignment.
From and after the effective date specified in each Assignment Agreement, which
effective date shall be at least five (5) Business Days after the execution
thereof, the assignee thereunder (the "Assignee") shall be a party hereto and to
the extent of the interest assigned by such Assignment Agreement, have the
rights and obligations of the Lender under this Agreement. Within five (5)
Business Days after receipt of the notice and the Assignment Agreement, the
Company, at its own expense, shall execute and deliver to the Lender, in
exchange for the surrendered Note, a new Note to the order of Assignee in a
principal amount equal to the applicable Commitment assumed by it pursuant to
such Assignment Agreement and new Note to the assigning Lender in the amount of
its retained Commitment. Such new Notes shall be in an aggregate principal
amount equal to the aggregate principal amount of such surrendered Note, shall
be dated the date of the surrendered Note which it replaces, and shall otherwise
be in substantially the form attached hereto.
57
<PAGE>
(d) The Lender may from time to time sell or otherwise grant
participations in all or a portion of its rights and obligations under this
Agreement and the other Loan Documents (including all or a portion of its
Commitment, Letter of Credit Obligations and the Advances owing to it and the
Note held by it) to another financial or lending institution or entity,
whereupon the holder of any such participation, if the participation agreement
so provides, shall be entitled to all of the rights of the Lender hereunder;
provided, however, that the selling Lender's obligations under this Agreement
shall remain unchanged, (ii) the selling Lender shall remain solely responsible
to the other parties hereto for the performance of such obligations, and (iii)
the Company shall continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations under this Agreement and the
other Loan Documents, and the Lender shall retain the sole right to enforce the
obligations of the Company relating to the Advances and Letter of Credit
Obligations and to approve any amendment, modification or waiver of any
provisions of this Agreement or the other Loan Documents. If the Lender sells a
participation hereunder it shall provide prompt written notice to the Company of
the name of such participant.
SECTION 9.09. Subordination of Indebtedness. Any Indebtedness of any
Guarantor now or hereafter owed to the Company is hereby subordinated in right
of payment to the payment by such Guarantor of its Guaranty Obligations such
that if a default in the payment of the Obligations shall have occurred and be
continuing, any such Indebtedness of such Guarantor owed to the Company, if
collected or received by the Company, shall be held in trust by the Company for
the holder of the Obligations and be paid over to the Lender for application of
such Guarantor's Guaranty Obligations.
SECTION 9.10. Maximum Interest Rate. Nothing contained in this
Agreement, or the Note or any Letter of Credit Obligation shall require the
Company to pay interest at a rate exceeding the Maximum Permissible Rate. If
interest payable to the Lender for any period would exceed the Maximum
Permissible Rate, such interest shall be reduced automatically to the maximum
amount that will not exceed the Maximum Permissible Rate, and interest payable
to the Lender for any subsequent period, to the extent less than the Maximum
Permissible Rate, shall, to that extent, be increased by the aggregate amount of
all such reductions.
SECTION 9.11. Entire Agreement. This Agreement and the other Loan
Documents executed and delivered contemporaneously herewith, together with the
exhibits and schedules attached hereto and thereto, constitute the entire
understanding of the parties with respect to the subject matter hereof, and any
other prior or contemporaneous agreements, whether written or oral, with respect
thereto, including, without limitation, the Commitment Letter, which is
expressly superseded hereby; provided, however, that the indemnities of the
Company in favor of the Lender contained in the Commitment Letter shall survive
the execution and delivery of this Agreement. The execution of this Agreement
and the other Loan Documents by the Company was not based upon any facts or
materials provided by the Lender, nor was the Company or any Guarantor induced
to execute this Agreement or any other Loan Document by any representation,
statement or analysis made by the Lender.
58
<PAGE>
SECTION 9.12. Set-Off. Upon and subsequent to the Acceleration Date,
the Lender, and each of its branches and offices, is hereby authorized by the
Company, at any time and from time to time, without notice to the Company (i) to
set off against, and to appropriate and apply to the payment of the Obligations
(in each case whether matured or unmatured) any and all amounts owing by the
Lender, or any such office or branch, to the Company (whether payable in Dollars
or any other currency, whether matured or unmatured, and, in the case of
deposits, whether general or special, time or demand and however evidenced) and
(ii) pending any such action, to the extent necessary, to hold such amounts as
collateral to secure such Obligations and Guaranty Obligations and to return as
unpaid for insufficient funds any and all checks and other items drawn against
any deposits so held as the Lender in its sole discretion may elect. The Lender
shall give the Company notice of its intention to exercise its rights under this
Section 9.12; provided, however, that failure by the Lender to give the Company
notice shall not prevent the Lender from exercising its rights as provided in
this Section. The Company, to the fullest extent it may effectively do so under
Applicable Law, agrees that any holder of a participation in any Advance may
exercise rights of set-off and counterclaim and other rights with respect to
such participation as fully as if such holder of a participation were a direct
creditor of the Company in the amount of such participation.
SECTION 9.13. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which, taken together, shall constitute one and the same instrument.
SECTION 9.14. Replacement Note. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Note, and in the case of a loss, theft or destruction, upon delivery of any
indemnity agreement reasonably satisfactory to the Company or, in the case of
any such mutilation, upon surrender and cancellation of the Note, the Company
shall execute and deliver, in lieu thereof, a replacement note identical in form
and substance to the Note and dated as of the date of the Note, and upon such
execution and delivery of the replacement note all references in this Agreement
and in all other Loan Documents to the Note shall be deemed to refer to such
replacement note.
SECTION 9.15. Release. In consideration of the Lender's agreement to
enter into this Agreement and to establish the Commitment hereunder, the Company
hereby (a) releases, acquits and forever discharges the Lender, its respective
agents, employees, officers, directors, servants, representatives, attorneys,
affiliates, successors and assigns (collectively, the "Released Parties") from
any and all liabilities, claims, suits, debts, liens, losses, causes of action,
demands, rights, damages, costs and expenses of any kind, character or nature
whatsoever, known or unknown, fixed or contingent, that the Company may have or
claim to have against the Lender which might arise out of or be connected with
any act of commission or omission of the Lender existing or occurring on or
prior to the date of this Agreement, including, without limitation, any claims,
liabilities or obligations relating to or arising out of or in connection with
the Loan Documents (including, without limitation, arising out of or in
connection with the initiation, negotiation, closing or administration of the
transactions contemplated thereby or related thereto), from the beginning of
time until the execution and delivery of this Agreement (the "Released Claims")
and (b) agrees forever
59
<PAGE>
to refrain from commencing, instituting or prosecuting any lawsuit, action or
other proceeding against the Released Parties with respect to any and all
Released Claims.
60
<PAGE>
WITNESS the hand and seal of the parties hereto through their duly
authorized officers, as of the date first above written.
OMEGA PROTEIN CORPORATION,
A NEVADA CORPORATION
By:
-------------------------------------
Robert W. Stockton
Executive Vice-President
OMEGA PROTEIN, INC.,
A VIRGINIA CORPORATION
By:
-------------------------------------
Robert W. Stockton
Vice-President
[SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
<PAGE>
SUNTRUST BANK, SOUTH FLORIDA,
NATIONAL ASSOCIATION
By:
-------------------------------------
Name:
Title:
[SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
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<PERIOD-START> APR-01-1998
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